In the UK, the average age of a first time buyer is over 30. With the cost of living constantly rising, saving for a deposit is becoming increasingly difficult. On top of this, house price inflation is running at over 10% putting home ownership further out of reach for many.
While the financial struggles for a first time buyer getting onto the property ladder are rightly deliberated across mainstream media, for those who are in the financial position to purchase a property, this blog looks to provide guidance on the process. Buying a house isn’t something people are ever taught how to do. You learn as you go and getting the right advice from the right people helps avoid mistakes that can have significant financial consequences.
Where to start, what to do, who to get help from…
The house buying process for a first time buyer can be broken down into four fundamental stages, with other elements coming into play along the way.
Step 1 – Working out what you can afford to buy
The house price you can afford is a simple sum of your deposit plus mortgage. Your mortgage affordability, how much a bank will be happy to lend to you, will be primarily dependent on your income and expenditure, plus a few other factors. While just a conversation with a mortgage broker will give you an accurate idea of what you can afford, it is sensible to get a mortgage in principle sorted at this stage. A mortgage in principle acts as an indication from a bank of how much they would be happy to lend to you. When making an offer on a property and sometimes before even viewing, estate agents will want to see your mortgage in principle to ensure you are a credible buyer. You don’t want to be delaying at this stage and potentially missing out on a property because you didn’t have your mortgage in principle sorted.
Step 2 – Finding a house and getting an offer accepted on a property
Once you’re armed with the knowledge of what you can afford, it’s time to find a new home. Rightmove acts as a starting point for most people as here you can see all properties for sale and set filters based on price, location, size and various other factors. To book viewings and make an offer, you’ll need to contact the relevant estate agent. Any offers you make will be put to the sellers and if they accept, the property becomes sold subject to contract (SSTC) – the contract being part of the legal work further along in the process. If it’s a new-build property, there’s often a show home you can walk in and look around on site. Purchase prices are less flexible, particularly with larger developers, and a reservation fee is paid to secure the property, equivalent to SSTC.
Step 3 – Applying for a mortgage and getting a mortgage offer
After having an offer accepted, you need to choose your mortgage product before your mortgage application is submitted. Normally, this involves another conversation with your mortgage broker to finalise figures and collect any further documents. The prospective mortgage lender reviews your application and conducts necessary verification on you, as well as their own assessment of the property. If the lender is satisfied with the above, they will issue a mortgage offer confirming they are happy to lend to you.
Step 4 – The legal work
Searches and enquiries form the basis of the legal process. Searches involve checks with the local authority on the property and the surrounding area. Enquiries relate to queries raised between solicitors following the sharing of the initial contract pack. This represents the bulk of the legal work. The solicitor will also conduct relevant ID checks on you, ensure any conditions of the mortgage offer are met and the necessary documents are signed, amongst the many other conveyancing matters… Once this is all complete, contracts are exchanged which represents a legally binding agreement to proceed with the purchase. Normally, exchange of contracts is shortly followed by completion and completion it’s moving day!
The legal work can actually begin as soon as step 2 is complete, but some choose to wait until they have received their mortgage offer. For most this isn’t necessary and can slow down the process, but it does mean no legal costs are incurred until the mortgage is offered.
The above framework is accurate and applicable for any first time buyer. Additionally to this, it is strongly advisable you instruct a survey on the property after having an offer accepted. If the property is new build, this is likely not necessary as it should be protected by a warranty. Surveyors act as a trained eye able to identify potential structural and non-structural issues which can have a significant effect on the property value. While buildings insurance is there as cover for if things do go wrong, a survey gives you an informed, professional opinion on the state of the property before you commit to the purchase.
Whatever age you are, getting onto the property ladder is a great achievement. While the professionals involved in the process should endeavour to make things run as smoothly as possible, it will still be a stressful process because of the financial investment you are making. If you’re looking to buy your first home in 2022, get in touch. We can take you through step 1 of working out what you can afford so that you’re prepared and informed before you go looking for your first home.