How to buy a property for the first time
Buying your first home should be an exciting time, but it can be overwhelming, especially if you don’t know what to expect. In this guide, we’ll take you through the buying journey and explain all you need to know about purchasing your first property.
In order to qualify as a first-time buyer, you must have never acquired any major interest in a residential property or land anywhere in the world. You won’t qualify if you’ve ever inherited or been given a property, or if you were added to the title deeds of a property.
A benefit that first-time buyers currently receive is exemption from Stamp Duty Land Tax on properties purchased for up to £300,000, so long as the total price is £500,000 or less (this is correct at the time of writing in 2019). Stamp Duty is a form of tax that you pay on properties over a certain price, in England and Northern Ireland.
When you buy a property you may need a deposit and possibly a mortgage.
Depending on how many buyers and sellers are at the top of your chain, it is possible to complete the whole process within six weeks. You must, however, expect the unexpected. Buyers and sellers throughout the chain are not tied into any sale or purchase until each person in the chain exchanges contracts.
The key to getting this right is to remain calm, think logically, keep going and try not to get too stressed. Make sure you keep an open dialogue with the seller of the property you want to purchase so that they feel assured that all is going to plan from your end.
Documentation you will need
If you need to secure a mortgage:
If you’re intending to a secure a mortgage, there’s documentation that you may have to provide in order to complete your application. It is best to have all the documents ready to go, in order to speed up the process. You’ll need:
- Proof of ID, e.g. passport or driver’s licence
- Proof of address, e.g. utility bills
- Proof of earnings, e.g. payslips, accounts, current P60, tax calculations (if self-employed, employment contract, etc.
- Proof of income and outgoings, e.g. bank statements (usually last three months)
- Monthly Expenditure Form, this is a form detailing your monthly expenditure
- Your credit score
If you do not need to secure a mortgage:
- Proof of ID, e.g. passport or driver’s licence
- Proof of address, e.g. utility bills
1. Weigh up the costs
Before the property search starts, it’s important to ensure that you understand all the additional costs that can be involved with buying a property, and more importantly that you physically have the funds to afford it.
In addition to Stamp Duty costs you must consider the following:
Deposit: In order to take out a mortgage on your property, you need to save up a deposit. First-time buyer deposits are typically 5%-15% of the total market value of the property. Commonly, the bigger your deposit, the cheaper the mortgage rates you’ll be offered, and the lower your monthly interest payments are likely to be. For this reason, it’s beneficial to save up as much deposit as possible.
Valuation: A lender will organise a valuation for lending purposes/mortgage valuation on the property you want to buy when they’re considering your application. A valuation for lending purposes is a type of house survey. It is simply a way for the lender to make sure the property you want to buy is at least worth the amount you want to borrow and that the property itself is suitable security for a mortgage. Some lenders won’t even require a valuer to visit the property and will simply conduct a desktop (i.e. online valuation). Not all lenders will charge you for a mortgage valuation, but this will vary.
Conveyancing/Solicitors’ Fees: Buying a property involves the management and completion of a lot of legal paperwork. There are many laws that need to be adhered to and protocols to follow, therefore it is important you find a good Solicitor/Conveyancer to take care of this part of the process for you. Fees can be in excess of £500 so ensure that you have enough funds for this service. Click here to get an instant free quote in 3 easy steps from the UK’s largest Conveyancer with excellent ratings on Trustpilot. To speed up the buying process you can instruct a Conveyancing Solicitor before you have made an offer on a property. Giving a Conveyancing Solicitor the heads up that you would like to use their services will give them advance notice to get all the necessary paperwork together.
Mortgage Broker fees: It is normal for a mortgage broker to charge you a fee for arranging your mortgage. Your adviser will inform you of any fees you may face in your first call or meeting with them.
Insurance: A mortgage lender will not loan you money for a property without buildings insurance, it is a mandatory requirement. Buildings insurance covers the fabric and permanent fixture of your home and should cover the full cost of repair in case of a fire, storm damage or vandalism, etc. Whilst it is not a necessity, you may also want to take out contents insurance. This covers everything within your home in case of an accident or theft.
Mortgage protection insurance is important when planning for the unforeseen. Cover includes income protection, critical illness insurance and life insurance. So, if you or a member of your family become sick and are therefore unable to work, or worse, you’ll be covered.
