Guide: 7 Steps to Buying Your First Home

Buying your first home is exciting, but first you have to do the not so exciting part - saving!

Most people can’t afford to buy their first home outright, so they take out a loan known as a mortgage to fund the purchase.

You’ll usually need to save a deposit of at least 5% of the total house price to get a mortgage, but many people choose to save more, aiming for a 10% or 20% deposit.

By saving a bigger deposit, you’ll have less debt and you can usually access lower mortgage rates, but you may have longer to wait until you’re ready to buy. If you find it difficult to save (for example, if you’re paying a lot of rent) a 5% deposit mortgage may be a more realistic option.

In addition to your house deposit, you may also need to save for:

• Solicitor/conveyancer fees 
• Survey costs
• Mortgage fees
• Stamp Duty Land Tax (in England)
• Land Transaction Tax (in Wales)
• Removal costs
• Furnishing and decorating your new place

These costs can add thousands on top of what you already need for your deposit.

It’s a lot of money to save, but there are government initiatives available to help first time buyers, such as Help to Buy schemes and the Lifetime ISA.

If you’re planning on taking out a mortgage, be aware that the mortgage lender will take a close look at your circumstances before agreeing to lend you the money.

They will look at things like:

• Your salary, and how stable your employment is. It may be more of a challenge to get a mortgage if you are self-employed, in a temporary role, have commission-based earnings or if you just started a new job.
• Your monthly outgoings, including general spending and any regular payments such as credit card, loan and car finance repayments.
• Your credit rating - you can check this for free online. It is negatively impacted by things like missing payments and taking out lots of different loans and/or credit cards. You can improve your credit rating by paying debt back on time.

Keep in mind that in the months (and even years) before you buy a house, you should be sensible with your finances to improve your chances of being accepted for a mortgage.

Tips For Getting A Mortgage

Here are some top tips for protecting your credit rating and boosting your chances of getting a mortgage:

• Make sure you pay all bills and payments on time
• Pay off or reduce any credit cards or loans (with the exception of student loans)
• Avoid taking out any new loans, credit cards or buying things on finance as the time to buy a house draws closer
• Rein in your spending in the months before applying for your mortgage – the lender will look at your bank statements to see how you manage your money

Once you’ve saved your deposit and carefully considered your budget, it’s time to start viewing some houses!

Before you book any viewings, it’s a good idea to get a mortgage Decision in Principle.

What is a Decision in Principle?

A Decision in Principle is a certificate stating how much a lender is prepared to lend.

A Decision in Principle is based on an overview of your financial circumstances - it’s not as in-depth as a full mortgage application.

For this reason, having a Decision in Principle isn’t a guarantee you’ll be accepted for a mortgage,  but it’s a good indicator of whether you could borrow the amount you need.

Why should I get one?

A Decision in Principle shows estate agents and the people selling the property that you are a serious buyer, and should be able to borrow enough money to purchase the property. This may mean they consider your offer more seriously.

When you get a Decision in Principle with us, it won’t affect your credit rating.

Once your Decision in Principle is in place, you can start to view any properties you like the look of.

Making an Offer

Buying a home is a big decision, so don’t be afraid to ask for more than one viewing of a property before putting in an offer.

When you’ve found ‘the one’, you can put in an offer – now things get really exciting!

The seller may try to negotiate, so remember: even if you fall completely in love with the house, think very carefully before you go over your budget! If you offer more than you can afford or more than the property is worth, you may struggle to get a mortgage.

Remember, even if your offer is accepted, this isn’t legally binding – both you and the seller can pull out of the deal at any time before you exchange and sign the contracts.

TIP: You may want to consider asking the seller to take the home off the market if your offer is accepted- this reduces the chance of someone else coming in with a higher offer and stealing the house from under you! You can also say your offer is subject to a survey, so if any major problems are detected with the property, you can pull out of the deal.

Now that your offer has been accepted, it’s time to apply for a mortgage.

This is a good time to meet with a mortgage adviser. Your mortgage adviser will find out more about your personal and financial circumstances and recommend a suitable mortgage that is affordable for you.

Your adviser will also help you submit your mortgage application.

What will the lender want to know?

The lender will take a close look at your finances when assessing your application. They will request copies of bank statements and payslips so they can build an accurate picture of your income and spending habits. Try and have all your financial information to hand, and be open and honest with your lender to make sure this stage moves as quickly as possible.

Your mortgage lender will also want a valuation report carried out on the property to make sure they're willing to lend on it.

The lender will organise their valuation report, but you may have to pay for it if a free standard valuation is not offered with your mortgage deal.  

A standard valuation is for your lender’s benefit and you won’t receive a copy of the report.

However, you can also choose to have other types valuation and survey reports conducted– we’ll discuss additional surveys and valuations in the next step.

