Where to start?
Buying a new home is a huge step, so we have written a simple step-by-step guide. By following this guide, you can ensure that you are truly ready to buy and avoid common pitfalls.
Do you need to sell your property first?
In our experience, irrespective of market conditions, if you need to sell your current home before you buy, it’s best to put it on the market before looking for your next home.
Until your property is on market, you won’t know how long it make take to sell or what price you will achieve. There are many factors that influence this, such as proximity to local amenities/schools, new planning applications and the overall condition of your property.
Work out your budget
Once you have received interest or an offer for your property, you’ll be in an excellent position to start looking for your new home. The first thing you need to do is work out what your budget is, taking into account the potential impact of any future interest rate rises. Remember to factor in ancillary costs such as conveyancing, surveyor’s fees, estate agent’s fee for selling your current property, etc.
It’s crucial you get this right to avoid any disappointment later resulting from finding a property you want that is beyond your budget.
Apply for a mortgage
Once you've established your budget, which will generally include requiring a mortgage to complete the sale, now is the time to check your credit score. You will need at least a GOOD score which is above 881 to be able to secure a mortgage.
Next, get in touch with a mortgage broker and instruct them to secure a mortgage in principle for you based on your earnings and credit score. If you don’t have a mortgage broker, we can recommend our preferred local partner.
Generally, you will need a minimum salary of £30,000, and most mortgage lenders will loan 4-4.5x your salary. If you have a partner, combining your salaries and securing a joint mortgage will increase your buying capacity.
Start looking at properties
Once you have a mortgage in principle you can start looking for your next home and make an offer on the property you want to buy.
Appoint a solicitor
If you are buying and selling simultaneously, it’s a good idea to instruct a solicitor before you have sold your property so that they can get to work on preparing the legal paperwork for the sale and highlight any potential issues.
On the agreed day of exchange, you'll need to release your deposit to your conveyancing solicitor, which is usually 10% of the total price (sometimes solicitors negotiate this down). You’ll need to ensure that you have this in the form of cleared funds to transfer to the solicitor in order to complete the sale. Your deposit will be combined with your bank loan in the form of a mortgage.
The sale generally completes one to two weeks after exchanging contracts and you will receive the keys to your new home!
If you don’t do all of the above before looking for a property, you may end up disappointed and not be able to buy the property that you have set your heart on.
Sought-after properties often sell very quickly, so make sure that you are in the strongest position possible before you start looking at properties that are available to buy.
CREDIT SCORE BOX
You need at least a GOOD score, which is above 881
Lenders currently require a deposit of 15% to 25%
Permanent job box
Provide lender with proof of at least 6 months of pay – minimum earnings of £25,000
4X your earnings – The bank will lend 4 times your annual income, if you have a partner you can combine your earnings to secure a bigger mortgage
Mortgage in principle – Before you find a property, you need a mortgage in principle that proves you can afford to borrow enough to buy; this is not a mortgage offer
FIND YOUR HOUSE – Once you know the value of the mortgage you can secure, look for a property that matches your budget
SURVEYOR STEPS IN – A surveyor will inspect the property to determine its value and structural soundness and will report their findings to the bank
MORTGAGE OFFER – Once the surveyor has determined the value of the property, you can apply for a firm mortgage offer
SOLICITOR – The solicitor will combine your deposit and mortgage to arrive at the agreed price
MORTGAGE – The bank will issue the agreed mortgage funds to the solicitor
First-time buyers guide
Tips for first-time buyers
We all want the security of owning our own home, but buying a property for the first time can be daunting, and there are many important factors to consider.
A mortgage may just be a loan, but it is over a very long term, and your repayments can go up or down depending on market conditions.
Don't overstretch yourself, the future is unpredictable, and rates vary over time. If your mortgage repayments become unaffordable, the bank may repossess your home.
Save as much as possible; having a bigger deposit means your LTV and repayments will be lower.
Familiarise yourself with the terminology
LTV (loan-to-value) is a term used by mortgage brokers and banks to determine what proportion of the property’s value you are borrowing. For example, if your deposit is £10,000 and the property costs £100,000, your LTV will be 90%. The higher your LTV, the more expensive your mortgage will be.
Save, save, save
The best way to improve your chance of getting a mortgage is to save as big a deposit as possible. It will give you a lower LTV, which means a lower interest rate, and, therefore, lower monthly repayments, leaving you with more money in your pocket every month.
Explore all your options
Look into help-to-buy and shared-ownership schemes, housing associations often run these. Typically, the share of the property owned is between 10% and 75%, and you would then pay rent on the remaining amount with options in the future to increase your share.
A mortgage shared is a mortgage halved or even quartered
Alternatively, consider buying a property with friends or a sibling to combine your earning potential; this can help lower your monthly outgoings while giving you the security of owning your home. Nowadays, some lenders will allow up to 4 people to share a mortgage.
Improve your credit rating
Get a credit report and check your credit file, make sure all of the addresses in it are accurate. There are lots of online guides that can advise you on how to improve your credit score, by making sure you’re on the electoral roll, for example, and clearing any outstanding loans/credit card balances.
How old do you want to be when your mortgage is paid off?
Before applying for a mortgage, it's a good idea to think about how long you want the term to be. The younger you are, the longer your term can be. Lenders usually lend up to the age of 75. If you are sharing a mortgage, this will be calculated based on the age of the oldest applicant. Remember, the longer the term, the lower the repayments but, the more interest you are likely to pay over the life of the mortgage.
Sequence of events leading up to buying a property
We hope you found this guide useful. If you have questions we haven't answered, our buying team is available to help you.
To recap, here's the usual sequence of events that take place when you buy a property
- Secure finance (if necessary, put your property on the market, get a mortgage in principle)
- Find a property you want to buy
- Make an offer
- Find a conveyancing solicitor
- Find a surveyor (if the bank providing you with a mortgage does not have their own)
- Agree on a moving date
- Contact a removal company
- Exchange contracts
- Get the keys and move in