How to Buy Your First Home
1. Get an Agreement in Principle (AIP)
Once you are ready to buy your first home, it might be tempting to find a property and worry about the mortgage afterwards, it is highly advisable that you get an ‘agreement in principle’ (AIP or sometimes DIP for ‘decision in principle’) before you invest too much time in house hunting. It doesn’t take long and will show you exactly how much you can borrow (it could be more than you think!) allowing you to spend your time looking at properties you definitely know are within your budget.
And don’t forget to tell any estate agents you meet that you have an AIP as it will show them you are serious about buying and aren’t going to waste their time looking at a property only to find that you can’t get a mortgage to buy it should you wish and in a competitive housing market getting the estate agent on side is imperative.
2. Find a Property
Once you know what you’re looking for its time to get in touch with estate agents to view some properties. Use the property portals like Zoopla and Rightmove to search your local property market, remember to set up alerts to notify you when new properties are added, then get on the phone and arrange some viewings.
It is essential to build up a rapport with the estate agents you meet (which is why calling in the first instance is much better than emailing) as you want them to remember you and think of you should any new properties come to the market, they are probably dealing with 20 or 30 active applicants, many of whom are probably looking for a similar property to you and being the first person the agent calls could be the difference between securing your dream home or ending up living with your mum throughout your thirties.
3. Make an Offer
Another tricky step. Offer too high and risk paying more than the property is worth but offer too low and maybe the vendor takes umbrage and refuses to sell to you at a reasonable price, if at all. Before you put forward an offer do some research on the property, try and find out how long its been on the market and why it hasn’t sold yet, has it had any price reductions and what have other similar properties sold for.
You should also get a feel for the property market as a whole, is it a ‘buyer’s market’ meaning properties are harder to sell and you could get away with a cheeky offer or a ‘seller’s market’ where a property might achieve multiple bids within days of listing meaning you shouldn’t waste time with an offer below asking price and might even consider going above the asking price if it ticks all of your boxes.
And this is where that AIP you arranged in step 1 comes in handy as an offer is not just about money, it’s also about your buying position. You may offer the same as someone else, or even more but if they are a stronger buyer they may get the property. This is because a property seller doesn’t want to incur the costs and inconvenience of an abortive sale, they will have to pay for solicitors fees and may have a property they would like to buy so will more often than not choose a buyer who is in the best position to proceed with the purchase and showing that a lender is happy to lend to you is most of the battle won.
4. Arrange Your Mortgage
Well Done! You’ve got your dream home under offer and are all set to buy your first home but there is a long way to go before you get the keys. On average a purchase takes about 3 months from offer to ‘completion’ and around a third collapse or ‘fall through’ so get ready for a roller coaster ride.
You will now need to get a mortgage offer which will involve completing your chosen lender’s full application and submitting any documents and evidence they ask for. If you already have an AIP its still worth checking the market again to see if any better deals have popped up as there are thousands of different mortgages at any one time and they change daily.
Although it is possible to apply for a mortgage yourself, through your own bank or another high street lender, you will be lucky to see an adviser within 4 weeks and that is the last you will ever see of them as your case will be handled by a call centre with whom you will have to deal over the next three months.
Which is why using a ‘whole of market’ mortgage broker to help find and apply for your mortgage makes sense as we are always your point of call (a mobile phone call or email away) and we have direct access to the mortgage desks of all the high street banks and many other lenders besides.
5. Instruct a Solicitor to Take Over
In an ideal world every solicitor would be like the guys from Suits but they aren’t. And as you are now entrusting your life and your money to one it is essential you find someone good. A great place to start would be your mortgage broker (we would say that!) as they will probably know one or a few solicitors they have worked with in the past who were reliable, reasonably friendly and had an understanding of emails, which is not a given.
Bear in mind, you get what you pay for so if you choose the cheapest, online ‘conveyancer’ don’t be surprised to find you are dealing with a call centre and speak to a different person every time you call them who doesn’t really care if you buy your first home or not as they get paid the same either way.
Your solicitor will apply for ‘local searches’ to check if the area around the property or the property itself suffers from any major problems such as flooding or environmental contamination as well as checking the ‘title register’ to ensure the seller has the right to sell the property. They will also examine the draft contract and any other supporting documents, ‘raising enquiries’ with the seller’s solicitor to answer any questions they or you might have about the property.
6. Get a Survey
Before you can buy your first home you will need a valuation of the property as every mortgage lender will carry out a ‘valuation’ survey to ensure it is worth what you are paying for it and they can get their money back should they have to repossess. Although you are probably paying for this valuation it is not for your benefit but the lender’s so it is essential you consider paying for your own survey as it may highlight a serious defect with the property which could end up costing a fortune to to put right after you move in.
This is the cheapest and most basic of surveys and is barely worthy of the name. Although it is usual for a surveyor to visit the property it can often be just a drive by or even a ‘desktop’ valuation. The surveyor will only supply his opinion of the value of the property and will not report on the structure of the building.
The next level up from the valuation, the condition report is based on a a brief inspection of the property and will supply traffic light ratings to highlight any issues – green = ok, amber = cause for concern, red = urgent repair required. This report may be suitable for a newer property but will not go into much detail so may leave you with more questions than answers in an older property. The condition report doesn’t usually include a valuation.
Going into more detail than the condition report the homebuyers report will highlight any major defects with the property but is ‘non-intrusive’ so the surveyor will not move furniture or lift floor boards and hence this will give you a better idea of a property’s condition than a condition report but it won’t cut the mustard if you really want to know what the property is like behind the scenes. A homebuyers report doesn’t usually include a valuation but you can add one on for an extra cost.
Depending on the size of the home, a building survey could cost in excess of £2,000 but it is extremely thorough and could save you much more than that in the long run if you are buying an older property or something in need of repair. The surveyor will go into the attic and check under floors and between walls to get an idea of what, if any repairs, will need doing, how long they are likely to take and their estimated cost. You will be given a hugely detailed report and a valuation can be added on.
7. Exchange of Contracts
This is it. The big day…or almost, as this is the point of no return and you are about to buy your first home. Once your lender, solicitor and, most importantly – you, are happy then it is time to ‘exchange contracts’. You sign a contract and give it to your solicitor and the seller signs a contract and gives it to their solicitor then both solicitors give an ‘undertaking’ that they are in receipt of the signed contracts and you can crack open the champagne as all that hard work has paid off.
Although you still don’t own the property, the seller is legally obliged to hand it over and you are legally obliged to complete the purchase on your agreed completion date. Although this could, conceivably be any date in the future or even at the same time as exchange, it is usual to set a 3 or 4 week completion period during which time both parties can arrange the move safe in the knowledge that its a done deal.
Now is the time to book your removal firm and transfer all of your utilities, TV and internet providers.
Finally, the day has arrived when you can pick up the keys and move in to your first home. No more waiting to use the bathroom or watching Coronation Street because your mum likes it. You have arrived!