Whether you’re starting to think about buying a home, or you’ve made the decision and now you’re looking at how — this blog is going to be really handy for you. In this post I invite you to join me as I map out the journey first-time buyers take when they become homeowners. This is going to be a long one, so grab a cup of tea and get comfy.
Ready? Let’s do it.
The four phases of getting on the property ladder
Phase one: Preparation
When people who have just completed their goal of home ownership are asked what they’d do differently next time, the most common answer is that they’d start preparing earlier. This is because the preparation stage involves: Building your credit score, saving for a deposit, working out your budget, getting a mortgage in principle, deciding what area you want to live in and thinking about what’s important to you in a property.
Saving for a deposit can take several years, and building your credit score can also take a little while too (around six months). That’s why if you’re planning to buy a property in the not too distant future, it’s best to get started sooner rather than later. Even if it’s a few years away.
Here’s how this phase looks in a little more detail.
Building your credit score
For many people, that first encounter with credit scores, credit histories and credit reference agencies comes when exploring mortgage options. Prior to that they may never have heard of them. But getting to grips with this is absolutely essential when getting on the property ladder. I’ll share with you why.
Reviewing your credit history is one of the ways mortgage lenders like banks assess the risk involved in accepting your mortgage application. In particular with regards to how reliable they think you’ll be in making your payments ontime. Further your credit history doesn’t just contribute towards whether your application for a mortgage will be accepted or rejected. It also determines what deals you’ll be able to access, and those with a better credit history may be offered lower interest rates.
Your credit score is a number that gives you an idea of your creditworthiness in the eyes of the lenders. The higher the number, the more creditworthy you are and the more likely it is that your application for credit will be accepted. You are able to monitor this yourself, and I’ll give you some links to where you can do so in just a sec.
The credit reference agencies are responsible for calculating your credit score. To do this they collect information from a range of sources like banks and local councils, to assess key metrics relating to accounts you have opened, the payments you’ve made, your address history and things like whether you’re on the electoral roll or not. This is all information that lenders will have available in your credit history to make a decision on your application.
What the credit reference agencies do when they calculate your credit score, is mimic the decision-making process used by lenders when assessing your credit history.
Just because you’ve never run into problems financially before, doesn’t mean your credit history and credit score will be good. If you’ve never had a credit agreement like a credit card, a loan or a mobile contract, there will have been no occasions for companies to report your successful payments. This will mean that you have no credit history. And it can be as challenging to overcome when applying for a mortgage as having a bad credit history.
Why? Because it means that how you deal with credit is an unknown entity. There’s no information available on how you handle credit. And therefore lenders will regard you as a high risk customer.
It’s free to check your credit reports online. Try it now using the following services:
- ClearScore (uses Equifax data)*
- Credit Club (uses Experian data)
- Credit Monitor (uses TransUnion data)
From there you can create a plan to start building it. LOQBOX can help you with that. Find out more about LOQBOX and how it works here.
* Just to be super transparent if you sign up and follow this link although it’s free for you, LOQBOX may get a small referral fee from ClearScore. This helps us to continue to improve our service for our customers and keep LOQBOX free.
Saving for a deposit
In the context of home-buying, a deposit is the amount of cash a buyer will pay upfront towards the price of the property they’re purchasing. It is a percentage of the full value of the property. And the remaining amount will usually be arranged in the form of a mortgage.
So if you are buying a home for £300,000 and you put down a £30,000 deposit, that deposit is 10%. You will then need to get a mortgage for the value of £270,000 to cover the other 90% of the value of the property.
A 90% mortgage deal refers to a mortgage where you are paying a 10% deposit. A mortgage is a loan specifically for buying property. You will be expected to pay it off to your lender with interest in monthly payments over the term of your mortgage deal. The average term for repayment of mortgages is 25 years.
At the moment, and as a result of the pandemic, 95% and 90% mortgage deals have plummeted as lenders play it safe. Additionally lenders are being stricter with who they lend to. For first-time buyers this means they may need to save bigger deposits to be able to access mortgage deals, and/or they may find that they are being offered higher interest rates. Right now, mortgage providers are prioritising those who can offer higher deposits of 15-20%.