Council Tax: The amount of Council Tax you must pay is based on the location of your home, the valuation band that your property falls under and whether or not you’re entitled to a discount. You can usually receive a 25% discount off your bill if you live on your own or no-one else in your home counts as an adult. Work out your potential council tax figure here.
Utility bills: It may be useful to ask the current homeowner how much they spend on their utility bills. This will help you gather an estimate of how much you may be likely to spend, and whether it’s within your budget. Click here for Annual domestic energy price statistics to give you an idea of what your energy usage could be if you are not able to ask the current homeowner.
An idea of the type of property you want to live in: It may be useful to have an idea of the type of property you want to live in and the area. A quick scan of properties for sale online in your desired area will give you an idea of how much you would be looking to pay.
2. Secure A Mortgage
If you need to secure a mortgage it is best to contact a reputable mortgage broker to see what you can borrow/afford. A mortgage broker can guide you through the entire process, helping you find the best mortgage product for you.
The lender will run financial checks and will likely review the following areas:
- Employment history
- Salary and other income
- Regular expenses
- Your credit score
- Any debts, loans or defaults
- Any other financial commitments, e.g. childcare or school fees
- Monthly Expenditure Form
You may decide to agree on a particular mortgage amount, your broker will then help you secure your DIP (Decision in Principle). This is basically a promise from the lender to grant you the mortgage you want on the condition that the information you’ve provided is correct. Your broker will normally go about doing this.
Once you know how much you can spend on a property, you can start your search.
3. Property Search
Head online to Rightmove, Zoopla and Prime Location to find a property. Most Estate Agents place properties on these websites.
Take some time to research potential areas and get advice from Estate Agents. It is also helpful to have a list of property requirements, for example, do you want a safe enclosed garden? Do you want to be close to local schools in a specific catchment area? Do you rely on public transport, is it easy to get to? How many bedrooms do you need?
When was the property last sold
You can check when the property was last sold by clicking here. If the property had been previously bought and sold within the last few months/years, it may have been internally renovated, improved or part of the property extended during that time. If you choose to buy it, the seller should have all the receipts/ paperwork/ Party Wall Agreements/ Schedule of Condition Agreements, Building Control Regularisation Certificates and Fensa Certificates for any major or minor works that have been carried out in the property.
If you are buying a Flat/Apartment
You need to find out if it is a leasehold or freehold property. If it is a leasehold property, you need to know how long is left on the Lease. Will you need to extend it and can you afford the cost? For guidance on Lease Agreements and how to extend one, click here. If it is a leasehold property, you also need to find out how much is the ground rent, monthly service charge or whether it has a sinking fund that you need to pay into. Click here for further information. The building may require future building works that you will need to pay towards, so ensure you find out about this information from the seller/freeholder first. Once you have your figures, you should look carefully at whether you can afford it. You could go back to your broker to check whether you can still afford the purchase (if you are securing a mortgage for the property).
Check the EPC
An Energy Performance Certificate is needed whenever a property is sold. It assesses the energy efficiency of a property. The report will advise you how much your bills may cost, how to improve the property to save you money in the long term and how well insulated the property is. The Estate Agent or seller should have a copy of the EPC Certificate.
Does the property require alterations or building works
If you are purchasing a property where you want to make alterations/building works/extending the property, now would be a good time to contact a builder/contractor to get an idea of much this would cost. You will also need to take into consideration the cost of a potential Party Wall Notice/Award that you may need to enter in to with an adjoining neighbour for any works on or near a party wall (if the property is a terraced, semi-detached or an apartment/flat). If a Party Wall Award has to be agreed with your neighbour, this could cost in excess of £1,000 for Surveyors fees for a full award. Find out what all of these costs would be.
Is the location where you want to move have a risk of subsidence?
You can check whether the location you wish to move to is on The Subsidence Support’s map of areas at risk of subsidence.
4. Make an Offer on Your New Property
Once you’ve found your dream home and have ensured that you can afford any potential added expense, it’ll be time to make an offer on the property. Generally, as a first-time buyer, you’ll be more attractive to sellers as you don’t have your own property to sell, so you’ll be able to move a lot quicker. Your Estate Agent will be able to advise you on whether to make an offer at asking price or slightly below. If the seller is underwhelmed by your first offer, be prepared to negotiate but only if you are able to realistically afford the property.
