Whether you’re a first time buyer or seller or even if you have bought and sold a dozen properties before, there are always a few surprises that can come up along the way. Our guide is intended to help you through the key elements of the buying and selling process, to identify the key milestones and help you to be ready for them and any problems that may appear along the way.
Step 1 – Don’t lose your head
One of the biggest mistakes a first time buyer can make – and this is often repeated by those that have bought and sold many times before – is to find and fall in love with a property without first checking whether you can afford to buy it. Let’s face it it’s pretty embarrassing if you go to the check-out at your local super-market and discover that you’ve forgotten to bring along some cash or a card to pay for your shopping. So why would you expect it to be any different when you suddenly find out you can’t afford the dream home you’ve set your heart on.
Find out how much you can afford.
This will depend on: -
1) Your earnings. Mortgage Lenders will usually lend you 3.5 times your annual income however it is possible to borrow up to 5 times or even more.
If you are buying with a partner you will usually be able to borrow 2.5 times your joint annual income – although there are a number of variations to this rule based upon each lenders set criteria.
2) How much you have saved up. As a first time buyer you may be required to have a deposit of around 5-10% of the purchase price,
this could be from your own savings or being gifted to you by a relative or friend. It may also be the amount that you are bringing as profit from the sale of your existing property or by releasing equity.
3) Other expenses. You will need to take into consideration all of the other expenses involved in the house moving process, i.e. Estate Agents fees (when selling), Solicitors fees, Stamp Duty, Removals and the anticipated running costs for your new home.
In order to work out how much you can afford we would recommend that you seek advice from a licensed Mortgage Broker, bank or building society. As rule a high street lender will usually only be able to sell you a mortgage or mortgage related products from their company or group of companies. A broker will usually have access to a larger number of mortgage products available on the market.
Choosing the type of mortgage
Each will be able to explain to you about all of the different types of mortgages available to you which may include, repayment mortgages, interest only mortgages, cash back mortgages, discount mortgages and many others. They will be able to offer you a Mortgage in Principle (M.I.P. or sometimes called a Decision or Agreement in Principle) which will give you a good idea of how much you can afford to borrow and what type of mortgage you want.
This will be a conditional offer made by the mortgage lender, which, providing the information that you have given is correct they will ‘in principle’ give you a mortgage. Once you have an M.I.P. you’ll know what you can afford and once you have made an offer on a property you can apply for the actual mortgage which should come through quicker – helping to minimise delays.
Step 2 - Now you can start looking!
This should start off with you, the buyer, deciding where you want to live. You then need to register your details with Estate Agents in your chosen area. You may want to start your search on the internet where you can search property websites or download some Property Search Apps so that you will receive alerts directly to you mobile.
By registering you will ensure that you are up-dated with every new property that comes onto the market within your search criteria.
N.B. At the same time you may want to get some quotes for purchasing (and selling) from a few solicitors or conveyancers.
Once you have found your ideal property you need to make an offer. If the vendor accepts your offer things really start to get moving!
Step 3 - Buying the property
This is the time that you need to instruct your solicitor to act. He or she will contact the seller’s solicitors requesting copies of the title deeds and draft contract. You will need to put your solicitor in funds; probably around £200 should do in order to get them underway.
You will need to formally apply for a mortgage and advise your solicitor or conveyancer with details of your financial arrangements for the purchase.
You may also want to instruct a Surveyor at this stage to inspect the property that you are buying – the lender will appoint their own Valuer on your behalf but this is principally for their benefit in order to protect their security in case you fail to keep up your repayments and they need to repossess the property and sell it on. (See our guide to instructing a surveyor or valuer).
Step 4 - Exchange of Contracts (or ‘Exchange’)
If the survey comes back ok and i) your solicitor has finalised the contract details with the sellers solicitors, ii) you have a firm mortgage offer from your Lender and iii) all parties within the chain (if applicable) are ready and you have agreed on a completion date (moving date) then your solicitor can exchange contracts.
You will need to provide your solicitor with a deposit usually up to 10% of the purchase price, which will need to be cleared funds in order that your solicitor can forward it immediately onto the seller’s solicitors. If you pull out of the sale after exchange of contracts you will lose this money and the vendor could sue you for the balance of the purchase price. Your solicitor will also require their fees; any stamp duty due and any monies that you have agreed to pay separately for any of the seller’s fixtures and fittings.
Step 5 - Completion (Moving day!)
Upon exchange of contracts your solicitor will have committed you to a legal completion date – the date upon which the balance of the monies will be paid to the sellers solicitors. Your solicitor will apply for these monies directly from your lender and will forward them to your seller’s solicitor’s bank on the day of completion, usually via Telegraphic Transfer (the banks electronic money transfer system).
Legal completion does not take place until the seller’s solicitor confirms that they or their bank are in full receipt of the monies that you have legally
contracted to pay for the property.
The seller or their Estate Agent will not be able to release the keys to the property until they have been advised by the seller’s solicitors that they are in receipt of all the monies due, usually around late morning or early afternoon - if there is a chain involved this may not happen until later on in the day. If you have a long chain and you are near the top of it be prepared for a long wait and pre-warn your removal company – they will be used to this sort of thing but may make an extra charge if they end up working later than they had anticipated.
Your solicitor will carry out the necessary legal paperwork required in order to register you as the new owner of the property. They will also pay out to the government the stamp duty that is due and if you are selling a property for more than you are buying at they will forward you the balance of monies, less theirs and any Agents fees due.