Purchasing your first property can be a daunting prospect but it doesn’t need to be if you have a general idea of the process. This blog provides a helpful checklist for first-time buyers when looking to purchase a property.
Mortgages and Deposits
It is likely that as a first-time buyer you will have to obtain a mortgage for the property. It is always worth checking realistically how much you can borrow, and indeed how much you want to spend every month before you start looking for a property. Depending on the lender, they will require you to have a deposit (money to put down) of between 5% to 20% of the purchase price.
The source of funds for the deposit, meaning where the money you will be contributing is held, needs to be verified. The mortgage broker and solicitor will ask for 6 months’ worth of bank statements to show how these have been accrued, such as savings from salary or inheritance etc. Do not be alarmed at these checks. They are standard and are required to adhere to strict money laundering restrictions.
Part of your deposit may be raised by a “gift” from a family member (meaning the funds will not be repayable to them) and these will need to be declared to the lender for their approval. Any “gift” of money would also need to be subject to the above money laundering checks and a declaration signed by the person giving the gift (the donor) that the monies are not repayable.
Once you have a mortgage amount approved and an Agreement in Principle, you can now start looking for your new home.
Finding a property to purchase
It is recommended to register with an estate agent in the area where you wish to purchase or with an online search agent such as Rightmove to ensure you’re notified of properties as soon as they come on the market.
Given how difficult it can be in these times to raise funds as a first-time buyer, there are also options when looking at new build properties (properties that are in the process of being built) to take advantage of Help to Buy options.
With a Help to Buy: Equity Loan the Government lends you up to 20% (40% if you’re in London) of the cost of your newly built home. You pay a deposit of 5% or more and arrange a mortgage of 25% or more with a mortgage lender to make up the rest. You won’t be charged interest on the 20% (or 40%) loan for the first five years of owning your home.
If you can’t quite afford the mortgage on 100% of a home, Help to Buy: Shared Ownership offers you the chance to buy a share of your home (between 25% and 75% of the home’s value) and pay rent on the remaining share. Later on, you could buy bigger shares when you can afford to.
Please note that when deciding on what property to purchase there may be additional running costs for the property that you should consider. For example, if you are considering a flat purchase, there is likely to be monthly service charge fees for the communal areas to be maintained and the building to be insured. There may also be an annual ground rent payable to a freeholder.
Making an offer on a property
The purchase price for a property is a negotiation. Whilst you can offer less than the asking price, if there are other prospective buyers, you may need to offer the asking price or more. It may be worth checking online how much similar properties in the same area have recently sold for to help you decide what to offer.
Once you have agreed on your property
Once you find a property to purchase and your offer has been accepted by the Seller, you should instruct a conveyancer or property solicitor who will act for you on the legal purchase of the property. Please refer to our helpful blog “The key stages of buying a property – what you need to know” for a step by step guide to the legal process.
You should also start your application for the mortgage against that particular property.
It is always recommended that you instruct a survey to be carried out on the property to ensure the property is structurally sound which would not be revealed in the legal documents. Please note a survey is different from a mortgage valuation. A valuation is designed to give enough information for the lender to decide whether the property is safe to lend on. This is not an in-depth investigation or warranty for the structure of the property.
Preparing for completion day
Once the conveyancing procedure is underway, you will start to discuss completion dates for when you will move in.
In readiness for this, you will need to start booking removals and arranging buildings insurance (unless this is a flat) as the insurance will need to be activated from the exchange of contracts date.
As a first-time buyer, you are in a strong position as there is no “chain” behind you meaning you have no related sale property. However, there may be a chain if your seller is buying on. If you are currently renting and must give notice to leave. You should always discuss the completion date with your conveyancer before handing your notice into your landlord so you can confirm a realistic timeframe and not be left homeless if handed in too soon!
Once you have moved in, you will need to notify your utility providers and send a change of address to your banks and any other providers.
Then it’s time to enjoy your new home!
Lewis Denley is unlike other law firms, we aim to change the traditional approach to buying your first home, by providing straight-talking advice and transparency in our pricing. Please contact us to discuss buying your first home.