House Buying Process

Even experienced home owners find buying a property a complicated and confusing exercise, particularly as it's something most of us only do a few times in our life. For first time buyers, the process can be even more baffling.

Our simple guide takes you all the way from finding the right property to the day you move in.

Choosing a property
Checklist
Finding a property
Choosing a mortgage
Checklist for choosing your mortgage
What happens next?
Finding a solicitor
Making an offer
Gazumping
Conducting a survey
Exchanging contracts
Completing and moving in
Congratulations!

Choosing a property

The first thing you need to decide when you buy your first property is what sort of area you want to live in. Make a list of the things that matter most to you. These might include having a good school nearby, convenient local transport links and convenient shops or restaurants.

Next, you will need to decide how many bedrooms you want, whether you need a garden and whether you would prefer a house or a flat.

Bear in mind that bigger properties not only cost more to buy, but also normally cost more to heat and maintain as well. With this in mind, you may prefer to choose a newly built house, which should require less upkeep in the first few years. A bigger property also means a bigger Council Tax bill.

You may never find one property that is absolutely ideal in every respect. Be prepared to trade off one factor against another as you look around. For example, you might be prepared to live in a cheaper area if that meant being able to afford a garden.

Here's a quick checklist

Area
Distance to work and quality of local transport required
Quality of schooling if required
Quality of local shops and restaurants
Transport links (e.g. to visit friends or relatives)
Other important amenities (e.g. local parks or heathland)
Type of property
You can afford the asking price
You can afford the heating, other maintenance and on-going costs including council tax
Are you looking for a flat, a house or a bungalow?
If a house, are you looking for detached, terraced or semi?
Are you looking for something old or new.
How many bedrooms do you need?
What is the size of the garden?
Does it have a garage?

Finding a property

Once you have decided what sort of property you are looking for and the area where you want to live, contact as many local estate agents as possible. Ask them to send you details of suitable properties on their books on a regular basis.

Once you have identified a property you are interested in, it is worth calling the relevant estate agent once a week or so to ensure you get an early look at properties which have only just been placed with the agent. In this way, they will know you are a serious buyer and they will generally make the effort to contact you when new properties come up.

Once you get started, you will probably see a lot of different properties in a fairly short period of time. Keep a record of each one you have visited, together with a few notes reminding you of its good and bad points. Then you can look back on this list to check that you are still fulfilling your requirements in the properties you are viewing.

Choosing a mortgage

It is important to organise your mortgage as soon as you think you have found a suitable property. The loan may take a few weeks to process, and the person you are buying from (and the estate agent) will want to know your mortgage lender is all set to go.

If you want to arrange mortgage finance before you've even found your property you can get an Approval In Principle from your chosen lender. This Approval is often handy to convince the vendor that you are a genuine purchaser. We can arrange for your mortgage application to be submitted as an Approval in Principle, just make sure you mention this when submitting your application online.

The amount you will are able to borrow is primarily determined by your income, your employment status, the size of deposit you can provide and what other financial commitments you have.

There are two ways you can find a mortgage. The first way is to shop around among the different mortgage lenders yourself and see what each has to offer. The second way is to go to a mortgage broker, who can search a database of lenders to find a suitable loan for you.

The approach you choose will depend on what kind of person you are. Some borrowers are more comfortable getting their mortgage from a lender they have dealt with before; for example, they simply use the same bank which runs their current account. Others are determined to get the best mortgage deal, and so use a broker to shop around from the thousands of different mortgages available. The great advantage of the internet is that you can do this 'shopping around' yourself on-line, and then apply at a time that suits you, perhaps in the comfort of your own home with help a free phone call away.

Checklist for choosing a mortgage

Does the mortgage guarantee a fixed rate of interest (and hence monthly payment) for the first few years? This can be a help during the early years, when your finances may be stretched.
Look out for early repayment charges which can make it costly to change lender. Will the loan let you take payment holidays if the repayments are likely to become a strain at certain times of year? This is known as a flexible loan and can also be helpful for people whose income fluctuates from one month to the next.
Does the mortgage offer you a cashback lump sum when you first take it out? Loans like this can help you pay for furniture, carpets and all the other things you will need in your new home.
Will you still be able to afford the loan when any fixed-rate or discounted period is over? When special offer periods like this come to an end, most mortages move to the lender's standard variable rate which may be significantly higher.

