20 Steps of Buying Your First Home
Congratulations on making the decision to try to take the step onto the housing ladder, a sensible decision, but a difficult task.
Houso is building a community, an eco system that is striving to better the property market, gaining access to more properties, but soon we will be able to connect you with high quality partners to help the process run smoother.
Steps for 1st time buyers.
- Mortgage Broker – Get in touch with a reputable mortgage broker, ascertain your credit history, and discover any black marks on your folder. I am notoriously bad at paperwork, and occasionally I forget to pay my credit card only by a day or so – but it was only late last year when re financing a house that I discovered that this put a definite black mark on my credit file. So – if you have any cards and like me you are forgetful – set the Direct Debit up to cover the minimum payment so you never get this on your file. Obviously we are not FCA accredited and we are not suggesting taking credit and not clearing it off monthly, it is merely something that can be done to help your file, that even as a relatively experienced property person I had wrong.
- Help to Buy Make sure you discuss the Help to Buy program with your broker, this is a government incentive to help first time buyers onto the property ladder. Basically you would need to find a 5% deposit and the government would advance you an interest free 20% deposit. The interest free period comes to an end after 5 years, and then there is an interest rate of 1.75%. Remember the government is taking a share of your home, as such when you re sell they will also take a share of the gain and the initial property price. So if you make money on the property HMRC will recoup 20% of the total sale price not of the profit, but they have leant you the money to get it in the first place. Also remember Help to Buy (H2B) is only available on new build homes.
- Mortgage in principal After discussing your circumstances with the mortgage broker, he will give you an indication of the level of deposit you would require and also what you would be able to buy based upon the income of parties involved in the purchase, basically your spending power. You might not have the required funds yet, and therefore your home move is a little further off, if however you have been squirrelling the deposit money away, and your earnings are clear then you could start moving to a Mortgage In Principle. This is where they have formally run the credit checks, made sure all is as you say it is, and basically committed to lending you a certain figure for a certain period of time.
- House Hunting Now you start house hunting. You would have already familiarised yourself with the portals such as Rightmove and Zoopla, and you are looking at properties within your price point, and probably a little over. Now is the time to do your research, see what has been selling in your area and what figures have been achieved, not asked for, but achieved. A flat at the moment is a trickier buy, because many of the lenders are only lending on flats that are 2 years old or more, although this is subject to change. Ask questions about the property: is it leasehold or Freehold? what are the parking arrangements? what is the management company structure and cost.? How many properties are there left to be built on site? what is the companies snagging and warranty policy? (Snagging is what we developers and builders call fixing the issues, and ask whether they have a written policy showing what is and isn’t covered, things such as cracks, what is a defect?)
- Efficiencies – When viewing ask whether the developer has experienced any other sales and whether the Solicitor that represented the other buyers might be interested in working with you, take down their details do some research on them and add their names to point 7 below. We recommend a local firm to act opposite our sales, we have no financial incentive to do so, but we know that they have approved the contract pack already, and they will be working with more knowledge and be able to undertake the work more efficiently and cost effectively because of this.
- Value for Money£ per Sqft – This is how professional property people work, to calculate the £SF divide the cost by the area – e.g £300,000/1150 Sqft = £260 per square foot – this is the best way to calculate what you are buying and ascribing a figure to it. The process is easier on new builds as the quality should be similar across the similar house types on site. A new build is often more £sf than a second hand home because of the warranty and guarantees that come with it. The same calculation can be applied to second hand stock, and it is a good way for you to make sure you are not overpaying for something.
- Solicitors – After conducting your research, and narrowing your search parameters down, engage with a local Solicitor, seek 3 firms to price for a property based upon your purchase price, get your paperwork in order, ensure you have your proof of ID, and a utility bill. Once the quotes are in decide who you would like to represent you. Remember there are a whole raft of options to choose from depending on your budget, we always try to support local businesses, but Houso will soon be able to help you find your Solicitor wherever you are and whatever you want to pay. There are places for all, but of course sometimes you do just get what you pay for in life.
- Make an Offer: Make an offer – after undertaking your research, having your viewings and deciding it ticks the boxes, it’s time to move forward to submitting an offer. This can be done through Houso direct with the sales manager or homeowner where you are looking to buy, but of course as we are building our stock you might find your home elsewhere, so pick up the phone and submit it. There will often be a couple of rounds of negotiation, and then a deal can be struck. Because you have taken care of your finances, and your Solicitor you are in a strong proceedable position and any builder or developer would be glad of your business- as long as the figure is acceptable to them.
- Mortgage Broker – Get back in touch with your broker to say you have found a house, and make sure nothing has changed with MIP and you can proceed. With his approval move to 10.
- Reservation Fee: Pay your reservation fee to reserve the home, £500 if you are using H2B.
- Heads of Terms- The Vendor (person selling) will arrange for heads of terms to be circulated, this is normally the job of the estate agent/selling agent, it will include the intricacies of the deal, price, time scale, name and address of parties involved and both sides solicitor details.
- Contract Pack – the contract pack will be issued by the sellers solicitors and this then moves to the next phase.
- Removals, Furniture deliveries, BT/Virgin, Utilities, Broadband and Curtains – You probably might not need the removals unless you have the furniture, but start turning your attention to engaging with suppliers that you will need, get prices from removal companies. BT are notoriously painful to deal with when setting up a new line at a new property, and the builders etc can not activate this for you, so book this way in advance – you do not want to be without broadband, especially if you are WFH. The electric and gas supply to the property will be live when you move in so don’t worry about that, but you will be busy so its better to have research done on tariffs prior to occupation, so it is all squared away sooner. Ask your Vendor for window sizes so you can get some curtains for yours and your kids bedrooms otherwise it will be towels stuck up with tape! Remember you do not legally own the home yet, so whilst it is prudent to do your research and understand what you want, do not part with any money until you have exchanged – but key thing is to find out the lead time of how long all the providers take – are the sofas and beds in stock? If not you need to ascertain how long they will take to arrive and work back to when you need to press the button on purchasing.
- Help to Buy authority to exchange – Your solicitors will seek authority to exchange from H2B which will be them moving the money about, you will need to send your deposit contribution to your solicitor.
- Exchange of Contracts – After the legal works have been checked, and approved by your Solicitor you will be moving to exchange of contracts, this is when both parties are contractually obligated, i.e you can’t pull out without loosing your deposit. Your exchange deposit is 10% of the purchase price. Now you are both committed your fire up everything in 13, with a definitive moving date.
- Draw the Mortgage – Between exchange and completion there will be a lag time to get the money over from your mortgage provider, often 5-10 days,
- Complete – This is when the home becomes legally yours, you get the keys!! Well done. Have a tour of the property a hand over, understanding where key things are, like the fuse board and the stop cock for water. Nail the unpacking, and crack a beer.
- Warranties – Your new home will come with all sorts of warranties (assuming its a new build) so get on with registering all of those, often electrical appliances come with additional warranty if you register the details so take full advantage of that.
- Meet the Neighbours – Drop a card round and say Hi we have just moved in and then sign your names very clearly – we have all done it, been so excited about moving, met the neighbours and then in all the excitement forgotten their names- then it becomes awkward. If you can note their names down in your phone on a scrap of paper whatever you can do to not forget! Neighbours can turn into great mates, so bite the bullet and commit.
- Enjoy your happy place.