The process of buying a house
If you’re a first-time buyer, the complexities and responsibilities involved – not to mention the large sums of money – can make buying a house an intimidating prospect.
This is especially true when you consider that the average UK property was priced at £226,798 in March 2019, according to GOV.UK. To help put your mind at rest, we’ve put together a quick guide outlining the steps to buying a house that most first-time buyers will have to follow.
Though set up as a series of steps, in reality many of them will need to be carried out in parallel. For example, you’ll probably want to look into Buildings Insurance before you exchange contracts, so it’s ready to be put in place as soon as the property becomes your responsibility.
You might also find our article on the costs of buying a house useful to read alongside this one.
1. Find out how much you can borrow
Before you start looking at properties, you’ll need some idea of how much you'd be able to borrow from a mortgage lender. Not only will this give you a clear idea of what you can afford in the market, but some estate agents will want to see proof that a lender will provide you with a mortgage, before you can view their properties.
A mortgage lender will take a number of factors into consideration when calculating what they'd be willing to lend you, including your income, your outgoings, your employment status and how much money you’re likely to have for a deposit. The personalised mortgage quote they’ll give you is called a Decision in Principle.
2. Save for a deposit
Arguably, saving for a deposit should be step one, because unless you’re independently wealthy, you’ll probably need to start saving for your deposit well before you embark on the process of buying a house. As the deposit you require will be a percentage of the price of your home, knowing the amount a mortgage lender is willing to offer you – and therefore what you can afford – will give you a target to save towards.
Your deposit is almost certainly going to be the single biggest upfront cost in buying a house. The amount required can be anywhere between 5% and 25% of the purchase price of your home. In other words, if you were buying a house at the average UK property price mentioned above, you'd need to save almost £57,000 for a 25% deposit.
Of course, there are plenty of properties across the country that cost well below that average figure and you won’t always need to pay the full 25%. That said, it’s worth paying as much as you can afford, because the more you pay as a deposit, the more likely it is that you’ll be offered a better mortgage deal, plus your monthly repayments could be lower.
3. Start your house hunt
Now that you have the basic finance in place, you can start looking at properties. Once you’ve decided on areas that interest you, local estate agents will be able to suggest properties within your budget and arrange viewings. Remember to do your research before you reach any decisions: what are the local facilities like? Are there good transport links? If you have children, do the local schools rate highly?
4. Making an offer
Once you’ve found a property you’re convinced is right for you, you’ll need to put in an offer to the seller. Usually, this will be done via the estate agent. You can try coming in under the seller’s asking price, although that can be risky as there may be other buyers also putting in offers. It’s also worth bearing in mind that, even if the seller accepts your offer, other buyers can still make offers right up to the point when you exchange contracts. This is called ‘gazumping’ and can see you losing out without warning at any time. But with a bit of luck and a little negotiation, your offer will be accepted.
5. Find a solicitor
At this point, you’ll need a solicitor to start dealing with the legal complexities required to make the property yours in law - this is known as conveyancing. To find a solicitor, you can look online, find someone local who may be familiar with the estate agents and the territory, or go with a recommendation from someone you know. It’s worth comparing prices, as they can vary widely, although it’s not always wisest to go with the cheapest option. It can be a good idea to try calling the solicitors you’re considering before you make a decision.
Once selected, your solicitor will communicate with the seller’s solicitor, carry out searches with local authorities and the Land Registry, draw up your contract and check the legal title of your chosen property.
6. Apply for a mortgage
If you’ve already spoken to a mortgage lender and got your Decision in Principle lined up, now is the time to go back to them with your agreed offer and get your mortgage arranged. Remember, you’re not obliged to take a mortgage with the lender you first consulted. Now that you know exactly what you need, it’s worth looking around to check you’re getting the best deal for you.
7. Get surveys done
As part of the mortgage application process, your lender will require a survey of your chosen property to ensure it’s worth the amount they’re loaning against it. The survey they require is a fairly basic property valuation and so it won’t necessarily pick up on any faults that may require your attention. You can choose to upgrade to a Homebuyer’s Report, which looks more closely at the condition of the property and includes recommendations for repairs. At the top end, you can commission a building survey, where an in-depth examination is made of the property with a report including both current and potential problems with the property and what should be done to put them right.
8. Exchange contracts
Once you’ve accepted a mortgage offer and you’ve seen the survey reports and any action they recommend has been carried out, you’re ready to sign the contract your solicitor has drafted for you. This is also the point when you pay the deposit via your solicitor. The point at which you and the seller exchange contracts is when you both become committed to the deal. You can no longer be gazumped, but, in turn, if you back out you could lose your deposit. You’ll also need to agree a completion date with the seller – when you pay for the property and can take possession – which generally takes place up to a month after exchanging.
9. Arrange insurance
From the point when you exchange contracts, you become legally responsible for the property. That includes having buildings insurance in place, which will usually be a condition of your mortgage. Find out more about what our Buildings Insurance could offer.
This is the final step and the one when your mortgage lender transfers the cost of the property to the seller. As soon as payment is confirmed, the keys to what is now your property, should be ready to pick up from your solicitor.
Congratulations! You’re now a homeowner.