How to Buy a House for the First Time (Step-By-Step)
First-time buying can seem a daunting process. Knowing how much you need, the expenses involved and finding houses. In this post, we break down step by step exactly how to buy a house for the first time and get yourself started on the property ladder.
Before we start stamp duty land tax is tax paid when purchasing a property over a certain price. Most first-time buyers won’t have to pay any SDLT at all but it’s worth checking on GOV.UK before you start the process.
Step #1: Save for a Mortgage Deposit
Okay, so the first step to buying a house is saving for a mortgage deposit. You will usually need at least 5% of the price of the property you’re buying. For example, if you’re buying a house that is £200,000 with a 95% mortgage you will need to put down £10,000 and borrow the remaining £190,000 from the lender.
Note: a larger deposit will give you a better interest rate on your mortgage, meaning lower repayments.
Step #2: Speak With a Mortgage Adviser
Secondly, we would recommend using a mortgage adviser to help you find the best mortgage possible based on your circumstances. The amount a mortgage provider will let you borrow will depend on various things, including the size of your deposit, your annual income, and your credit score.
Generally speaking, a lender will let you borrow around 4 – 4.5 times your annual salary, Again this does depend on the individual lender, it’s possible to find lenders willing to offer more than that.
If you get a joint mortgage with another person lenders will let you borrow significantly more money as they combine your annual income together. Also, you may have a larger deposit as 2 people are contributing.
You should bare in mind most lenders will need a minimum of 3 months payslips if you work for a company. If you’re self-employed they typically need 2 – 3 years of accounts, however, some lenders now accept just 1 year.
Step #3: Apply for a Mortgage AIP (Agreement in Principle)
Once you have found a lender it’s worth applying for a mortgage agreement in principle. This is initially confirmation from a mortgage lender that they would, in principle, be willing to lend you a certain amount of money.
Having an AIP can make you more attractive as a buyer, it shows estate agents and vendors that you will be able to get the amount of money you need to buy the property.
Step #4: Finding Your First House
Now that you know how much you can borrow and you have an AIP in place it’s time to start the fun part which is finding a house. I would recommend viewing quite a few properties in person to get a feel for different styles of homes and what you like best. Don’t rush this process and take time finding the perfect house.
Visit your local estate agents. Your local estate agents will have details about properties for sale in your area. Also, search through Rightmove the UK’s number 1 property portal.
Deciding how much to offer can be tricky, It’s common to offer below the asking price, but if it’s a popular property you may need to offer the asking price or in some cases above the asking price.
Step #5: Apply for a Mortgage
After your offer has been accepted it’s time to go back to your mortgage advisor and discuss what type of mortgage you want to apply for and which is best suited to you. Fixed-rate, repayment, interest-only, tracker. Fixed-rate mortgages are by far the most common, with most people choosing to lock their rate for two or five years.
Sitting down with a mortgage advisor really helps lay out all the options and terms in front of you so that you can work things out clearly. For example, how much my monthly payments would cost based on different interest rates, loan amounts, etc.
Mortgage advisors charge a fee ranging from £500 – £1,000. They can also charge as a percentage ranging from 0.5% – 1% of the mortgage loan.
Step #6: Find a Solicitor or Conveyancer
The next step is to get a solicitor or conveyancer to transfer ownership of the property to you. These are specialists who complete all the legal paperwork, land registry, and local council searches. They also draft up the contract and handle the exchange of money.
Find and compare quotes from regulated and reviewed solicitors or conveyancers in your local area. If you ever have any questions during the process of how to buy a house for the first time make sure you ask your solicitor they are there to help.
Solicitors or conveyancers charge a fee ranging from £500 – £2,000.
Step #7: Get a House Survey
Property purchases can have potential pitfalls that you need to be aware of and minimise as much as you can. The way you combat this is by making sure you do your research and chose the right property in the first place as well as getting a house survey to assess the condition of the property and detect any problems.
For example, you don’t want to buy a property that has a big structural problem (something like subsidence) that is not apparent when you view the property but can lead to far greater expense in the future.
It’s better to be aware of any issues before you buy so that you can make an informed decision on how much to offer and budget for any repair work required. A house survey could also enable you to negotiate the purchase price down or ask the current owner to fix any problems.
Step #8: Exchange Contracts
At this point, you are almost there. The exchange of contracts is when your solicitor and the seller’s solicitor swap signed copies of the contract.
There is now a legally binding contract between you and the seller. The chances of anything falling through from this moment are extremely low. Now you can really celebrate!
Step #9: Completion
The final step is completion. This often takes around a couple of weeks after the exchange of contracts, however, this is flexible and you can agree on a convenient date with the seller.
On completion day, the money will be sent to the seller and you can now go to the estate agents to collect the keys and move into your new house. Congratulations!
As mentioned at the start of this blog the process of how to buy a house for the first time can seem daunting but hopefully, after this step-by-step guide, you now have a better understanding of what’s involved and realise it’s not as complicated as it may seem.
Let me know in the comments below what’s putting you off buying your first home. Also, any questions please feel free to ask!