First time buyer guide: How to buy a home 

First time buyer guide: How to buy a home 

First time buyers now account for more than half of the UK market.  We’ve put together six steps for a simplified first-time home buying experience.

Step One: Consider Costs

Save

It is important to open a savings account or consider a Help to Buy ISA or Lifetime ISA to ensure that you have saved enough money for your mortgage deposit.

As well as your deposit, you will need to find money for valuation and legal fees, although some mortgage deals will cover this. Also, in England and Northern Ireland, you will have to pay stamp duty on properties over £125,000.

Check out house prices in the area that you want to buy. This will determine the size of the mortgage and deposit required to meet your needs.

Depending on your circumstances, there are various schemes available that could help to reduce costs:

• Help to buy Mortgage Guarantee Scheme
• Help to buy and other shared equity schemes
• Shared Ownership
• Help to Buy ISA or Lifetime ISA

Budget

Start by deciding what you can afford and then create a budget. Try not to overstretch yourself and consider how you would cope if your financial situation changed for any reason. Would you be able to afford the mortgage? Also, consider the costs of Council Tax, water rates, life insurance and property insurance

For example, if you are buying your first home with a partner, you may plan to start a family – maternity pay and childcare can soon eat into your monthly budget.

Also, factor in costs of decorating materials and furnishings. Some sellers may leave furniture and appliances such as washing machines and dishwashers, or you may be able to negotiate a reasonable price for them.

Step 2: Choose a mortgage adviser or provider

Arranging a mortgage can be incredibly time consuming, so start researching your options as soon as possible and get the ball rolling. During your research, you may find that you’re limited as to how much you can borrow, which can have an impact on step one.

You can get a mortgage directly from a lender, or through an Independent Financial Adviser or a Mortgage Broker. Some mortgage brokers might charge a fee, whilst others do not as the will earn a commission from the provider for the mortgage recommendation. If they do charge any upfront fees, they must explain this to you upfront.

Following a credit check and and answer some personal questions by the lender, your mortgage will be agreed as a ‘mortgage in principle’. A Mortgage in Principle is a statement or certificate from a lender to indicate how much they would be willing to lend to you.

Step 3: Find your Perfect home

Online tools: There are online tools that allow you to search for your dream home such as RightMove or Zoopla. The tools list homes for sale or rent, and allow you to compare house prices in different areas.

Lifestyle needs: Looking for the right area is important to considering your lifestyle needs. If you have children, you will need to consider schools and other local amenities. If you commute to work, good bus and rail links are vital.

Type of house: You’ll also need to decide on the type of house that you want. New builds require less work (and expense) as they have brand new bathrooms, kitchens and flooring. An older, ‘character’ property may require some renovation and costs can soon add up. Think about how much work you are prepared to do and how much could you potentially afford to spend.

Council Tax: It’s important to consider council tax too, as different types of houses attract different rates of council tax. Look on GOV.UK to find out your tax band.

You can use online tools such as Rightmove and Zoopla to arrange viewings, which are a necessary part of finding your perfect home. Before and during your house viewings you should consider the neighbourhood, time of day, the way the house faces etc. You should also ask questions such as how long the house has been on the market, how many viewings they’ve had and if they had any offers etc.

Online websites such as Rightmove and Zoopla also have contact numbers of the estate agent the house is being sold by for you to call to arrange a viewing. It is a good idea to arrange a few different viewings to help you decide what you do and don’t like and help you to decide what’s a good deal. Remember to look out for things that could be problematic in the future or create additional expense, such as mould or do the carpets need to be replaced?

Before you go for a viewing, you should also think about questions you might have such as whether the house is freehold or leasehold, what are the typical costs of gas and electric, and water etc.

Step 4: Make an Offer

When you’ve found the house of your dreams, you need to secure the sale. First, double check similar houses in the area to determine if the sale price is reasonable.

Don’t be afraid to offer below the asking price, there is often room for negotiation, especially for first time buyers. Also, if the property has been on the market for a while, a lower offer may be accepted.

Once an offer has been made, the mortgage provider/broker will need to be informed, so that you can move on to the next steps with your mortgage. This will include a mortgage being offered to you, if you have kept within the limits that they set you in step two. If there are any additional costs such as a valuation or mortgage set up costs, they will be made clear to you at this point. There may also be some financial stress testing at this point, where they will need various documentation, to prove your earnings and expenditures.

Step 5 – Instruct a Solicitor and surveyor

Before going any further, you will need to make sure that you have found and appointed a solicitor. Your solicitor, along with handling things such as Help to Buy and Lifetime ISA bonuses, will handle the purchase of your property by carrying out land searches and arranging contracts for exchange.

The typical cost for this work is £500 – £1,500 plus VAT, and your solicitor may ask for a deposit up front, typically 10% of their fee.

The surveyor will survey the property to check for problems which may affect the property price. Your mortgage lender will also arrange for a surveyor to carry out a valuation survey on their behalf to check that the property is worth the sale price. This survey is not comprehensive and typically costs in the region of £250. If you are concerned about the property condition arrange your own structural survey. Check to see if your mortgage provider offers a free valuation survey beforehand.

Many home buyers opt for a ‘Homebuyer Report’, for which you will often have to pay extra. This survey will check the property for damp and subsidence and will also examine the condition of the walls and floors. There are other, more in-depth surveys available, but the type of survey required will depend on the age and condition of the property that you purchase.

Step 6 – Finalise the offer and exchange contracts

You’re nearly there! Just a few final tasks until you can collect the keys:

• Following the survey, you may want to renegotiate the price of your house or flat. The survey may have uncovered some problems that could be expensive to fix – use this information to request a price reduction.

• Contact your mortgage lender and ask them to proceed. They may charge an arrangement fee of £0-£2,000 to set up the mortgage, but this will have been made clear to you at the time of the mortgage being recommended or offered to you.

• Carefully go through the contract with the solicitor and sign once you are satisfied that the details are correct.

• Exchange contracts and arrange buildings insurance to cover the structure of the property.

Buying your first home is an exciting experience, but it can also be a lengthy and stressful process. It’s important to carefully plan and take your time to find the house that’s perfect for you.

Please remember, the information in this article is not financial advice. If you are unsure of anything, you should consider approaching a qualified mortgage adviser.

For more information about Help to Buy schemes visit www.helptobuy.gov.uk

Please note: All information within Your Resource Centre is correct at the time of publication, and we make every effort to keep content accurate. However sometimes information may be out of date. You should not rely on this information when making financial decisions as no financial advice has been given. The information reflects the view of the author and not that of Shepherds Friendly Society.

If you’re not sure what to do when making financial decisions then you should consult a financial adviser, who will likely charge for any advice that is given.

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