A Step by Step Guide For First Time Buyers
Guide & Tips for first time buyers
We have recently helped a number of first time buyers in the Surrey and South West London area and we often get the same questions asked. This is a write up on the process and expectations of buying your first property. Buying your first property can be stressful and confusing but it really is not as complicated as most people believe. If you have the right guidance and professional team around you it should seem like a walk in the park. The process is as follows –
Stage 1 - Speak with a mortgage broker to find out how much you can borrow. Do this as early as possible, as you then understand what you need to work towards. Usually it will work out you can borrow 4.5 – 4.75x of your annual salary. If two of you are buying jointly with an average £30,000 wage this means you could borrow up to £285,000. If you are putting down a 5% deposit you would be able to purchase a property of £300,000. I would advise to use an independent broker, independent of the agent you are buying through. The reason for this, is due to the fact your broker should be working for your best interest. If you use a broker owned by the agent, I have found they are usually working for the selling parties best interest and can control and manipulate the situation a lot more. This is not every time, but I have seen it an awful lot.
Stage 2 – Once you have saved a deposit and spoke to a broker you then are aware of your budget. You can then go and find the property you want to buy. At this stage you know exactly how much you can afford and what offer to put on the property. Use your mortgage brokers expertise, they do this day in and day out. Ask them to help with negotiations and advise on the purchase price.
Stage 3 – Your offer on your property has now been accepted, you need to instruct solicitors and finalise your full mortgage application. When you are looking at solicitors be wary of the recommendations again, a lot of estate agents will advise you to use their solicitors as they are receiving a nice sum of money if you do. Some brokers also operate in this way. My advice would be to get quotes from agents solicitors, brokers solicitor and a recommendation from a friend or family member. It is important you have a solicitor that is working completely for your own interests as you do not want missed legal problems causing you issues when you sell at a later date. A freehold property will generally be cheaper than a leasehold property due to the titles of the property being a lot more simple. Based on a £300,000 freehold purchase, expect to pay anything in the region of £700 – £1,300 plus VAT for legal fees depending on what part of the country your solicitor is based. If you are paying any more, it is worth asking a few further questions.
Stage 4 – Mortgage application completed and valuation instructed. Your mortgage company will send a surveyor to value the property you are buying. The cost of this varies on the value of your property, most lenders will not charge a valuation fee for first time buyers. I would say budget £800 if you are buying a property over £500,000 and £500 for anything less. The valuation usually takes place within a week.
Stage 5 – The valuation has gone back to the lender and waiting for the underwriter to review which usually takes another week, depending on the mortgage company you use. At the same time the lender will be reviewing all the documents you had sent your mortgage adviser, once they are happy with the documents and the valuation it will go in the cue for your mortgage offer to be issues. Again depending on the lender this can take anything from a day to 2 weeks.
Stage 6 – At this stage the offer from your mortgage provider has been sent to you and the solicitor and you are now 3 weeks down the line from original mortgage application being sent to the lender. You are now awaiting on solicitors to do their work which will usually take another 4-5 weeks. This entails your solicitor questioning the sellers solicitor about any issues, including planning issues, structural issues and a whole host of questions the solicitors will ask each other. Sometimes this can be extremely timely and can take up to 8 weeks.
Stage 7 – All questions are answered and you are then sent a report from your solicitor confirming everything they have been questioning about the house you are buying. You need to review and ask them any questions you have at this point. If happy you need to sign the contract and send the deposit funds to the solicitor. At this point you will have to set up a Building insurance if you are liable for your own insurance. You will be liable if you are buying a house or a share of freehold e.g. a maisonette where you are both owners of the structural building.
Stage 8 – The solicitor has the contract and the deposit funds, they then call for the money from the lender. This is the point you can exchange the contracts with the people you are buying from. This is the point of no return. At the day of exchange you are then liable for the buildings insurance so this must be set up.
Stage 9 – The funds are received from the bank and sent to the selling parties solicitor, you are then given your keys.
Please budget for all professional fees, I have provided the following breakdown of fees to look out for based on a £300,000 freehold house purchase. The following fees will need to be paid out of your own cash. Each transaction will be slightly different though and I have given an average of the market below.
- Solicitors fees - £1,000 plus VAT (£1,200)
- Mortgage Broker fees - £500
- Valuation fees - £300
- Stamp Duty - £0 for first time buyers up to £300,000 purchase price
If you need any guidance do feel free to give us a call on 0208 012 8182 or get in contact with me directly James@mesafc.co.uk .
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