Buying a home is often the largest purchase you will ever make. You need the right information, at the right time, to ensure you make informed decisions. You can cut down on your stress levels and speed up the process by knowing which questions to ask, what your rights are, and what responsibilities you have as a home buyer.
This information is for people who are thinking of purchasing a home. First Time Buyers may find it particularly useful, but as the buying process can change, even more experienced buyers can benefit from this information – it may well be a long time since your last home move!
Who Can Help?
When purchasing a property, there are a number of specialists can offer you advice or support:
Estate Agent – will help guide you through the buying process and work with other parties to help the sale progress
Legal representative/conveyancer – carries out the legal work needed to buy a property
Mortgage Lender – lends you money to purchase the property
Mortgage Adviser – advises which mortgage is best for your individual circumstances
Insurer – able to provide a buildings and contents insurance policy you need to purchase a property and to protect your belongings
Surveyor – assesses the physical condition of the property and can give an independent valuation
Energy Assessor – prepares an Energy Performance Certificate (EPC) on the property and can advise on improving energy efficiency
Before you even start looking for a new home, it is advisable to have an idea of how much you can afford to spend on a property. Most buyers will require a mortgage in order to purchase a home.
The larger your deposit, the more favourable the mortgage deals you are likely to be able to access. Adding your potential borrowing to your deposit will give you an indication of the amount you can afford to pay for your new home.
You amount you can borrow depends upon a number of financial factors; your income, your current expenditure and also your credit score.
Applying for a Mortgage
We would always advise going through a mortgage broker rather that contacting a bank or building society directly. A good mortgage adviser will have access to hundreds of mortgage deals (called ‘all of market’).
Prior to speaking with a mortgage broker or adviser, you should check your credit score. This score shows how likely you are to be accepted for credit. The higher the number, the more likely you are to be offered a range of good mortgage deals. There are lots of free online services to allow you to check your credit file.
A mortgage lender will consider the total amount you can borrow and how affordable your monthly mortgage payments will be when deciding how much to lend. The assessment will take into account your income and your current outgoings. It will also consider any changes that might affect whether you would be able to afford repayments; interest rate changes or possible redundancy.
If possible, you may want to reduce any outstanding balances on credit cards or loans before you apply for a mortgage as the monthly repayments will be factored into the amount you can borrow.
There are many different types of mortgages on offer. Using a mortgage broker can be a good way to get individualised mortgage advice, although you may have to pay a fee. It may be especially useful to get individualised advice if you have unusual circumstances (e.g. if you are self-employed or have a low credit score) as this can limit the types of mortgages that are available to you.
Before you begin viewing properties you should get an Agreement in Principle. This is a written statement from a lender giving an estimate of what you can borrow. It gives you some indication of your budget and signals to sellers that you are serious about buying a property. Getting a decision in principle from one lender does not mean you have to take out a mortgage with them.
As part of the Agreement in Principle, lenders will carry out a credit search. Some lenders will carry out a ‘soft’ enquiry that will not affect your credit score. Other lenders will undertake a ‘hard’ enquiry that may affect your credit score. You should find out what type of enquiry lenders use, as too many hard enquiries could negatively affect your credit score.
Your monthly mortgage payment is not going to be your only outgoing when buying a property. You may also need money to pay for:
Essential Repairs or Improvements
Mortgage Fees and Life Insurance
Estate agents, solicitors and mortgage lenders are required by law to check your identity to prevent money laundering and fraud. Failing to provide ID documents could slow down the process.
You will have to produce documents to prove your identity or address and information on your source of funds.
Get the documentation you need together as soon as possible to make sure you are prepared:
Proof of Identity – passport, driving licence, EEA member state identity card.
Proof of Address – driving licence, bank or credit card statement, utility bill (not more than 3 months old).
Proof of Funds – last 3 months’ payslips; P60 form from your employer; tax return and other documents if you are self-employed.
Choosing a Home
This is a subject worthy of it’s own blog! So much so, we have written one – search our blogs for more advice and information.
Making an Offer
Making an offer on a property is a very big step!