The pandemic has provided those in employment with more opportunities to save money than usual as they are likely spending less on things like holidays and socialising. So some first-time buyers may have been able to give their deposit savings a boost during lockdown.
Although saving for a deposit is a big commitment, there are lots of ways to make saving fun. I will share these with you in a future blog post, so watch out for that.
Working out your budget
The general rule of thumb for working out your budget is to multiply your salary (or combined salaries if you’re buying with a friend or a partner) by four. However other factors will also impact how much you’re able to borrow including your credit history, the current economic environment and the amount you’re able to put down in a deposit.
Barclays have quite a nice mortgage calculator here which you can use to see how much you might be able to borrow.
Further, when considering your budget, you also need to remember the other costs involved when buying a home. These include, but are not limited to: Stamp duty (more on that here), house insurance (which is mandatory when taking a mortgage), conveyancer’s fees (the same as solicitor’s fees), mortgage advice (although this can sometimes be free), the home buyer’s survey and removal fees. You may also want to put some money aside for things like furniture and decorating once you’ve moved in. Especially if you’re buying your first home, and moving from furnished rental accommodation. You will need to buy a lot of things when you move in.
Mortgage in principle
Many estate agents will not enable you to make an offer on a property without first passing their checks. These checks include making sure you are actually able to pay what you’re offering. They will ask for proof of deposit and a mortgage in principle to show this. Therefore, unless you’re a cash buyer, a mortgage in principle is something you will need before you’re able to put in an offer.
A mortgage in principle is a certificate you can acquire from a lender which states how much money they’re happy to loan you to buy a house (in theory). In most cases you can obtain these online, by filling out a form on a lender’s website. When you submit that application, the lender will soft check your credit report.
A soft check will not impact your credit history and will not be visible to other lenders. (For more on soft checks v hard, have a look at this blog.) If the lender accepts your application, the mortgage in principle will then be emailed to you, and you’ll be able to show this to your estate agent when putting in an offer.
Note that a mortgage in principle is not the same as a full mortgage application in which the lender will hard check your credit report, as well as examining a range of other factors to include checking your payslips and bank statements. The mortgage in principle is only a pre-agreement. And in theory. It is not binding.
Decide what area you want to live in
This one might have an obvious answer for you, or it might not. If you already know where you want to look for a new home, please feel free to skip. If you’re not sure, then read on.
When looking for where to buy a new home, several things are important. Here are a bunch of questions for you to consider…
How easy will it be for you to commute to work, what are your options for doing so, and how long will it take? Where’s the nearest train station? If you have a car, or plan on having visitors drive over to see you, is there easy parking at your property? What can you afford in the area you’re looking to buy in (you can look into this more with sites like Rightmove)? Could your money go further if you looked at different areas? If you have children, or are planning to, are there good schools nearby? If you have cats that go outside, what about busy roads? If you have a dog, are there nice places to take them for a walk? How easy is it for you to get out of town when you want to? What council tax band is it in (this will affect your ongoing costs)? In terms of lifestyle, do you want to be in the hustle and bustle of the city with lots going on? Or do you want to be out in the countryside with peace and quiet? How near to your friends and family do you want to be?
Think about what’s important to you in a property
Different to the above point which is more specifically about the area, this is a question about the property itself. When you think about your new home, what’s on your wishlist for what it will have/ or not have?
For example, for people who love cooking and entertaining a kitchen and dining room might be really important. For those who have a dog, a garden is essential. Some people hate bungalows, that’s just the way it is. Some people want to live in a flat with a balcony overlooking the water, or the city. What features are important to you?
A helpful exercise here is to make a list, and then identify which of those things are deal-breakers (i.e. you wouldn’t buy a property if it didn’t tick these boxes), and which are the nice-to-haves that you would love if possible but you can live without.
Phase two: House hunting
Once you know what you’re looking for (budget, location, property) and you’re in a position to start making offers (credit history, deposit, mortgage in principle), you can begin house-hunting seriously. Here’s how this phase looks.
