How to buy a house

Buying a house

If you are a first time home buyer, the prospect of buying your first house or flat can be daunting. Where do you start? What do you need to know about buying a house? What are the risks and pit falls?
Here, at A Mortgage Now, we help many home buyers into their first home and outline below some of the key things to consider when you buy a house for the first time.

What to consider when you buy a house

Your first home needs to be suitable for your needs in its layout, style and location. Yet, most importantly, it needs to be affordable. Unless you are one of the tiny minority who can afford to buy their first house cash, you will need to consider a mortgage.

View our video – mortgages and first time buyers

What is a mortgage?

A mortgage is a long term loan secured on your property and commits you to monthly payments over many years. It is therefore important to be sure your income can support your mortgage payments and other costs over the long term. Remember, your home may be repossessed (taken away by the mortgage lender) if you do not keep up payments on a mortgage secured on it.
Inevitably, therefore, most first home purchases are a compromise. You probably won’t buy your ideal house first time, but you need to be looking at a solid first rung on the property ladder.

Location, Location, Location

Is a term you will you have heard many times and was further popularised by a successful TV programme. There is no doubt that where your property is situated is the most important factor when deciding its value against similar sized and styled properties.
A house in the right location will prove to be a sound buy when you are ready to step up to a bigger home and put your first home up for sale. The right location means many interested buyers and a good selling price and swift sale.
Properties in the right location will have good access to local amenities such as transport links, employers, shops and schools. This means more choice for you with regard to your lifestyle and therefore the right location for your first house is about more than just the right property price.

First Steps when buying a house

Decide first where you would prefer to live and what type of property you want to purchase. Do you want a house, or will a flat or apartment be more suitable for you? How many bedrooms will you need? Will you need a garden?
Take a look around the location you prefer and get a gauge on average property prices. You can then do some sums and decide if the type of property you want in the area you prefer is affordable to you.
use our mortgage calculator on this page to get an idea of monthly mortgage costs

Talk to an independent mortgage broker to establish how much your mortgage is likely to cost you each month. Remember, you will need a deposit and the higher your deposit, the less expensive your mortgage payments (more about deposits later).
As well as your mortgage costs, you need to factor in other costs involved in running your home – don’t forget.

  • Council Tax
  • Gas Bills
  • Electricity Bills
  • Water Bills
  • House Insurance
  • Life Insurance

If you are unsure about the likely costs of any of these items, speak to a friend who already owns their own home.
Once you have your figures, you can establish if your preferred house and location are within your reach. If not, the compromising starts. Can you consider buying a slightly smaller property? Can you look at the fringes of your preferred area to obtain a lower purchase price?

Make sure you can borrow what you need to buy a house

You need to obtain a mortgage to buy your house. In order to arrange the mortgage, the lender will need to consider risk as they want to be confident they will get their money back in the terms set out under the mortgage.

Underwriting a mortgage

Your mortgage lender will want to consider three things primarily:

  • Status – do your income and outgoings suggest the mortgage will be affordable to you?
  • Serviceability – If a mortgage were advanced, would you be likely to make payments regularly and on time?
  • Security – is the intended property suitable to guarantee the bank’s money if repossession is required?

Because of risk, obtaining a mortgage is not a simple case of looking up a mortgage product rate and signing some forms. The process the lender needs to follow is quite involved and will take several weeks.
Fortunately, you have the option to use the services of an independent mortgage broker such as, A Mortgage Now, who can take the stress and worry out of the equation and greatly improve your chances of obtaining lending.
An independent mortgage broker will:

  • Assess your situation
  • Advise you on likely costs and affordability
  • Advise you on different mortgage rate types and their suitability
  • Consider lenders and mortgage products from across the market
  • Decide which lenders will consider you as a suitable risk
  • Prepare indicative mortgage figures for you
  • Submit your mortgage application to the lender in the best way to possible
  • Deal with the lender on your behalf
  • Handle any problems or complications as they arrive
  • Advise you on insurance to protect yourself and your home
  • Arrange that insurance for you
  • Liaise with the estate agent and solicitor

In short, an independent mortgage broker is an invaluable aid to the first time home buyer, taking much of the stress and worry away from you and greatly improving your chances of securing a mortgage on favourable rates so that you can buy your first house.

View our video – The benefits of using an independent mortgage broker

How to buy a house – the process

In order to buy a house for the first time, there is a clear process to be followed.

  • Identify target property types, area and budget
  • Arrange a mortgage offer in principle
  • Register with local estate agents
  • Arranging viewings
  • Make an offer and negotiate price
  • Appoint a solicitor
  • Submit full mortgage application
  • Apply for insurance
  • Agree and sign solicitors terms
  • Pay solicitor for initial costs
  • Solicitor applies for searches
  • Valuation carried out
  • Mortgage offer received
  • Contracts prepared by solicitors
  • Queries exchanged by solicitors
  • Contracts agreed
  • Insurance put in place
  • Contracts exchanged by solicitors
  • Provide deposit to solicitor
  • Mortgage drawn down by solicitor
  • Purchase completed
  • Collect keys and move in
  • Property registered in your name
  • Make first mortgage payment

Dealing with estate agents

Estate agents do not have a good profile in the UK, but despite pressure from the internet, they continue to be the main outlet when householders wish to sell their home.
Property websites like Zoopla, Right Move, and Find a Property, rather than replacing Estate Agents have become integral to the property marketing process with Estate Agents using them as their main source for listing properties for sale or rent.