If the report values the property differently to the price you have agreed to pay, this can affect your mortgage offer. For example, if you have offered the seller £200,000 but the property is valued at £150,000, the lender will reduce the amount they are willing to lend you.

If the lender is happy with the valuation report, they will give you a mortgage offer, bringing you one step closer to owning your first home!

The mortgage offer will include how much they are willing to lend you, as well as a date the offer is valid until.

Buying your first home is probably the most expensive purchase you’ll have made in your life so far - so you want to make sure you know what you’re getting yourself into.

At the same time as making your mortgage application, you need to choose a solicitor or conveyancer to take care of the legal side of things.

What is the difference between a conveyancer and a solicitor?

The legal process of transferring property from one person to another is called conveyancing.

Licensed conveyancers are specialists in property transactions, but can’t advise in other areas of law.

Solicitors are qualified lawyers who can offer a full range of legal services, including conveyancing. Due to their wider legal expertise, solicitors can assist with more complex legal disputes.

What will my solicitor or conveyancer do?

At this stage, your solicitor or conveyancer will conduct searches with the local authority and Land Registry to make sure everything is ok with the property and the local area. For example, they’ll check the house isn’t in a flood zone, near contaminated land, or subject to any legal disputes. Later, they’ll handle contracts and the transfer of funds, plus they will provide general legal advice throughout the process.

Surveys and Valuations

You can also get a survey to highlight any problems with the property before you go through with the purchase. You may be able to arrange a survey through your mortgage lender, or you can contact a surveyor independently.

The type of report you choose will depend on the type of house you’re buying, its general condition, how much information you want to know, and how much you’re willing to spend.

These are the 3 types of valuation and survey reports that mortgage borrowers can arrange through the Society:

Standard Valuation Report: This report is for the purpose of assessing the suitability of the property as security for the mortgage. It is carried out by your lender to ensure the property is worth the price you have agreed to pay. This report doesn’t give details on the overall condition of the property and cannot be relied upon to identify any defects, but provides sufficient information for the mortgage company to decide if it’s safe to lend on. You will not receive a copy of the report.

HomeBuyer Report: A HomeBuyer Report will include a valuation and survey of the property and should identify major faults with the property’s condition. The surveyor will complete a limited inspection of parts of the property that are easily visible and accessible. Any major defects of the areas examined will be listed, with recommendations on any action or further investigation needed.

Building Survey: Also known as a structural survey, this is the most technically comprehensive type of survey. A Building Survey should reveal issues on the inside and outside of the property, including any serious risks and dangerous conditions. The surveyor will produce a detailed report on the condition of the property with advice on any repairs needed. A Building Survey doesn’t include a valuation of the property.

What happens if there’s a problem with the property?

If the legal searches or survey highlight any problems, you may want to amend your offer – although the seller doesn’t have to accept.

If you’re really concerned, you can withdraw your offer and look for a different property. You won’t lose your deposit, but you’ll be out of pocket for the legal searches and the survey.

What happens if I’m happy with the survey and legal checks?

If you’re happy with the results of these checks, great! You can now accept your mortgage offer and get ready to exchange contracts.

Exchanging contracts is exciting – once you and the seller have both signed the contracts, the property legally becomes yours!

However, you can’t exchange contracts until everything is in order. This is likely to be weeks, if not months, after the seller originally accepted your offer.

The length of time you have to wait depends on many factors – for example, if the person selling you the house hasn’t already bought a new home, they won’t be able to move out yet. Until the seller has somewhere to go, they won’t be ready to exchange contracts. This is known as a chain. The longer the chain, the longer things can take – this can be a frustrating process for many first time buyers who can’t wait to get the keys to their first home!

If it takes a particularly long time to get to exchange, it’s worth checking the expiry date of your mortgage offer. If this expiry date passes and you’re still waiting to exchange, you may have to go through the application process again.

Once you and the seller exchange and sign the contracts, you and the seller are both legally committed to the sale – so make sure you read the contract carefully with your solicitor.

At this point, your solicitor will take your deposit. Remember, you’ll lose your deposit if you don’t proceed after this point.

You’ll also agree on a completion date – this is the date when all the money changes hands and you get your keys!

Completion usually takes place a couple of weeks after exchanging contracts, so you shouldn’t have to wait too much longer. Some people even agree to complete on the same day that they exchange contracts!

IMPORTANT: The property is now legally your responsibility, so make sure you take out building insurance from the date of exchange - if anything happens to the property from now on, it's down to you to fix it!

Today’s the day - it's completion time!

On your completion date, your mortgage lender will send the remaining money needed to purchase the house to your solicitor, who will then transfer it to the seller. Your solicitor will also register the change in ownership with the Land Registry of England and Wales.

At this point you will need to pay your solicitor, as well as any Stamp Duty Land Tax (in England) or Land Transaction Tax (in Wales).

Once all payments in the chain have been confirmed, you can finally pick up the keys to your very first home - congratulations!