If you are securing a Mortgage:
- Once your offer has been accepted you need to contact your Mortgage Broker/Lender to let them know.
- Your broker can submit a formal mortgage application on your behalf. The lender will usually assess your application and documentation prior to organising a mortgage valuation on the property itself. If the sale price does not reflect the condition and value of property, you can ask the seller of the property to reduce the price accordingly.
- Once this is agreed, you now need to instruct your Conveyancing Solicitor to commence working on all the legal work required to purchase the property.
If you are not securing a Mortgage:
- After an offer has been accepted you need to instruct your Conveyancing Solicitor to commence working on all the legal work required to purchase the property.
If you deem it necessary, you can also schedule a homebuyer’s report or a Building Survey that will provide you with a document detailing the actual state of the property highlighting any areas that will likely need work in the near future. If any issues arise with the report, you can go back to the Estate Agent or seller and ask for a reduction in the sale price.
5. Arrange for a Home Buyers Report or Building Survey
Most people will now engage the services of a Surveyor (preferably registered with the RICS) who will view the property to provide you with a Building Survey/Home Buyers report. You should speak to the seller first before you put this in place as the Surveyor will require access to the property. 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 liaise with the seller to reduce the price if any issues arise with the property. This is an invaluable asset when buying any property and worth spending money on. If any structural issues are raised in this report and the property requires further investigation, you will then need to engage the services of a Structural Engineer if you want to proceed with the purchase.
If you need a Structural Engineer to assess the property, you should first speak to the seller to let them know the situation. The seller is not obligated to pay for this service but you could ask them to pay half. This report will help them to access whatever alterations they need to carry out on their property in order to sell it. If the seller refuses to meet half the cost of the report, you have the option to either pull out of the purchase or pay for it yourself. You are not obligated to give the seller a copy of the report unless they have paid towards it.
A Structural Engineer will then provide you with a Building Inspection Report/Full Survey/Structural Survey. Again you will be able to use the report to negotiate the price of the property you are purchasing if it does indeed require more work. Check whether you can afford any major works before you keep going. If an issue does arise and you cannot proceed, make sure you let your broker, your Conveyancing Solicitor and the chain know.
If a Building Inspection Report/Full Survey/Structural Survey picks up that the property you are purchasing has a history of subsidence or the property has subsidence, click here for more information. If the property is affected by suspected tree subsidence, click here for more information.
When it comes to buying your first home, it’s important that you try to keep an open dialogue with the seller of the property you want to purchase. This way everyone feels assured that all is going to plan. This can also eliminate any further stress from the situation.
6. Find out whether there are any Boundary Issues/Party Wall Agreements/Schedule of Condition’s and Regularisation Certificates, Fensa Window Replacement certificates, EPC Certificates associated with the property you want to buy.
At this point, you should ALWAYS check whether there are any boundary issues with the property you want to purchase. Speak to your Conveyancing Solicitor, ask them to double-check the measurements of the boundaries between you and your neighbours either side of you. This can be used if there are any future boundary issues with your neighbour. You should request whether there have been any past or current boundary disputes and ask for the relevant documentation. You should always ensure that you are aware of your actual boundary lines and measurements so that if neighbour disputes arise in the future, you have your boundaries confirmed in writing by your Conveyancing Solicitor.
Party Wall Agreements/Schedule of Condition:
You should ask your Conveyancing Solicitor to confirm that the seller has documentation in relation to any Party Wall Agreements/Schedule of Condition Agreements. These are important documents and copies of them should be with the Land Registry. They confirm that your neighbour(s) are in agreement with any works that have been carried out on or near the party wall(s) of the property.
If the property you are going to purchase has had any major or minor works carried out, the seller should have Building Control Regularisation Certificates. If these are not in place, you should speak to your Conveyancing Solicitor to confirm how you will be able to move ahead without these in place and what effects they can have on the property. If building works carried out by the seller does not have a regularisation certificate from Building Control, you should request that your Conveyancing Solicitor places an Indemnity Agreement between you and the seller. An Indemnity Agreement ensures that you (the buyer) would be indemnified from any costs associated with poor works carried out in the property by the seller. This agreement would mean that the seller would be legally obligated to deal with the issue after he/she has moved. The Seller is obligated to pay for the cost of the Indemnity Agreement.
