Buying a House: Steps and Tips You Need to Know
From first figuring out how much you can afford, to working with lenders and solicitors, the road to buying a home can be long but fruitful.
Buying a house is often called one of life’s most stressful experiences. But if you understand the steps involved, you'll know whether getting on the housing ladder is right for you, feel a lot more in control of the process if it is, and likely will keep costs down.
Here’s what the process usually looks like and how to get started.
1. How much house can you afford to buy?
Before browsing properties, the first question to ask yourself is what and where you can afford to buy. This will be based on how much you can borrow in a mortgage, and how much you can put down as a deposit. There is plenty involved in getting a mortgage, but the main thing to understand is that the amount you will be able to borrow is based on your income, your outgoings and your credit profile.
Buying with another person will increase how much you can borrow as both salaries will be considered. Remember to budget for the costs of moving, as well as the cost of the property. These may include stamp duty, conveyancing fees, local authority search fees, surveys, insurance, moving vans, and, of course, a new sofa.
» MORE: How much mortgage can I afford?
2. Get a mortgage in principle
Once you are confident you have a deposit, you can apply to a bank for a mortgage in principle, also known sometimes as an agreement in principle. This offers an indication of how much a bank is likely to lend you based on your deposit, income, spending and debts. You can go to any bank for this, and the application won’t affect your credit score if they conduct a soft search. Check with the lender first to ensure they are not carrying out a hard search which will affect your credit rating.. The bank is under no obligation to follow through with this offer, but it will demonstrate to a seller that you are in a strong position to buy.
3. Put in an offer
When you have found a property you like, with a fair idea of how much you’ll be able to borrow to finance it, you can put in an offer with an estate agent or seller and begin negotiation. If your offer is accepted, ask for the property to be taken off the market.
In England and Wales, the deal is not legally binding until exchange of contracts. Sometimes sellers pull out of a deal because another buyer has come along and agreed to pay more money than you have. This is known as ‘gazumping’ and can be costly if you have already spent money on surveys (see below).
» MORE: Learn about buying costs
4. The conveyancing process
You will need to find a solicitor to take care of all the paperwork for your purchase. They're known as conveyancers.
Expect to pay conveyancing fees in the range of £850 to £1,500 for this, according to the Money Advice Service. That's costly, but again, it shows you are serious and can get the process moving as soon as an offer is accepted. Your conveyancer will get to work carrying out local authority searches and putting together contracts ready for exchange and completion. You can use a solicitor from anywhere in the UK; they don’t have to be based in the town or city where you live or are buying.
5. Applying for a mortgage
When your offer is accepted you can apply for your mortgage. It doesn’t have to be with the same bank that gave you a mortgage in principle. You might decide to use a mortgage broker who can guide you through the process and suggest mortgage products that are most suitable. Be aware that lenders will look at your last three to six months of bank statements as well as carry out credit checks. Be careful with your spending in the run up to your mortgage application, don’t apply for other credit products and make sure your credit record is correct and up to date.
» MORE: How to apply for a mortgage
Your mortgage lender will carry out its own valuation survey, but don’t rely on this as a comprehensive guide to whether the property you buy is sturdy. Lenders are mainly concerned with whether you are overpaying, given they have a stake in your home, and that the property actually exists.
To protect yourself against structural defects in the property — things like damp or rot — you need a separate building survey or homebuyers survey. You can find out more at The Royal Institution of Chartered Surveyors.
7. Exchanging contracts
Once the searches and surveys have been carried out, and you have a written mortgage offer, you can progress to the exchange of contracts. How long it takes to get to this point varies, and often hinges on whether or not you are in a chain — this is where, for example, you need to wait to sell your current home before you can buy the new one. (This is less of a concern when you are a first-time buyer.) Your seller might also be in a chain, unable to move to their new property until the person they are buying from has found a new home.
Make sure you have buildings insurance arranged at this point. Once that and everything else is lined up, your solicitor and the buyer’s solicitor will speak and then physically exchange contracts, at which point the agreement that you will buy the property is legally binding.
You will need to pay an exchange deposit at this point, usually 5% to 10% of the property price. Have the cash ready to send to your solicitor. Be wary of scams, and don’t send the money to your solicitor based on details they have given you on email. Always check them in person or over the phone.
Once contracts are exchanged and the deposit is paid, solicitors will agree a date for completion.
When you complete the deal depends on when everyone in the chain is ready to move. It is usually a couple of weeks after exchange, but it can feasibly be done on the same day. On the day of completion your full mortgage and deposit will be sent to the seller, via your solicitor, and you’ll get a phone call when it’s finally time to pick up the keys.
» COMPARE: Mortgage deals and rates
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Laura is a journalist and author, writing about money since 2008. Including writing for The Times for 9 years. She believes finance doesn't need to be complicated. Author of Money: a user's guide. Read more