Your first home - The home buying process

Guiding you through the home-buying process

Buying your first home is an exciting and occasionally stressful experience. With proper planning you can avoid a lot of potential problems. The property buying process is different in Scotland. This guide is for purchases in England and Wales only.

If you would prefer to talk with a consultant about the home buying process, call us free on 8088 298 5136.

Think finance first

First Time Buyers with pre-arranged finance are in a stronger position to negotiate favourable purchase prices because they don't have a property to sell. It's very tempting to look at property first and think about the finance afterwards. When you're looking for your first home, it's likely that what you want and what you can afford don't match!

Purchasing your first home is likely to be one of your biggest financial commitments. Additional costs are likely to be incurred during the process and funds will need to be set aside for legal fees, Stamp Duty Land Tax, a Survey and, perhaps, moving costs. And then there's the mortgage. The amount you can borrow will depend on your circumstances. The applicants income, employment status, credit history, outgoings and the amount you put down as a deposit will be considered by a potential lender.

Consider the unexpected. We don't want you to over commit yourself and borrow so much that you can't afford to deal with costs associated with your day to day living, increases in interest rates, unexpected improvements to your home, even a baby. If you're purchasing a home you will also have many other related bills to pay after you move in too; utilities, insurance and Council Tax are just some examples.

We will be able to give you an idea of the amount you can borrow, based on your circumstances, before you start looking at property and provide you with a lenders Agreement in Principle. It is always reassuring to know that it is possible to borrow money before you make an offer to the seller.

Property location

It's often been said that the three most important considerations when buying a property are location, location and location. There are of course lots of other important factors to look at when buying your first home. It does make sense to think about your ideal area before you start your property search, keeping your lifestyle in the front of your mind.

Cost is often the deciding factor when choosing a suitable location. Fortunately technology has made searching much easier. Most estate agents have websites and others feature lists of homes for sale from a wide range of agencies. You won't normally pay an estate agency fee when buying unless you're selling an existing property.
Things to consider include convenience for work, transport links, schools, parks and safety. Would you prefer a garden? Is the property likely to be big enough for your short and long-term needs?

Take your time

Consider preparing a checklist to keep a record of the homes you visit (see our movers checklist). Your checklist might focus on the general condition of the property; for example, exterior paintwork, internal décor, guttering and roof. Also consider recording your likes and dislikes for each room in the property. If you're buying on your own, take a friend and seek a second opinion.

Take a good look around and view the properties at different times of the day. Drive around or take a leisurely stroll and check out the area thoroughly. Is it up and coming? New bars, cafes, cinemas or shops opening nearby can be good signs. What are the transport links like and is it close to the local school or shopping centre?
Brand new homes
Many first time buyers prefer newly built homes for all of the obvious reasons; the modern fittings and that feeling of having something that's totally new. It also means you'll have less work on your hands as it will require little maintenance. A new home should come with a ten or fifteen year warranty.

Making an offer

Once you've organised your finance in principle and found a suitable property you will need to decide how much you are prepared to pay it. At this stage you will tell the selling agent how much you want to pay. They will contact the vendor (seller) and the vendor will either accept or decline your offer. Don't be surprised if your initial offer is declined. You may consider making a higher offer and repeating the process until you are successful. If you make a higher offer, consider how it may affect your ability to meet your mortgage payments and other commitments.

In England and Wales, the sum you offer will not commit you to purchase the property at this stage. For example, if a property valuation/survey later discovers that a lot of work needs doing because of a roof problem you could negotiate the price down to 'compensate' for the future expense.

