When buying your first property where do you start?
When you buy a property you need a mortgage unless you have a lot of cash sitting in the bank and you can buy a property outright. Research is key. It is no good looking for a property unless you know whether you can afford it first.
Get a copy of your credit score
- You should apply for your credit score before you take any further steps if you intend to secure a mortgage for your property (if you need one). This will prevent delays if you apply for a mortgage and are subsequently rejected on the grounds of an issue with your credit score. If this does happen, you would need to apply for a credit report to see what is causing the issue. Your score is a number from 0-999 that’s based on the information in your Credit Report. The higher your score, the greater your chance of getting the best credit deals. Getting approved for credit (such as a mortgage, loan or credit card) isn’t guaranteed, and having your application rejected could delay your plans. However, you can raise your chances of approval by increasing your credit score. When applying for a mortgage, your credit score must be good otherwise the mortgage lender may refuse to lend to you. To be on the safe side you could obtain an up to date credit report and ensure that you check it thoroughly before you go any further.
- If there is a problem with your credit score, obtain a credit report.
- Once you have the report, check whether there are any errors about any of your borrowing. You may have previously had a loan and paid it off and it does not show on the report. If this is the case, you MUST write to the credit company to let them know the change of circumstances.
- This report will also contain a list everyone in your current home who may have taken out any borrowing including loans and credit cards. If they have defaulted on payments or have heavy borrowing, this WILL affect your chances of getting a mortgage. If this is the case, write back to the credit report company to financially disassociate yourself from each family member.
- To do this, write the following letter:
I enclose a copy of my credit report.
I write to confirm that I am not financially associated with:
[list each family member on the report]
Can you please update my credit report accordingly.
[Your name/Address etc.]
The company will then remove those listed on the report and this should then improve your credit score/credit report.
Get your documentation in order
- Copy of photographic ID (driving licence or passport)
- Current P60 (if employed)
- Last two years SA302 (if self employed) from Inland Revenue
- Copy of your tax declaration (if self employed) from Inland Revenue
- Last three months pay slips
- Last three months bank statements
- Monthly expenditure form
Keep a list of the following handy
- How much deposit you have.
- Your earnings.
- A copy of your credit score/credit report (for guidance about a credit report click here). If you do not have a good credit score click here.
- A figure for the costs associated with legal fees from a conveyancing Solicitor.
- A figure for stamp duty to be paid.
Check whether you can realistically afford utility bills and council tax payments associated with owning your own property. You can always ask a friend or a parent for advice with this on how much they spend on a monthly basis.
Now follow this step by step guide
1. Speak to a financial advisor and/or a mortgage advisor (preferably one that doesn’t charge you a fee and searches the “whole of market”). You don’t have to have either of these, but if you want sound advice and you do not feel confident when buying your first home, these guys will help you make the right decision.
Contact the mortgage department of your bank. Tell them you are looking to buy your first property. They should be more than happy to give you guidance (but remember, you do not have to have your first mortgage with them).
2. Look for a property online or visit estate agents. Get an idea of what is available at what cost. Check Zoopla, you may find a property recently sold in the same area with a guide price. Bear in mind if you are looking to purchase a leasehold flat, you may have to pay a monthly service charge and sometimes you can get hit with bills for redecorating communal areas etc.). Ask the estate agent to check with the seller and the freeholder of the building if there are any works planned now or in the future. Your buildings insurance should automatically be included in your service charge when buying a leasehold flat, do check this with the estate agent (get it in writing). Also check how long is left on the lease. Once a lease has less than 80 years remaining, it becomes very costly to extend it. If your dream flat has a lease of under 80 years ask them to extend it with their freeholder as part of the sale and you can then both negotiate on the price. You may not be able to extend your lease if the building is owned by the National Trust or if the building is within a cathedral precinct or if the Landlord (Freeholder or their Managing Agent) is a charitable housing trust. Do your research, the freeholder may be difficult and may not want to renew it so even if you are offered a very low price. Ensure it can be extended and how much it would cost. Get this in writing from the seller/Freeholder before you commit to purchase.