Begin the search online
Search sites like Rightmove, OnTheMarket and individual estate agencies for properties in your budget, in the area you want to live in. You can set up saved searches and email alerts to turbocharge the efficiency of your browsing. Further, many properties are now listed with virtual viewings that give you a tour of the property which can aid in helping you decide whether you want to view the property in real life or not.
Contact the estate agents to arrange viewings
When you see something you like the look of enough to commit to a viewing, all you need to do is contact the estate agent selling that property to arrange a time to visit. This is really easy on sites like Rightmove and OnTheMarket (mentioned above) as you can click to call or email the agents.
With the property market being hot at the moment, and many Covid-19 regulations still in place, they will likely ask you a few questions before proceeding with your booking. This will include asking you about your current situation (are you currently selling a property or are you a first-time buyer) and whether you have any Covid-19 symptoms. Then they’ll book you in. Unless the homeowner is showing you around the house themselves (less likely), viewings will take place within the working hours of estate agencies. This is typically 9am – 5pm Monday to Saturday.
Going to viewings
Again with Covid-19 regulations being what they are, there are a few things you need to know about going to viewings at the moment. You will need to wear a mask, and you are only able to attend in a maximum group size of two at a time. Further you will not be able to use the toilet in the house you’re viewing (one to bear in mind if you’re travelling a fair way). The estate agent will also provide hand sanitizer and ask that you take a squirt on entrance.
While there, as well as having a look to see how many features on your wishlist this property ticks, you also want to notice how well the property has been looked after. Is it tidy and well presented? And have a think about things pertaining to the immediate environment. What’s parking like? Is it noisy? You also have the opportunity to ask the estate agents questions about the property and the sale while you’re there.
It’s worth discussing with the estate agent exactly what you’re looking for in a new home because even if this property isn’t doing it for you, they may be able to contact you next time something they think will suit you comes up.
Putting an offer in
Ah, now this is where it gets fun. So you’ve been to see the property, and maybe even gone back for a second viewing. You love it. You want to make an offer. To do this, and as discussed earlier, you’ll need to provide proof of identification and funds to the estate agent before they will put your offer forward to the seller. Proof of funds will include both a proof of deposit and a mortgage in principle. Unless you’re a cash buyer and don’t need a mortgage in which case you’ll just need to provide proof that you have the money.
In terms of what you should offer, you really have to go with what you think it’s worth. Some people will suggest you always go in under asking price to try to get a bargain. But others will offer well over asking to try to secure the property. So this one will have to be at your own discretion. To sense-check the guide price on the listing you can have a look at what price similar properties in the same area have recently sold for. Use this information to assess whether you think the property you’re looking at is priced right. And you can always ask friends and family for their opinions too.
At this point, if there are other people making an offer on the same property it can also get quite competitive. You may be asked if you want to up your offer, because other people might up theirs. You have no way of knowing if they will or won’t. And so you might have a few tense days while you wait to hear back from the estate agent whether your offer has been accepted or not.
When you do get your offer accepted, it’s time to move on to phase three.
Phase three: Buying the property
Still with me? Good job! So on to phase three, actually buying the property. The keyword here is: Paperwork. And there’s lots of it.
The full mortgage application process
Okay, so you know you got that mortgage in principle to be able to make the offer on the property? Two things to consider here. The first is that this isn’t an agreement from your lender that they will definitely give you the mortgage. It’s as the name suggests, an agreement only in theory based on a few details you provided regarding your salary and expenses, and a brief scan of your credit history.
The second is that you are under no obligation to actually go with the lender you got the mortgage in principle from either. There may be better deals out there for you. Or it may be that when it comes to the full application there are some things relating to your unique situation that means fewer lenders are available to you. This can include things like being self-employed.
Whatever your situation, at this point, I think it’s a great idea to seek advice from a professional mortgage advisor. And one who is independent. Mortgage advisors know what each specific lender likes to see in an application, and what they don’t. And they’re able to suggest the best deals for you based on their knowledge of the current market.