What happens next?

Once you have chosen and applied for a mortgage, the lender will want some supporting documentation. The information your lender may require includes:

Evidence of your income and commitments, such as recent pay slips, a P60, your latest mortgage statement and your bank statements.
Information from credit reference agencies, your employers, other lenders and your landlord.
Proof of identity, such as passport or birth certificate.

If you apply for your mortgage through Rugby Mortgage Solutions we will handle this documentation or your behalf and manage the process with the lender, one of the advantages of using a broker to select your mortgage.

Finding a solicitor

As a first time buyer, you will not have to worry about selling a property before you can move. But you will still need to find an experienced solicitor to carry out the conveyancing on the property you want to buy.

The job of a solicitor or conveyancer comprises the following tasks:

Obtaining the deeds which prove it legally belongs to the person you are buying from.
Researching just where the property's legal boundaries lie and passing this information on to you.
Preparing a fixtures, fittings and contents list which makes it clear whether or not things like carpets or kitchen appliances are included in the purchase price. This enquiry form will also ask the vendor whether they are aware of any material structural or other defects to the property that you should know about.
Advising you on a draft contract for sale, prepared by the seller's solicitor, setting out the terms of your purchase.
Carrying out a search of local planning information to uncover details of any upcoming developments, such as a new road, which could affect the property's value.
Agreeing a date for completing which suits both you and the property's seller.

Conveyancing may well take longer than you had imagined, but don't be tempted to rush matters. Your house or flat is probably the most expensive thing you will ever buy, so it is important to be sure there are no loose ends.

Most lenders will be prepared to accept your choice of solicitor, as most experienced solicitors will have acted for the lender in question before. However it can be best to check whether the solicitor is registered and recognised by one of the following two agencies before you get too involved. If they are this is likely to make the conveyancing process much simpler. To check out your chosen solicitor or conveyancer, just contact:

The Law Society
Tel: 0870 606 2566

or:

Licenced Conveyancers Association
Tel: 01245 349 599

If you choose and apply for a mortgage through Rugby Mortgage Solutions we provide you with a list of conveyancers who we have worked with and recommend. They are all able to work with you over the internet, by phone or by post, whichever is easiest for you.

Making an offer

Once you have found a property you would like to buy, the next step is to make an offer, normally through the estate agent. Most sellers build a certain amount of leeway into their price, so it is usual to offer less than the seller is asking.

In deciding what you are prepared to pay, bear in mind things like the property's state of repair and how much you would have to spend on building work or redecoration.

Your first offer might be up to 10% below the asking price. It is then up to the seller to either accept that price, or try to negotiate a higher one. If there are several potential buyers interested in that particular property, the vendor may have enough bargaining power to insist that his full asking price is met. Indeed, in a strong market, the property may sell for a price in excess of the asking price!

If you know that many people will be interested in the property (perhaps because good properties of that type are scarce in the market), and you are very keen on it, you might consider offering the asking price up front to avoid a 'bidding' war.

Once your offer has been accepted, the estate agent will confirm this in writing. You can then go ahead with arranging a survey and finalising your mortgage arrangements. The acceptance of your offer is not legally binding until you and the seller exchange contracts.

Gazumping

If house prices are rising or there is great demand and little supply, this can create the temptation for the seller to abandon your offer if a higher one comes along. This process, known as gazumping, is more common in England and Wales than it is in Scotland.

Being gazumped could leave you out of pocket on expenses like the legal costs and survey fee, but that is unfortunately a risk you have to take. The sale is secured by law only when contracts have been signed and exchanged.

Conducting a survey

Once your offer has been accepted, a survey is required to assess the property's condition and value. Your mortgage lender will require at least a basic valuation before allowing your loan to go ahead.

In almost every case, we recommend strongly that you get a more detailed report on the condition of the property to protect not only your lender's interests, but your own as well. Make sure that the surveyor you use is a member of the Royal Institution of Chartered Surveyors or the Incorporated Society of Valuers and Auctioneers.

