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So you want to get on the property ladder…
Please find a few things below that you’ll need to consider
1. What kind of property can you afford?
There are a range of websites and tools you can use which will tell you how much you can borrow in relation to your salary and savings. Most people buy a property via a Mortgage (which is basically a large loan to buy a house) alternatively, some people buy a property out right and they are known as cash buyers.
You use something called an affordability calculator. It will require your salary, debts/monthly outgoings and how much you have saved that you’d use towards your deposit.
Here are a few simple and extremely helpful calculators below:
Natwest Affordability Calculator
Habito Affordability Calculator
At this point, you can also approach a Mortgage Broker to advise you through your options. There’s nothing worse than making an Offer on a property you can’t afford! 1. You lose out on your dream home 2. It’s embarrassing, you don’t want to give an agent or a vendor the run around. Protect your name.
Do not be disheartened, remember the above results are not the be all and end all of your home buying dreams, there are various schemes that will enable you to own a property with as little as £2,500 deposit. You can find out more about those various schemes here.
2. Find your dream home
Now that you know how much you are “worth” and will be able to borrow, go and find your dream home. Remember to research the area. What will the commute be like in to work? How close are the local schools? Is the train station within walking distance from your house? What kind of reputation does the area have? Will your car be safe?
Sign up to various Estate Agencies for email alerts when properties within your desired area and price range are put on the market. Set up some viewings, go and view properties and get a feel for the area. Just because a property looks nice in pictures, doesn’t mean it’s right for you.
Tip: If you view a property in say the afternoon/morning, before you seal the deal and make an offer, drive through the area on a Friday/Saturday night to get a real feel for the vibe of the area.
3. Make the right Offer
Go online and google the area, right down to the road you are purchasing your property on. Use Zoopla to see how much similar properties to yours have been sold for.
Do not spend more than you can afford. Remember all of the other external costs – legal fees, stamp duty, the actual move, furnishing.
Has the vendor agreed to leave anything behind? Is there anything you’re not sure about? Get this all in writing! You have to be assertive, not all sellers are nice and compliant. You don’t want to exchange contracts, complete on your purchase and then find out that the kitchen has been gutted or the air vents have been removed – be very specific! Don’t depend on the agent or the solicitor, go to the property and do your own inventory.
4. Your Offer is accepted
MAJOR PROGRESS – Celebrate a little, but not too much…
Remember no-one is bound by any contractual legal agreement at this point.
Don’t get carried away.
5. Find a Conveyancer, also known as a Solicitor.
Find a solicitor you can trust and has a good reputation. Sometimes a purchase is delayed or falls through because a solicitor is not chasing the other side or following up on their searches. If you’re not consistently checking in with them, they don’t push on. It’s also important that your solicitor is on the panel for most lenders.
Some Mortgage products come with free legals and some brokers can offer you the services of conveyancers for as little as £250.
6. Be Careful
At this point you and the seller are not legally bound to complete on the purchase until the exchange of contracts.
At this stage, someone could offer the seller more than you.
The seller can also decide that they don’t want to sell anymore
7. Secure a Mortgage.
This shouldn’t take longer than 3 weeks.
Go through a Mortgage Broker or directly to the bank. At this point you will need to provide the property details, the contact details for your solicitor, contact details for the agent/vendor as the lender will want to arrange a valuation appointment. Also be aware of some Mortgage criteria related requirements. You will need to have at least 3 months payslips, 3 months Bank Statements and an up to date figure of any debt you currently have in your name. If your deposit is part savings and part gifted, be prepared to get the family member/friend to sign a gifted deposit letter. If you are in your current job for less than 3 months, be prepared to provide contact details of someone in HR as the lender may require an employment reference. If you’ve been in your current role for less than a year, be prepared to provide the details of your previous employer, job title and salary.
Remember: Just because you’ve supplied the broker/bank with an abundance of information, doesn’t mean that there won’t be any further questions. When your Mortgage application is submitted, it goes to a place called underwriting where credit checks are run, your documents are picked apart and further questions can arise. E.g “Why does applicant 1 send £500 to a Mr Sharp on the 3rd of every month? What is this for and will it continue after completion?” At this point, your Mortgage Broker will get in touch with you as they won’t have these answers, especially if it’s not a credit card/loan/hire purchase payment that you’ve already disclosed. Don’t be frustrated, just cooperate and provide answers.
The lender will carry out a valuation on your property. Sometimes they will do a drive by valuation, sometimes they will go in to the property and analyse each room, the quality of the walls etc.
Sometimes a desktop valuation is done and the lender doesn’t actually have to physically go to your property.
If your property is too small, the lender will not lend (This is only a worry for studio flats).
Something to watch out for:
Your offer on a property has been accepted at £550,000
You are applying for a £400,000 Mortgage (75% max LTV product)
You have a £150,000 Deposit
Your property is valued at £530,000 once the valuation has been carried out
The property is undervalued by £20,000, therefore theres a shortfall.
You now have 4 options
- Increase your deposit to make up the 20K difference
- Go back to the vendor and renegotiate the purchase price
- Remain on the 75% max LTV product and rejig figures
– £530,000 Price, £135,000 Deposit, Make up 20K from own resources due to valuation and mortgage shortfall.
- Pull out of the purchase, find a new property and update the lender once you have a Mortgage Offer to get the property details amended
9. Now that you have a Mortgage Offer, your Solicitor comes in to play
Your solicitor will carry out relevant searches and enquiries.
These include local authority searches, land registry etc.
Feel free to check in with your solicitor and apply respectful pressure if your purchase and move is time sensitive.
10. Dates – Negotiate the exchange of contracts and completion date
Your solicitor will liaise with the sellers solicitors to negotiate the above. If the sellers have already moved in to their new home, this can be swift, if your sellers are currently waiting for the sellers of their onward purchase to move out, this could delay your completion – this is also known as a chain.
11. Exchange date agreed, what’s next?
It’s time to get half of your deposit funds over to your solicitor. Anything over 10K will cost you £25 to transfer from any UK bank account. This is known as a CHAPS payment. Be very careful! Make sure you have confirmed and confirmed again the account details with your solicitor to avoid being defrauded. Personal advice, confirm via email, over the phone and then ask for payment details to be sent to you in the post if you’re not completely comfortable.
11a. If you are purchasing a freehold property, you will be required to have building insurance in place at the point of the exchange of contracts – this is a legal requirement. If you’re purchasing a leasehold property, this is not necessary as your service charge and ground rent covers this insurance requirement.
12. Get completion statement from your solicitor and deeds to sign
Your solicitor will send you a completion statement which outlines the remainder of deposit owed, stamp duty figure, what you owe for their services. You pay these expenses on the day of completion or a few days before.
At this point you also sign the transfer of ownership deed. This deed means that you accept ownership of the property. Your solicitor will send this to the sellers solicitor.
Your solicitor will draw down funds from the lender. The lender will send the funds to the solicitors account where the remainder of your deposit is. Your solicitor will then send all of these funds to the sellers solicitor and receive the title deeds.
14. COMPLETION. CONGRATULATIONS! You are officially the owner of your new home.
You receive the keys and can now move in to your new home.
15. The aftermath
Paying your stamp duty – Your solicitor has 30 days to pay this. You would of transferred your solicitor this money at stage 13
Your details will be registered with land registry
The title deeds will be sent to you by your solicitor
16. It’s all over. Sit back, relax and make sure you stay on top of your monthly Mortgage payments 🙂