Mortgages can be really complicated things, and these guys take the headache away when it comes to finding the best deal for you. Some mortgage advisors will charge you for their services, but some will be free as they take commission from lenders when they refer you to them. Take it from me, it’s definitely worth doing.
Once you’ve been through available deals with your mortgage advisor, and selected the one you want to apply for. You’ll then begin the full application process. For this you’ll need to provide lots of paperwork. This will include things like payslips and bank statements, national insurance numbers, proof of identity… lots of things. Your mortgage advisor will fill in your application, package all this information up nicely in the way the lenders like, and send it all off.
Then we wait. Typically it can take around a month to hear back from the lender whether your full application has been accepted or not. And again a mortgage advisor is helpful here as they will chase the lender to get updates on your application status and push the whole thing along.
Also note that this application for credit will show on your credit history.
Appointing a conveyancer and the conveyancing process
Alongside your mortgage application, you’ll also need to appoint a conveyancer to get the property sale in motion. A conveyancer is a solicitor. You will appoint a conveyancer to act for you in the purchase of the property. And the seller who you’re buying the property from, will also appoint a conveyancer to act for them in the sale of the property. All conversations and questions between you and the seller relating to the property will go through your conveyancers. This article is a useful summary of what conveyancers do.
But in a nutshell, your conveyancer will do pretty much everything from here. They will arrange searches with the local authorities, they will look over fixtures and fittings, they will request information from the sellers, they will arrange for your mortgage provider to make the payment to the seller, they will also arrange for your deposit to go to the seller, and they will make the stamp duty payment to HMRC. They will raise a lot of queries and perform a lot of checks. They’ll make you aware of a whole bunch of stuff you never knew mattered! Then when the time comes they will organise the exchange and completion (more on this later). And throughout the whole process they will send you a lot of copies of paperwork to read through and okay. So they’ll probably phone you frequently to run things by you and check in with you.
During the house purchase you may also find that you need to spend a lot of time calling your conveyancer to push the sale along when things feel a little slow. It happens.
To appoint a conveyancer, it’s always best to get a few quotes. Your estate agent will likely recommend one to you as they will get a referrer’s fee. But you are under no obligation to go with this option. At the same time, it may well be that they have chosen a particular partner because they’re very good.
You can find out by Googling for conveyancer’s in your area and reading reviews. That said, you don’t necessarily need to use one in your area — but a lot of people do because at points you may have to physically drop paperwork into their offices. And this is obviously harder for you if they’re not nearby.
Getting a survey
This is another hold-your-breath moment in the home buying process. If you’re getting a mortgage, this is usually mandatory and the survey is often arranged by the lender. (But paid for by you.) There are many different levels of survey with differing costs. You can find out more about the options available here. But most people will go for at least a RICS HomeBuyer Report rather than just the basic one.
This level of survey will give you more of an idea about whether there are any problems with your property that may cost you a lot of money to fix. If there are serious problems identified you may need to think about dropping out of the process, or renegotiating the price at which you’re buying the property for so as to account for these costs. Your conveyancer will be able to advise you.
The survey will also give the surveyor’s opinion on whether the property is worth the amount you’re paying for it. If it’s under what you’re paying, then your lender likely won’t be able to grant you the mortgage.
All this said, it’s worth noting that, in my opinion and experience, a lot of what is written in a survey report can be… over cautious. For example, where something is an unknown to the surveyor, this only means that it can’t be ruled out. And therefore you may find a red mark next to it with the suggestion that, for that factor, the property is high risk. However, it might turn out to be completely fine and that that problem never existed at all. Just something to bear in mind.
Once the results of the survey are back with your conveyancer, any discovered issues within that then becomes a focus of their interactions and discussions with you and with your buyer’s conveyancer as they work towards a satisfactory resolution.
Once a resolution is reached, the sale can progress.
Buying with a partner or friend, but not married? How will you own it?
