Unless you are lucky enough to have won or been given money to buy a house outright. You will need to save for a deposit and borrow money.
Saving for a deposit
Buyers are usually required to provide a deposit of 5% of the price of the property being purchased. If you are saving for a deposit it is often worth considering the Government’s Help to Buy scheme. The Government will boost your savings by 25%. If you’re in a rush to buy, you could consider shared ownership. This is where you part-buy, part-rent or use your parent’s assets as security for a deposit.
How much can you borrow for a mortgage?
The amount an institution is prepared to lend to you depends on various factors. This includes the size of your deposit and what your credit score is.
When calculating how much you need to save you should consider costs such as legal fees, surveys, stamp duty (if applicable) as well as removal costs. Online mortgage calculators, can work out roughly (based on your income and outgoings) how much you can borrow. This can be helpful, but it is essential to speak to your broker or lender too.
Mortgage in principle
Following initial checks, a mortgage lender may agree in principle to lend you a certain amount. Often referred to as DIP (decision in principle) or (AIP) agreement in principle. Having an agreement in principle puts you in a stronger position when making offers on properties. As it shows that you will be able to borrow the money required to buy the property.
Local estate agents
Once you have decided which area(s) you are interested in buying in it’s often useful to register your interest with local estate agents. Estate agents usually send out property alerts and regular lists of new properties coming onto their books for sale.
View properties in person
While it is sometimes possible to form a view from viewing properties online. It is always best to view properties in person. If you view a property you should try to visit it more than once; and at different times of the day. A second viewing can sometimes uncover issues or problems with a property that weren’t visible at your first viewing.
Make an offer
Before making an offer, you should research on Rightmove, Zoopla or the Land Registry what similar properties recently sold for. This will help you work out where you should be pitching your offer.
Once you agree on what you will offer (subject to survey). You should telephone the estate agent and put your offer in writing to them. If you are a first-time buyer, not in a chain, be sure to notify the estate agent. As this might make the difference in your offer being accepted above another.
Apply for a mortgage
Once your offer is accepted you should make a formal application for your mortgage. This stage is where you decide what type of mortgage is best for you. This is based on the amount you need to borrow. Factors such as the term of the loan (25 years is most common, but sometimes this can be higher). The loan type (fixed rate mortgage or tracker) should be considered. You will be able to establish at this stage, subject to choices made above, what your monthly repayments will be.
Find a conveyancer or property solicitor
Once your offer has been accepted the estate agent will want to know the name of your solicitor or conveyancer. Your conveyancer or solicitor will carry out searches on the property you are buying; and liaises with the seller’s solicitor, estate agent and your mortgage lender. They draw up the contracts and deal with matters such as checking the lease. If you are buying a leasehold property, land registry, stamp duty and transferring money from you to the seller.
Most buyers agree that obtaining a property survey is very important before completing a house purchase. A survey aims to establish the condition of the property and detect any defects. A survey is not compulsory but can be money well spent if the surveyor finds issues with the property. This can lead to negotiations on the price of the property or, in some cases, you withdraw from the purchase. A surveyor’s fees will vary on the location, size and type of property.
Once your solicitor has completed his investigations and; if your surveyor has provided the property with a clean bill of health you could be ready to complete. Speak at an early stage with your solicitor about the practicalities of completion. Also, how much money they will require from you to complete the purchase.