Before you can buy a house, you will need to accumulate some savings. This then goes towards your purchase as a “deposit”.
How much deposit do I need to buy a house?
Typically, you need a minimum deposit of 5% of the property value. For the remaining value, you may be able to obtain a mortgage or buy through a number of help to buy schemes. The larger your deposit, the more mortgage products you will have to choose from.
However, in the most recent budget, the Government has outlined a new mortgage scheme to enable lenders to offer more mortgage deals for buyers with low, or 5%, deposits. For our recent blog post on the change, click here.
Affordable schemes to get you on to the property ladder
There are many government-lead initiatives to give buyers a helping hand onto the property ladder. Some schemes include:
- Affordable Housing Schemes
- Help to Buy scheme
- Shared ownership schemes
- How do I get a mortgage?
There are many mortgage products out there and your ability to borrow will be based on several key criteria, such as your earnings and how long you have been in your current job.
For more info, click here or speak to our advisors.
What is the mortgage application process?
Your borrowing power is determined by the lender and their view of how likely you can afford to make the mortgage repayments.
This process can be very detailed and you need to provide evidence of your income, and show information of your outgoings, including:
- Existing debts
- Household bills and outgoings
- Other costs and liabilities, like childcare costs and travel
- Your credit rating will be checked
If you are employed, you need to show up to three months’ pay slips as proof of your earnings.
If you are self-employed, you need to show tax returns and accounts prepared by an accountant going back three tax years. I thought it was two years or does it vary? 3 years for own company – 2 years for self-employed?
There is a fine balance about portraying yourself in the best possible light in order to be accepted by the lender for a mortgage, but also being honest so that you do not take on a mortgage that you cannot afford.
Speak to our advisors before seeking finance so that we can help prepare you for a successful mortgage application process.
Can an unsuccessful mortgage application affect your credit rating?
How to Buy a Home
We have broken down the buying process for you:
- Step 1 – Understand your budget by obtaining a mortgage in principle
- Step 2 – Arrange a solicitor and surveyor
- Step 3 – Find a property
- Step 4 – Make an offer
- Step 5 – Finalise offer & mortgage
- Step 6 – Exchange contracts
- Step 7 – Completion
Step 1. Understand your Budget
Before you embark on buying your first home, you need to think about your savings and the costs involved with buying a property.
Your savings will need to cover the deposit of the property (typically from 5%-25% of the property value), as well as other costs of purchasing, like solicitor’s fees and Stamp Duty Land Tax.
If you need a mortgage or are buying through Help to Buy, this is a good time to speak to a mortgage or Help to Buy advisor. The first-time buyer market can be extremely competitive and so it is always best to have your finances in place before beginning your home buying journey. so you are not left disappointed
This will help to improve your profile as an easy buyer which will help when putting an offer on a property. Having your deposit and mortgage in principle in place at the time of offering will help the seller have more confidence that you can proceed with the purchase quickly
At this stage you are looking to agree a mortgage “in principle”. This lets you know how much money you will likely be able to borrow and gives you a very good idea of your total budget.
Step 2. Find a solicitor & surveyor
Again, having your solicitor already in place can add to your profile showing you are a buyer ready to go.
Often people don’t instruct a solicitor until after they have found a home to buy, however, by having one already lined up, this puts you in a better position to act quicker than other buyers on the market.
Why do I need a solicitor?
You require a solicitor or licensed solicitor, or they are commonly referred to as a conveyancer in property, to carry out all the legal work involved with buying your first home. They do local council searches, to check if there are any local plans or problems that could impact your property. They will also coordinate with your mortgage or Help to Buy provider during the process.
Why do I need a surveyor?
A surveyor carries out an inspection of the property to analyze its condition and identify any problems to you as the prospective buyer.
Usually, you instruct a survey once your offer has been accepted by the seller, but as mentioned above, it is a good idea to have a surveyor lined up in anticipation of this.
There are multiple types of surveys that a homebuyer can choose, and this will mainly depend on the type of property you are buying.
Step 3. Find a property
The fun part!
It is a good idea to register with as many estate agents as possible so that lots of local agents are searching for the type of home you want. This way, as soon as something becomes available, they should let you know. Good agents will call you before the property hits the portal search sites especially if you are responding to their emails and calls. Estate agents are sensitive souls and believe it or not they are human! . We also recommend searching and having email alerts set across all the major property websites. Some agents only advertise across 1-2 of the major portals so if you want to see everything on the market, it is a good idea to scan all the major ones including Rightmove, Zoopla, OntheMarket and PrimeLocation.