3. Once you find a property you can afford, ask the estate agent and/or seller further questions about the property.
4. If you would like building works to be carried out, now would be a good time to contact a builder to get an idea of much this would cost. Give these costs to your financial advisor/mortgage advisor or your bank to add to your potential monthly expenditure.
5. Check the properties EPC (Energy Performance Certificate). An EPC will tell you about the properties energy performance and give you an indication of how much your monthly gas and electricity will cost.
6. Contact the local council on how much the council tax payments will be per month.
7. Is the property a listed building? You can check here to see if your potential home is listed in England.
9. Go back to your financial advisor/mortgage advisor or bank. Check again whether you can afford the stamp duty, legal fees and that you have enough deposit. Is there an arrangement fee for the mortgage? How much is it and can you afford it. Check whether you want to pay this upfront or just have the lender add it to the mortgage.
10. If all the figures work out make an offer on the property.
11. Once accepted, you need to find a mortgage lender (if you are doing this without the help of a financial advisor or mortgage advisor). Search online here.
12. Once you have found a mortgage, they will want to view the property to ensure the amount borrowed reflects the actual condition of the property. This is known as a Valuation/Mortgage valuation. If the lender advises they will not lend as the sale price does not reflect the condition and value of the property you can either pull out of the purchase or ask the seller to reduce the price accordingly.
13. Most people will now engage the services a building surveyor who will view the property to provide you with a Building Survey/Home Buyers report. The report will confirm the value of the property and will pick up things like problems with electrics or whether the property will need a new roof etc. Once you have had a survey carried out, you can ask the seller to reduce the price if any issues arise. This is an invaluable asset when buying any property and worth spending the money on. If further issues are raised in this report and the property requires further investigation, you will then need to engage the services of a Structural Engineer. The engineer will then provide you with a Building Inspection Report/Full Survey/Structural Survey. Again you will be able to negotiate the price of the property you are purchasing with this report if it does indeed require more work. If all issues are resolved you are ready to move to exchange of contracts.
14. If at any time before you exchange contracts you feel this is not right for you, you can always pull out of the purchase.
15. At this point gather all the email addresses of each buyer/seller in the chain (if you can) by asking the owner of the property you are about to purchase to give them to you. Then ask the seller for their solicitor’s email address. Generate one email with everyone copied in advising who you are, what property you are buying in the chain and what you have been advised your solicitors are waiting on from elsewhere in the chain. One of our members found this to be the best way of making sure everyone in the chain knew who or what was holding things up. It is quite an unusual way of making sure the chain pulls together to make everything go through on time. It can and does work and each person in the chain (except the solicitors) will thank you for it. The Solicitors will not respond and if they do, they will probably tell you to stop emailing them but the point is that everyone else in the chain will know where they stand and these emails encourage the actual people in the chain to respond to give their position. There will be no more “it is with the seller’s solicitors” or “we are just waiting on something from this buyer” etc. Everyone in the chain will know where the problem lies and any hold ups which should make the transition go much more smoothly.
16. You should now be in a position to set an exchange of contracts and completion date. Some people decide to exchange and complete on the same day and this is possible to request. Once you have exchanged contracts you are officially committed to the purchase of your first home! You may be asked to pay a holding deposit, but most sellers do not need that once contracts have been signed.
17. Completion date is set, now you should be looking into buildings and contents insurance for your property. You should also be advising utility companies of the moving date and packing your home for the move. For guidance on how to do this, click here.
18. Completion date has arrived! Keep in contact with your solicitor throughout the day (if the completion is set for a specific time). Your sellers should be ready to leave the property at the specific time set, if not, contact your solicitor to advise them of this.
19. Congratulations on your move!
20. Your solicitor will register the property with the Land Registry for properties in England and Wales and you will receive the title deeds to your new home. Your solicitor will arrange for the payment of Stamp Duty.
You could now look for mortgage life insurance (optional).
You should now be looking into buildings and contents insurance (if you have not done so already).
You should now follow our when you move checklist, our everything you need to know when you move into your new home and what essentials you may need.