What you Should Know as a First Time Buyer
Buying your first home can be an exhausting, nerve-wracking and an expensive business. Buying a property will usually cost more than you think.
However, knowing what to expect can help you make the process smoother and quicker.
Finding the Right MortgageSecuring a mortgage offer is no longer as simple a process as it once was. In previous years you could usually borrow around three and a half times your income, or if you were taking out a joint mortgage, two and a half times your combined income.
This has now changed. Most lenders are now basing their mortgage lending criteria on ‘affordability’. This process takes into account your savings and your debts, and also looks at your lifestyle, whether you have children and so on.
A rising cost for many first time buyers is the mortgage arrangement fee. Some lenders are asking for anything up to £1,000 in loan arrangement charges, survey fees and other ‘add-ons’ that will increase the cost of your mortgage.
The DepositAt present, most lenders expect anyone applying for a new mortgage to have saved their own deposit of at least 10 percent.
In fact, the average deposit first time buyers are currently paying is closer to £20,000. The bigger the deposit, the best the terms of the mortgage you’ll be able to get.
You should also remember that as well as the deposit, you’ll need to consider all the other costs, such as mortgage arrangement fees, solicitor’s costs, removal fees, stamp duty and home and contents insurance. It all quickly adds up!
Home Information Pack (HIP)If you're buying a home, make sure you see the Home Information Pack. Since 14 December 2007 every property put up for sale, regardless of size, must have a HIP available to prospective buyers.
The HIP gathers all the useful information needed at the start of the buying process, and is designed to be clear and informative.
Details contained within a HIP will include local land searches, title deeds and an energy performance certificate that outlines the energy efficiency rating of the property.
Solicitors and SurveysChoosing the right solicitor is important. You will be relying on them to make sure that the legal aspects of the sale are satisfactory, making sure that the seller is legally entitled to sell the property, and that there are no disputes over land you should be aware of.
Your mortgage lender will arrange a basic survey to check the value of the property, usually for a cost to you of £150 or more.
You may decide that it would be worth arranging for a more detailed survey that would identify any problems such as dry rot, subsidence or structural problems. A more thorough survey will cost you closer to £400.
If the survey reveals any serious concerns, you then have to decide if you want to continue with the purchase, or ask for the price of the property to be reduced.
The mortgage lender may lower their valuation and reduce their mortgage offer as a result. Unless you can persuade the seller to reduce the price, you may be forced to make up the shortfall.
The Final HurdleWhen you reach the ‘exchange’ stage, this means that both the buyer and the seller are fully committed to the deal. If you decide to pull out at this stage, you will lose your deposit. The seller cannot decide to accept a higher offer after this point.
After the exchange, the ‘completion’ date can be set – although it is possible to exchange and complete on the same day if you need to move quickly. Completion means that you get the keys and can move in. Congratulations!