15 Nov, 2017/ by Homeward Legal /First Time Buyer
Can you afford to buy?
This is, along with demand, the single biggest issue facing first-time buyers in the current property market. House prices have far outstripped wages, sending many properties out of the reach of those on average salaries. A decade ago 100 percent (and even 110 percent) mortgage offers were plentiful, but these are much rarer to find now as few lenders are willing to offer more than 90 percent to first-time buyers. You will need a deposit of between 5 and 20 percent of the cost of the property you want to buy. The bigger the sum you can put down as a deposit, the better chance you have of receiving not only a firm mortgage offer but one with a cheaper repayment rate. Remember that a lender will only be interested in your ability to repay a mortgage. You will also have to budget for paying other essentials from your salary, including council tax, utilities and home insurance. Don't forget, too, that you will have to find the cash to pay solicitors' fees and possibly stamp duty. It's essential to do your sums first before you start looking in earnest to avoid disappointment.
Read more here in our A-Z of buying for the first time.
How will you finance the purchase?
Most first-time buyers, if not all, will require a mortgage. Banks and building societies are the main source of finance for property transactions. There is also help available to get first-time buyers on to the housing ladder from central government. Check out the Help to Buy website outlining the initiatives available for first-time buyers. Homeward Legal's 5 financial factors to consider is a good starting point, too.
Read more here in our guide to the different loan schemes available.
Getting ahead
It's important to get on the front foot when applying for a mortgage. Lenders are much more risk-averse than they were before the financial crash a decade ago. So apply as early as possible for a mortgage. You will need to provide a wealth of information to the lender on your income. It's a good idea to check your credit score before you start so you know there are no impediments there to a mortgage. The lender will also carry out "stress tests" - designed to ensure you can afford the repayments if interest rates rise by up to 3 percent above the rate your mortgage is fixed at. The sooner you get the process underway, the sooner you'll know exactly how much you can borrow and how much you will need as a deposit.
Read more here on what the stress tests involve.
Where to start
What comes first - finding your ideal home or securing a mortgage offer? This is one question to which there is no clear answer. The sensible thing to do is to get a mortgage in place with your deposit banked so you can move quickly when you do see the property you want to buy. But life is rarely that simple and often first-time buyers will fall in love with a place and that's what prompts them into considering buying. The same advice applies no matter what order you approach buying in. Move as quickly as you can in applying for a mortgage, if one is required, and ensure you provide the lender with every piece of information they request as quickly as possible.
Read more here about the different kinds of residential mortgage available.
Where to look
But where do you start if you haven't yet begun house-hunting? Browsing online listings will let you see what's available in the areas you're targeting while also giving you some idea as to price. Many people will still want to walk into a high-street estate agent and take advantage not only of their local knowledge but also of the fact that sometimes properties become available for sale and are so sought-after, their listing never makes either the window or online. Estate agents are obviously keen to secure the best price possible for the seller, but they can act as an excellent go-between to smooth out any issues around a sale or offer. Build a good relationship with local estate agents and you can benefit.
Read more here about the sort of information you can find about the area you're keen on moving to.
Do you need a survey?
So you've spotted a place you want to buy. The next step is to decide if you need to have a survey carried out. Most mortgage lenders will insist on a survey, but there are several different types and you need clear advice on which one best suits both you and the property. Depending on which type you commission, you will be given information on the state of the building and its construction. Talk to the professional sales team at our sister site Surveyor Local who can provide advice and information on the surveys they arrange, all done by members of the Royal Institution of Chartered Surveyors (RICS). With a fast turnaround on reports, you can be assured your survey is in good hands.
Read more here for why you should consider commissioning a survey.
Make an offer
You can make an offer on a property through the seller's estate agent - they are bound by law to pass on all offers to their client. But even if your offer is accepted and the seller agrees to take the property off the market, your purchase will not be complete until contracts have been exchanged at the end of the conveyancing process in England and Wales (the property-buying system is different in Scotland). For a clear guide on what making an offer involves, read more here. And there are other factors that could scupper a deal - the seller might accept your bid only for another buyer to offer a higher amount. You can be outbid on a property, the seller might pull out or slow the process down because they haven't found a new home. Again, nurturing a good relationship with an estate agent can help you negotiate on the price so you get the best deal possible. Negotiating is good - you can often knock money off or have items included in a sale with a little bargaining.
Read more here on gazumping, gazundering and gazanging and what they mean for buyers and sellers.
Instruct a solicitor
To complete the purchase of a house, you will need to instruct a solicitor or a conveyancer (DIY conveyancing is possible but not recommended for novices). Conveyancing is the legal and administrative process required for the legal transfer of home ownership from seller to buyer. Some buyers may already have a relationship with a solicitor and want to instruct them to start the conveyancing process. Most first-time buyers may never have had any dealings with a solicitor or conveyancing firm and so being introduced to one using Homeward Legal's online, secure service can be the best way to proceed. Our nationwide panel of specialist solicitors and licensed conveyancing firms are regulated by the Law Society. And because we offer a no-move, no-fee guarantee - where you won't lose a penny if for some reason your transaction doesn't complete - you can instruct a solicitor or conveyancer with confidence. Remember too that the price you are quoted is the price you will pay, giving you peace of mind that you can budget appropriately knowing you won't be hit by unexpected extra expenses.
Read more here on Homeward Legal's practical guide to conveyancing and what it involves.
Understanding conveyancing
The conveyancing process cannot be rushed and this is the part of the transaction that you as a buyer cannot hurry along. Buyers often ask how long the conveyancing process will take and here we try to answer that question honestly. The key here is to keep in touch with your legal representatives and to respond to any communication they send you as quickly as possible. Homeward Legal's sales team can also act as a conduit to your legal firm if you have any issues in communicating with them, again offering peace of mind that your transaction is being dealt with as quickly and efficiently as possible.
Read more here on the local authority searches that are an essential part of conveyancing.
Exchanging contracts
You will not own your new home until the contracts between your solicitors and the sellers' solicitors have been signed and exchanged and the deed of transfer is signed stating that you are willing to take ownership of the property. Once contracts are exchanged, neither you as the buyer nor the seller can pull out of the deal without financial penalties. You will have to transfer your deposit securely to your solicitor and your solicitor will then request the release of the mortgage funds from your solicitor. Your part in this element of the process does pose a risk of fraud, but greater security procedures are being put in place to keep transactions safe. But once the cash has been transferred and accepted, congratulations, you own your first home! Now all you have to do is move in…
If you're a first-time buyer, check out Homeward Legal's comprehensive First-Time Buyers' Hub where all your questions about purchasing for the very first time are covered in detail.