Your solicitor

If your offer is accepted and you haven't already spoken to a solicitor, now would be a good time to appoint one. Talk to family, friends and work colleagues and they may be able to recommend one. You could also contact the Law Society or visit their website www.lawsociety.org.uk/choosingandusing.law

The work a solicitor does is called conveyancing and his tasks will include:

• Checking the legal documents relating to the property.
• Carrying out a search to see whether local authority plans could affect your property.
• Agreeing what is included in the sale.
• Negotiating with the seller over any changes to your offer.
• Arranging the exchange of contracts and legal completion.
• Forward your payment of the Stamp Duty Land Tax

Selecting your mortgage product

Now that your offer has been accepted and you have instructed your solicitor it's time to return to your mortgage broker to discuss product availability. There are literally thousands of mortgage products available from more than one hundred lenders in the market today. Finding the right one can be bewildering but our mortgage consultants will be able to narrow down the list and explain each of them in detail. We have access to all UK lenders products and will help you choose the product that is right for you. Factors to consider are whether the mortgage product incurs an Early Repayment Charge if you choose to move your mortgage to another lender, move home or make large capital repayments. Will the mortgage product allow you to take repayment holidays or make overpayments? Will you still be able to afford the monthly repayments when the special or discounted rate is over?

Selecting your repayment method

Two methods of repayment are available. You can choose between capital and interest (Repayment) and an Interest Only mortgage. If you choose the capital and interest method your outstanding balance will reduce over the term so that there is nothing left to repay at the end of the term. If you arrange your mortgage on an Interest Only basis it is advisable to have plans in place to pay off the capital debt (the amount borrowed) because you will still owe the lender the same amount you initially borrowed at the end of the mortgage term. Your preferred method and the interest rate payable will determine the amount you repay each month to your lender.

Surveys and valuations

When you have selected your mortgage product and your preferred method of repayment we will then discuss your property survey requirements. The mortgage lender will usually want to carry out a mortgage valuation of the property to ensure it's worth the asking price and suitable security for the loan. You will normally be expected to pay the fee even though the report is for the lenders benefit. You may receive a copy and ought to be aware that it is likely to be very basic report; it may not reveal problems that might require your attention at a later date. You would normally be encouraged to obtain a more detailed surveyors report for your own peace of mind. There are two more detailed types of survey available. A 'Home Buyer's Report' concentrates on the parts of the property that are easily accessible or visible. A Full Structural Survey (Full Buildings Survey) is more detailed and can unearth problems that may otherwise remain hidden and could prove expensive to rectify.

Exchange of contracts

If your mortgage has been agreed and you are in receipt of a suitable Offer of Loan from the mortgage provider your solicitor may be in a position to exchange contracts for you. You'll need to sign a contract legally committing you to the purchase. At this time you will also have to pay your deposit and agree a completion date, which is usually a few weeks later. If you need the help of a furniture removal company, now would be a good time to contact them for a quote and booking. On the day of completion you will receive the keys to your new home. The deposit is often between 5% and 10% of the purchase price. If you pull out after exchanging contracts, you'll probably lose your deposit.

In the run-up to moving, don't forget to arrange insurance for your home, accident sickness, redundancy, life and critical illness. Some lenders will provide buildings insurance (not contents) free of charge between exchange of contracts and legal completion.

You will also need to inform the gas board, electricity board, phone and other utilities of your move. Don't forget to redirect your mail and inform others (your bank, insurance companies, Inland Revenue, etc) of your new address.

Legal completion

Completion is the day when the balance is paid to the vendor (seller). This is arranged through your solicitor and is the day you pick up the keys to your new home. When you buy, you'll have to pay a Land Registry Fee. You also pay Stamp Duty if the purchase price of your property is over £125,000. Again, your solicitor will arrange to look after this for you. Stamp Duty Land Tax rates are as follows:

Residential property - purchase price	Rate of Stamp Duty Land Tax
up to £125,000	0%
£125,001 - £250,000	1%
£250,001 - £500,000	3%
£500,001 or more	4%

How long does it all take ?

How long the process will take from finding your home to the day of completion will depend a lot on how many people are involved in your chain. Most people who are selling a property are also buying another. So if the people you're buying from find that the people they're buying from can't get a mortgage, for example, there'll be a 'break in the chain' and they may have to drop out. That means you'll feel the 'domino effect' - you won't be able to move in because your seller won't be able to move out.