There are two kinds of surveyor's report beyond the basic valuation:

A House Buyer's Report comments on the condition of only those parts of the property which are easily accessible or visible. The surveyor will recommend any further investigations he thinks are necessary, for example if he thinks the wiring needs checking or there is the possibility of some structural problems.
A Full Structural Survey involves a more extensive investigation. A full survey is more expensive than a house buyer's report, but should tell you much more about any work that may need doing on the property if you buy it. Full surveys are recommended in many cases, particularly if you are buying a property that is more than 100 years old or the building is more than three stories high. When you view the property yourself, look out for any signs of problems like cracks or damp patches so you can point these out to the surveyor later for him to inspect properly.

When you set out on the home-buying process, you should budget for the cost of more than one survey. You might find the surveyor's report on your first property uncovers serious faults (such as subsidence or rot) which mean you want to withdraw your offer. Even if there are no problems with the property itself, another bidder could step in with a better offer at the last minute.

Either way, you will have to start the whole process again, and that includes organising a survey for the next property where your offer is accepted. Where the survey does reveal serious problems, you are free to withdraw your offer. If the problems can be fixed, you may be able to use the survey results to negotiate a reduction in the sale price to compensate you for this extra expense.

Exchanging contracts

With your survey safely completed and the lender happy with it, you can move to the stage of getting a formal mortgage offer from your chosen lender which will detail all the conditions of the loan. Read this carefully and get your solicitor or your contact at Rugby Mortgage Solutions to explain anything you do not understand.

By this time, your solicitor should have a draft contract ready for you and the seller to sign. Once you have signed this contract, there is no going back, so be very sure you are happy with all the sale arrangements before you commit yourself.

Typically at exchange (unless exchange and completion are on the same day), you will have to put down a deposit of 5 or 10% of the purchase price. You also need to make sure that the building is insured as you are now legally obliged to buy it (your solicitor will help make sure that this happens).

Check that:

Your solicitor has completed all the local searches.
The surveyor's report is complete and accepted by all concerned.
You have a formal mortgage offer in writing which you have read and understood.
You have the agreed deposit available.
You have agreed a firm completion date for the sale, and this date is noted in the contract.
There are no outstanding issues remaining to be settled between you and the seller.

The last point is very important. For example, there might be some doubt as to whether the property's existing carpets are to be included in the sale price. You need to get this sorted out in writing before you sign the contract. When you have signed the contract, your solicitor will deliver it to the seller's solicitor in exchange for the contract the seller has signed. From this point onward, both you and the seller are legally committed to the deal.

Completing and moving in

All that remains after exchanging contracts is to pay over the money needed to buy the property, less any deposit already paid at exchange, on the agreed date. Your solicitor will get the mortgage funds direct from the lender and the remainder (if any) from you, and then pass it all on to the seller's solicitor. Once payment has been confirmed, you can collect the keys to your new home from the estate agent.

As soon as you know your completion date, book a removal firm if you need one and make sure they are prepared to provide the level of service you need, e.g. pack your belongings as well as transport them.

Allow yourself plenty of time to sort out all your things before the removal men arrive. Decide what is going where in your new home and label each container with its contents and the room where you want it to go. Remember to pack important items - such as the kettle - where you will be able to find them quickly and easily.

In the last week or two before the move, contact the companies that supply your gas, electricity water and telephone services to let them know you are moving out (if you are currently renting or own a property). Ask them to arrange for the meters in your old home to be read so that you do not end up paying for services the next occupant uses. You may also want to ask the Post Office to redirect your mail for a while. You will also need to let the Council know you are moving so that you are not liable for Council Tax payments at your old address.

Co-ordinate with the estate agent and the vendor to make sure that the meters are also read at your new home. Once you move in, ensure that you carefully file away all the important information you have gathered (i.e. addresses and contact details for the utilities and the Council, the original estate agent's particulars for the property and your mortgage details). They will come in handy should you ever decide to go through the whole process again!

Congratulations!

Finally take a moment to relax and appreciate your new home, and all the effort that has gone into purchasing it. Invite your friends over to appreciate your new home (and to admire your new mortgage!)