As a first-time buyer this is a question that will always create some degree of apprehension and self-doubt. Getting on the property ladder can be an exciting ambition, but for many it can also be a prospect filled with dread. Most of us like the idea of owning our own home but when buying for the first time would also appreciate some guidance or some help.
Buying a home is probably the biggest financial commitment any of us ever makes and the thought of paying the mortgage each month for the next 25 years can be positively scary! But don’t be easily put off – home ownership really is a dream worth chasing. Here are some simple steps which could make the whole process a little less daunting.
Step 1 – How much can you borrow?
You need to know how much you can borrow – so the first stop should be to a lender to determine your price range.
Step 2 – Finding your home
Before visiting the estate agents, it’s probably a good idea to make a wish list of all the things you want from a property – including where you would like it to be. In addition to location, you’ll also need to consider the type of property e.g. semi-detached house, bungalow, flat – and whether you’d prefer new or old. The number of reception rooms and bedrooms is also important, as is whether the property has a garden, parking space and a garage.
Lastly consider public transport, schools and local amenities – what shops and leisure facilities are you looking for? Of course to a large extent many of these requirements will depend on price so in addition to knowing what you can afford and what you want – you also need to be prepared to compromise!
Arrange for an estate agent in the areas where you would like to buy to put you on their mailing list. Keep them updated with your progress – particularly when your mortgage is agreed ‘in principle’ as this puts you in a strong buying position. Estate agents are instructed by and act on behalf of the seller and not you the buyer, so their service to you will be free.
Step 3 – Making an offer
When you’ve found the property you want to buy, you need to make an offer. If you feel you want to haggle over the price you can do so direct with the seller or through the estate agent – the price that is finally agreed will be your offer.
If you are asked to make your offer in writing it should be ‘subject to survey and contract’. This means you are not obliged to proceed until you have had the property surveyed (and probably also valued by your mortgage lender) and the contracts for the sale are signed and exchanged. Your solicitor will be able to give you more information on this.
Also at this point you should establish what is included in the sale for example, the carpets, curtains and other fixtures and fittings.
You may think so far, so good, however the seller can still accept other offers up to the point when contracts are exchanged. Even after your offer has been accepted someone else can still make a higher offer and the seller can accept it – this practice is known as ‘gazumping’. However, if the seller does accept another offer this doesn’t stop you from matching it or making a higher one. If the seller is undecided which offer to accept he/she can, and often does, sell to whoever is ready to sign the contract first – if this is the case you’re in a contract race!
Step 4 – Valuation and survey
Your mortgage lender will probably carry out a valuation of the property, but this is normally only for their own purposes, so arranging your own independent survey is important. This will also provide peace of mind in respect of the value and condition of the property. It may also identify any problems with the property or remedial work that needs carrying out.
Step 5 – The legal process
Having made an offer, the seller’s estate agent will want to start the legal process required to buy a house – so you will need to have a solicitor ready to act on your behalf. The document for transferring the ownership of property is a conveyance – your solicitor or licensed conveyancer will prepare this for you in addition to checking the terms of the contract of sale, dealing with the local authority and Land Registry and preparing any mortgage documentation. They also usually deal with the lender’s legal work, confirm what fixtures and fittings are included in the sale and make sure that buildings insurance is in place at exchange of contracts.
Step 6 – Exchanging contracts
When the contract terms have been agreed and your solicitor has received satisfactory answers to all enquiries, the contracts can be exchanged and your deposit paid to the seller through your solicitor. Once the buyer and the seller have exchanged contracts the transaction becomes binding and it is customary to agree a completion date (the date the property becomes yours).
Step 7 – Completion
On the day of completion the solicitor finalises the legal work and hands over the keys to the property in return for the balance of the purchase money – normally borrowed from your lender by way of a mortgage. The money is sent from your lender to your solicitor who passes it to the seller’s solicitor.
If the property costs more than £60,000 it is subject to stamp duty – a government tax which all purchasers must pay. Current rates of stamp duty are calculated at 1% of the purchase price on properties above £60,000, rising to 3% on properties above £250,000 and 4% on properties above £500,000. This amount is collected by your solicitor as part of the total legal fees. Finally, the transfer of ownership documentation is sent to the Land Registry to record you as the owner of the property and to register the interest of your mortgage lender.
If all this has gone according to plan, then congratulations are in order – you are now the owner of your own property.
Mike Lawson, regional manager for Cheltenham & Gloucester comments, “Buying your first home need not be a daunting experience particularly if there is someone to guide you through the process. And as far as the mortgage is concerned at C&G we try to make the process as painless as possible. Our staff are qualified to guide you through all the different types of mortgages available and help you choose one which is right for you. To obtain our special guide to buying your first home call in to any branch of C&G or Lloyds TSB to get a copy.”