Step 4. Making an offer
Once you have found a property you like, it is time to make an offer. This is usually made through the estate agent who showed you the property.
How much do I offer on a property?
This is always a really difficult question and can vary greatly between locations and the type of property you are buying. For example, if the property is priced well and has lots of interest from other buyers, you might offer the asking price. However, if the property needs lots of refurbishment works, you might offer below the asking price.
Remember, the estate agent is always acting for the seller, not the buyer, and so they’re only ac ting in their best interests, not yours. For impartial advice, or for us to sense check a property before you make an offer, get in touch.
Step 5. Finalize Offer & Mortgage
Once you have an offer accepted, it is time to start progressing to legally purchase the property.
The next step is to instruct your surveyor to visit the property. They will highlight any potential issues that you may not have noticed on the viewing. If there are expensive remedial works required, it may be a chance to renegotiate the price to cover the cost of the works.
At this stage, you will also look to finalize your mortgage with your finance advisor or bank. Your lender may also need to carry out a valuation survey to make sure they agree that the price agreed is worth it for that property and they are willing to lend against the value.
What happens if the mortgage valuation is lower than my purchase price?
If the lender’s surveyor values the property lower than the purchase price, the lender may reduce the amount they will lend to you. This leaves you with a shortfall and you will have to decide whether you can make up the difference or move on.
What can I do if the property is down valued?
Do not despair! There are still options to try and overcome the down valuation and proceed at the agreed purchase price.
If you would like further guidance on this from one of our impartial advisors, please get in touch.
If the mortgage valuation is approved, you will receive a binding mortgage offer and can proceed to exchange once the legal work is finished with the solicitors.
Step 6 – Exchange contracts
The seller’s solicitor will send your solicitor a contract to sign in order to complete the sale. Before signing, your lawyer will go through it and check that all details are correct. They will then report to you for your instruction to proceed by signing the contract.
Once you have done this, and your agreed deposit is transferred, both solicitors will exchange contracts, making the sale legally binding and committing both parties to completing on the property at the agreed date.
Step 7 – Completion
The remaining money needed to pay for your new home will be transferred to the seller via the solicitors. This may be a collection of cash and money from your mortgage provider which your solicitor can coordinate.
You will also need to pay the remainder of your solicitor’s fees (presuming you have already paid them a deposit at the start).
Your solicitor will then register the sale with the Land Registry for properties in England and Wales, although the record of your purchase may not be visible for several months.
Lastly, if your purchase was more than £500,000, you will need to pay Stamp Duty Land Tax. You have 14 days to pay this from the date of your purchase and your solicitor will usually organize this for you as part of your final statement.
What is the process of buying a house with cash?
Of course, the above step by step guide to buying a house may differ greatly if you are buying your property without a mortgage. It effectively simplifies the process and strips out a couple of steps above. Namely, you and your solicitor do not need to coordinate with your lender in arranging the mortgage product, valuation survey, or transfer of funds for completion, speeding up the process.
As you do not have to seek mortgage finance, you will have a good idea about your total budget from the get-go. However, make sure you fully understand your total budget taking into account some of the additional costs of buying a house below.
What costs are involved when buying a house?
Additional costs can include:
- Survey costs
- Solicitor’s fees
- Buildings insurance
- Initial furnishing and redecorating costs
- Mortgage arrangement and valuation fees
- Stamp Duty Land Tax (Thanks to the current holiday, if you buy a property on or before 30 June 2021, you will pay no Stamp Duty on the value of a property up to £500,000).
How long does it take to buy a house with no chain?
Buying with no chain can typically take as little as 3-4 weeks from making an offer to exchanging contracts and then a further 2 weeks to complete. It can sometimes take an additional two weeks if you’re buying a leasehold property.
A chain is when you rely on someone else to complete their transaction in order for you to be able to complete your own purchase. Chains can be incredibly stressful and is a common reason for many sales not going ahead due to a “breakdown” in the chain further up.
This is a major reason why so many first-time buyers opt for a new build property as there are no chains involved.
The length of time it takes to buy your home can be greatly increased if buying in a chain. The person you are buying from is also buying their next home and, in turn, are relying on their seller to find somewhere to move before they can sell your seller their home. This string of dependents can lead to you having to wait until everyone up the chain is in a position to exchange before you are able to. Fore more information regarding Property Advice follow us on our social media handles. For contact please click here.