Buying a property as an unmarried couple, or with a friend, is increasingly common. And your conveyancer will be asking you how you want to buy the property. As tenants in common or joint tenants? There are differences. To find out more about this, check out this blog: Joint Tenants vs Tenants in Common: Pros and Cons.
Further, if one of you is putting in considerably more money towards the deposit than the other and/or you’ll be contributing to mortgage repayments in differing amounts, then you may also want to think about whether you’ll own different percentages of the property. You can talk this through with your partner or friend, and with the help of your conveyancer find the solution that works best for you.
A condition of your mortgage offer will be that you arrange home insurance to cover your property, and you will need to prove you have done so by sending your certificate to your conveyancer, before they can proceed with securing the money from your lender. To find the best deal shop around. You can either go direct to insurance providers for a quote, or you can have a look on the many comparison websites out there. Or both! While you’re doing this you may also want to consider those policies that also cover you for contents insurance.
Phew. So you’ve read through more paperwork than ever before in your life. Been through the ups and downs of a full mortgage application and a survey. Possibly had moments where it looked like the whole sale was off, before finding a way to solve the problem and moving forward. And now, finally, you’re ready to exchange. Crikey. From having your offer accepted, at a minimum, this has taken about two months to reach this point. And it’s all you’ve talked about with your friends for ages.
Up until the exchange (short for ‘exchange of contracts’), nothing is guaranteed. It’s only at this point where the two conveyancers representing the buyer and the seller swap signed contracts, and the buyer pays the deposit, at which a legally binding commitment has been made. And no one can back out of the deal. You can find out more about it here.
Often this will happen at the same time as the exchange, but not always. It can depend on how many people there are in the chain, and what their timings are. You may also want to be strategic about this if for instance you’re renting and you’ve paid for a full month at the beginning of the month, then you don’t also want to complete at the beginning of the month because you will then have to pay both rent and your mortgage for that month.
At completion, the conveyancer will arrange for the full payment from both your deposit and your mortgage to go to the seller. You will then wait for a phone call to confirm this has taken place, and the property sale is complete. Your conveyancer will then arrange for stamp duty to be paid to HMRC within 14 days.
For more information on completion, and timings, have a look at this article here.
Phase four: Moving in
Woo! You made it. Check you out. Let the new home cards roll in.
You’ll need to arrange for all your things to be moved to your new property. Depending on how much stuff you own and how much money you have available to pay for this service, this can range from chucking a few bags in the boot of mum and dad’s car, to renting a van yourself, or hiring a removals company to do it all for you.
An essential step that you’ve long awaited. Crack open the bubbly, or however you like to celebrate, and maybe invite a few loved ones over to show them your new home.
Redirect your post
Don’t forget to redirect your post. This is easy to set up with Royal Mail and you can do so here. You’ll also need to update your address with relevant companies on and offline, remembering things like the DVLA, your bank accounts, and Amazon (or your orders will be going to the wrong address!).
Contact utility companies to set up your accounts
Somewhere in all that paperwork your conveyancer sent you will be the names of the electricity, gas, water and broadband suppliers to your new property. You don’t have to stick with these, and you can always shop around for a better deal. That’s your choice. But remember to set up new accounts with whoever your chosen supplier is when you move in, and give them meter readings.
Decorating and furnishing
Rome wasn’t built in a day, and likewise it’ll take you several weeks, months and maybe even years (if you have ambitious renovation plans) to get your new home exactly how you want it. With regards to furnishing, this can be a little bit of a challenge early on. If you’ve come from furnished rental accommodation, and you don’t have a bed, and you’re moving just before Christmas when it takes some companies at least 6-8 weeks to deliver — you may find yourself sleeping on the floor for a while. I speak from experience. Also furniture can be expensive, which isn’t the easiest thing to manage right after buying a house. When you first move in it can feel a little bit like camping, albeit indoors. But it is very exciting.
Congrats on getting to the end of this post! Over the next six weeks I’ll be sharing more articles focused on helping you achieve your goal of buying a home, so please check back here for more on that topic. And if you’d like a round-up of content sent to your inbox, you can sign up to our newsletter here.
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