Relocation, Relocation's nine step guide to buying a home:
Step 1: How much can you afford?
A proper calculation of all your incoming cash and outgoings is the first thing you need to do so you know what’s left. Mortgage lenders will want to know, too. You will need:
• Bank statements
• Credit card and other card statements
• Bills and other receipts for ALL your spending
• Wage slips
• To be honest
Once you have the real-picture budget, you can then look for ways to economise - but they must be realistic.
The ‘hidden’ costs of home owning
Don’t forget costs which may be new for you eg:
• Building insurance (usually a condition of your mortgage)
• Utility bills – water, electricity, gas, telecommunications
Costs of buying
You need cash up front for this which includes:
• The deposit – even just a 5% deposit will give you more mortgage options and benefits. If you have not already been saving, do what you can to raise this money.
• Valuation fees – valuation is for the lender; vary hugely depending on how much your mortgage provider adds for ‘admin fees’.
• Surveyor fees - if you wish to have a thorough structural survey of the property.
• Mortgage fees – another widely varying ‘arrangement fee’.
• Solicitor fees – often including other costs such as land registry fees and local authority searches.
• Stamp duty .
• Moving costs
Step 2: Getting a mortgage
Aim to get a mortgage offer ‘in principle’, in writing. This means they are provisionally happy to lend you money, depending on the eventual property. There are 100% mortgages, but you will pay higher interest rates and other fees, and have less choice of lender than if you had even just 5% deposit.
Use a mortgage broker to find you the best deal. They should:
• Save a lot of research time and effort
• Avoid multiple unsuccessful applications which can affect credit rating
• Offer access to more obscure products, eg for people with irregular income, such as freelancers
• Be free – make sure you use one that does not charge you a fee. The lender pays, though this cost can be passed onto you, buried in the mortgage ‘fees’. If you do arrange your own mortgage with, say, your bank, negotiate hard to reduce such fees
• Deal with negotiations with bank and chasing things up, especially during the purchase period, and especially if the broker is attached to the estate agency.
Mortgage types are now numerous but the basic ones on offer are repayment - where monthly payments include capital and interest, with the former increasing over the years - and interest only – where monthly payments are much less but it will never pay off the purchase price of the property. People should have an alternative method such as shares to cover the shortfall.
You must also decide if you want to fix your mortgage interest rate for a period: good if interest rates rise, not so good if they fall. However, it does mean no nasty surprises in your budget. Or you can ‘float’, which means your payments could go up or down.
Finding, surveying, completing
Step 3: Property search
You are now in a position to seriously find a property (having already started studying types and prices for your desired area):
• Draw up a wish/need list (and what you will compromise on!)
• Visit as many suitable properties as quickly as possible
• At each, compare with your wish list; take detailed notes including first impressions.
• After, compare and rank the properties; make a pros and cons list.
• Revisit the best ones and check things like heating, taps etc; also go back to the area at different times of day to see how noisy etc it is.
Step 4: Get a solicitor
Ring round for estimates and packages. Some firms will only charge for the initial search fees if a property deal then falls through, while others charge regardless.
Step 5: Get a surveyor
Again ring round for quotes. A survey is advisable as it may reveal major flaws which either deter you from buying or give you leverage when negotiating price.
Step 6: Make an offer
Preferably below asking price. Be firm about what you are prepared to pay. The estate agent will notify the vendor. If accepted you need to notify solicitor, mortgage broker/lender, surveyor, and organise building insurance (payable at exchange, see below). Try and make it a condition of your offer that the property is taken off the market. You can still be gazumped – that is, lose the sale to someone offering more.
Step 7: Chase
Monitor your mortgage application because until the lenders have organised the valuation, you’ll get no decision. Meanwhile get your own survey done and ask the surveyor to explain the significance of anything which concerns you.
Step 8: Exchange
Exchange of legal contracts and payment of deposit – if you pull out now you will lose this money. A date can now be set for completion – when the property is finally yours. At this stage make sure any agreed remedial work is carried out and organise removals.
Step 9: Completion
As soon as the mortgage is finalised and the money is ready for transfer, stamp duty and other fees paid, completion can take place and the keys will be handed over by the solicitor or agent. Congratulations!