So what can you expect from an Estate Agent?

As the home buyer, do not expect too much. Remember, the Estate Agent is engaged by the person selling the house (known as the vendor), and agents are paid by receiving a percentage of the sale price. Therefore, the higher the sale price, and the quicker the sale, the better it is for the Estate Agent. This gives the agent no incentive to help you get a good deal and they will rarely favour you over another buyer that will see them receive their fees earlier.
Whilst it is good business sense for an estate agent to be fair with both vendors and purchasers, you cannot rely on this as agents are poorly regulated and monitored.

What to watch out for when dealing with an Estate Agent as a first time buyer

  • Remember, the agent is working for the vendor not you
  • Remember, there are always other properties
  • Don’t be rushed into making a decision
  • Remember, solicitors and mortgage brokers introduced by the agent pay them for the introduction – that relationship may be more important than your custom
  • If you deal with the agents mortgage broker, the agent will most likely find out how far they can push you on price. In our experience, information is passed between the two far too commonly.
  • Be assured, you do not have to meet with the agent’s mortgage broker before viewing a property

Valuation of your property

Valuation of your intended property is a key part of buying your house. Your valuation is the method by which you ensure that the property is a good purchase commercially.

The mortgage lender (in England and Wales) will want to arrange their own mortgage valuation for lending purposes. This valuation will be at your cost.

The lender’s valuation is designed only to satisfy the lender so that the property is suitable security for lending. This basic valuation will not provide you with any detailed information on the condition of the property. It is therefore recommended, that the vendor also instructs a further valuation such as a homebuyers report or in some cases a structural survey.

View our video – mortgage valuation options

Legal work

When you purchase a property, you will need to instruct a solicitor to handle the legal process.

This process includes a number of steps to ensure that both the selling and buying parties know that they can buy or sell with confidence.

Amongst other things, the conveyancing solicitors will establish:

  • That the property comes with a valid Title
  • That any alterations have the required planning permission
  • That any necessary building regulations are in order
  • That any existing lending secured on the property is removed
  • That the local authority does not have any local development plans that could affect the property

The solicitors will also:

  • Draw up contracts of sale
  • Drawdown mortgage funds from lender
  • Submit any stamp duty land tax due to HMRC
  • Transfer funds to the vendor
  • Provide title deeds to the buyer

Purchase price £150,000

  • Purchase conveyancing costs: £496
  • Telegraphic Transfer fee : £30
  • VAT on costs @20%: £105.20
  • Land Registry Fee : £190
  • Local Authority Search Fee: £73.54
  • Bankruptcy Search Fee: £2.00
  • Personal Water and Drainage search: £30.60
  • Environmental search: £53.16
  • Official search: £3.00
  • TOTAL: £983.50
  • You will also be liable to stamp duty land tax of: £1,500

Purchase price £250,000

  • Purchase conveyancing costs: £506
  • Telegraphic Transfer fee : £30
  • VAT on costs @20%: £107.20
  • Land Registry Fee : £270
  • Local Authority Search Fee: £73.54
  • Bankruptcy Search Fee: £2.00
  • Personal Water and Drainage search: £30.60
  • Environmental search: £53.16
  • Official search: £3.00
  • TOTAL: £1,075.50
  • You will also be liable to stamp duty land tax of: £2,500

Stamp duty land tax when buying your first home

Stamp duty land tax is payable by you, the purchaser when buying your first home. The tax is levied as a percentage of the purchase price and payable on completion.
Although your stamp duty land tax bill rises as each purchase price threshold is reached, for most first time buyers, they will purchase in the 1% band (purchase prices up to £250,000).
Therefore, a purchase price of £200,000 will lead to a stamp duty land tax bill of £2,000.
On the rare occasion that a first time buyer purchases above £250,000, 3% stamp duty land tax is due on the entire purchase price (unless prices exceeds £500,000 when tax rises to 4%).
To establish your stamp duty land tax bill, use our stamp duty calculator on this page

When you buy your first house you also take on risk

  • What happens if you are sick and unable to work?
  • What happens if you die?
  • What happens if the property catches fire or floods?
  • What happens if your property is broken into?

All of these issues cause distress in themselves, but you also need to consider where they leave you and your family financially?
Considering and putting in place the correct insurance protects you from the financial risk associated with being a property owner. Make sure you discuss these issues with your independent mortgage broker as part of the purchase process.

View our video – mortgage life insurance