If any windows, Velux, Dorma or patio/bi-fold doors have been installed in the property you want to purchase, the seller should have either window replacement certificates from the company who installed them, Fensa Certificates or building control regularisation of the installation. If a Certificate is not in place, you should speak to your Conveyancing Solicitor. The seller can also contact the Local Authority to apply for retrospective Building Regulation approval. The other option is that you (the buyer) can request that the seller(s) Conveyancing Solicitor places an Indemnity Agreement between you and the seller. An Indemnity Agreement ensures that you (the buyer) would be indemnified from any costs associated with poor works carried out in the property by the seller. This agreement would mean that the seller would be legally obligated to deal with the issue after he/she has moved. The seller is obligated to pay for the cost of the Indemnity Agreement.
An Energy Performance Certificate (EPC) is required for all properties when constructed, sold or let. The Energy Performance Certificate provides information on the energy performance of the property and what you can do to improve it. For more information, click here.
If everything is now in place, you are now ready to directly engage with the people in your chain.
7. Keep the chain together
Ask your Conveyancing Solicitor what they are working on/what they are waiting for in the chain.
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 by your Conveyancing Solicitor.
This should encourage each buyer/seller in the chain to respond so that everyone knows what is happening. Do this twice a week to ensure that the chain moves quickly.
This is THE best way of making sure everyone in the chain knows who or what is holding things up.
It is quite an unusual way of making sure the chain pulls together to make everything go through on time but it does work, I speak from direct experience. The Conveyancing Solicitor may not directly respond in the chain, but the buyers and seller will and the Conveyancing Solicitor will see those responses. The Conveyancing Solicitors may advise you to stop emailing them, but you must keep doing it in order to keep the chain moving quickly.
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 now know exactly where the problem lies and any hold-ups. This will make the transition go much more smoothly.
8. Exchange of Contracts
Once you’ve received and accepted your mortgage offer, you will be able to finalise everything and exchange contracts. After the exchange, everyone is then legally committed to buy/sell. It’s also the last point beyond which you cannot withdraw from the purchase without losing money. You can set the date to exchange contracts and set a completion date. It is possible to exchange contracts and complete on the same day. If you would like to do this, you should contact your Conveyancing Solicitor and email the chain. You can set the date that works for you.
If at any time before you exchange contracts you feel that this is not right for you, your financial situation changes, there are too many issues with the property you are going to buy or have decided not to sell, you can always pull out of the chain. This can be a heartbreaking time for other people in the chain, but you must do what is right for you. It is not uncommon to find yourself or someone in the chain in this position, but the most frustrating thing to do is to not inform the people in your chain straight away, your Conveyancing Solicitor and your broker. So please make sure you let the chain know as soon as you make that decision.
9. Organising Your Move
You now need to advise council tax, gas, electric, water utility companies, broadband providers and telephone companies well in advance of your moving date (at least one month) and packing your home for the move. Click here for a handy list of who to contact. Obviously you will not know the detail of each provider and how much energy/usage the property uses. You could send a friendly email to the seller to see if they could offer some assistance with this.
Click on the following links to find out which company supplies the following services to the property:
Buying new furniture before or after the move
If you need to buy larger furniture or essentials for your new home (i.e. fridge/freezer/washing machine, cooker etc.), you should look to having it delivered on moving day or a day or two afterwards. This will save you on removal costs.
If you are moving from a rented flat or apartment into a larger property, you may need to buy essentials for your home, or garden (garden furniture), your dining room (dining room table and chairs) etc. or a new sofa. You could get everything delivered to the new property on moving day or a day or two after you move in. This will save you on removal costs.
Buildings and Contents Insurance
10. Completion Date/Moving day
Completion day has arrived! When the money has been received by the seller’s Conveyancing Solicitor, the keys will be released to you at the pre-arranged time and you’ll be all set to move into your new home.
If the sellers have not moved out of the property at the specific time set, get in touch with your Conveyancing Solicitor straight away and let them know. They can push things along for you.
*Good tip, take a photograph of your gas, electric and water meters as soon as you arrive at the property.
You’ve moved in but there is no guide or handbook to help you around your new property.
Help is at hand with our “everything you need to know when you move into your new home guide“. Click here for more information.
What happens now…
Ensure you have all the necessary insurances in place for your property and keep a copy somewhere safe. If you have purchased a leasehold property, you should contact the freeholder and request a copy of the Building Insurance Policy for the property.
You should either update your will or look into getting one.