Try not to put in an offer before you are 100% sure that you are ready. View the property as many times as you feel is necessary before you commit.
The asking price of the property is just that. Remember that the price of a property is what the buyer is willing to pay, not what the seller wants to receive! It is a negotiation process. The estate agent is legally obliged to pass on all offers and the seller is not obliged to accept any offer, regardless of how much it is.
Before you make an offer on a property, make sure you have considered everything and ask the estate agent any questions that you have, however silly you may think they are.
You should not put an offer in unless you are serious about buying the property. Pulling out of a purchase once a verbal offer is accepted will cause delays, possible extra costs and frustration both to you and the seller.
A verbal offer can be renegotiated at any time up to exchange, but you should think carefully before renegotiating and only do so when a change is justified; for example if the home survey identifies significant issues. Attempts to renegotiate the offer when a sale nears completion may cause delays and could risk the sale falling through.
If your offer is accepted, congratulations! You should ask the estate agent to stop actively marketing the property and to remove the listing from any online portals, although it is the seller’s choice whether to leave it on the market.
You should then advise the estate agent of your legal representative. You should receive a ‘Memorandum of Sale’ from the estate agent which outlines your offer in writing and provides details of the legal representatives for each party.
A few days after your offer is accepted, check with your legal representative that the seller has instructed their own legal representative and the purchase is progressing.
Instruct a Legal Representative
Once your offer has been accepted, you need to select a legal representative. We cannot stress how important your choice is! We have a great selection of trusted conveyancers who will do a great job.
They play a key role in buying process by conducting the appropriate legal checks on the property, completing the legal work for your property purchase and, if you are getting a mortgage, ensuring that it meets your lender’s requirements.
Your legal professional will organise local authority searches on the property you intend to buy.
These searches tell you about any restrictions relating to the land or property (e.g. tree preservation orders; whether the property is listed or in a conservation area) and about any relevant external factors (e.g. new roads or rail schemes) but, importantly, do not tell you about development on the neighbour’s land.
If you have concerns about this then a specialist search can be requested.
Your legal representative will also advise you about any additional searches you should undertake, such as flood risk or a mining report.
You typically have to pay for the searches up front and during the process, your legal representative will raise ‘enquiries’. These are questions about the information which they have received e.g. the title, or the mortgage offer.
Enquiries take place on a wide range of issues, and are therefore raised at different points through the process and will normally need to be answered by the seller. You should think about whether there is anything you would like your legal representative to ask on your behalf.
It may be possible to take out indemnity insurance to protect against issues uncovered by the property searches. Your legal representative will be able to advise you on this option.
You should save the search information you receive in a safe place – it may come in handy for reference if you sell the property in the future, although searches are only valid for a certain number of months and therefore may need to be redone.
Exchange of Contracts
‘Exchange’ is when the buyer and seller exchange their signed agreements which legally commits them to the transaction.
Typically, you can exchange when you are happy with the searches, survey, and the details in the contract, your lender has confirmed your mortgage, you are able to pay the deposit and you are able to pay all other associated costs including stamp duty. You will also need to organise buildings insurance because upon signing the contract, you are legally responsible for the property.
At exchange you will also confirm a completion date which is often around 2-4 weeks later, although they can occur simultaneously, which is when you will be able to collect the keys and move in!
Exchanging contracts is an official legal commitment. If you withdraw from the agreement after exchange you may lose your deposit and have to pay compensation to the seller for other losses.
Completion is when your legal representative transfers the remaining funds to the seller’s legal representative, and you take ownership of the property. Keys are often handed over around lunchtime.
Remember to take meter readings when you leave your current property and when you arrive at the new one. A date-stamped photograph is useful.
It is also advisable to pack a box of essentials that you will need on the first night in your new home – this might include toilet paper, crockery and cutlery, a kettle, snacks, toiletries, bedding and towels, chargers, cleaning items, bin bags and lightbulbs.
You may wish to change the locks of your new home to ensure you are the only one with a set of keys.
After the move your legal representative will register the change of ownership with HM Land Registry and settle any other payments, including Stamp Duty Land Tax.
That’s it. Congratulations! You are now the owner of your new home.