Thinking about buying a house but not too sure where to start?
In this blog you’ll find our helpful 6 steps of buying a house guide, making understanding the house buying process that little bit easier for you.
Step 1. Budget
One of the most important things to ask yourself when thinking about buying a house is, ‘how much house can I afford?’. To work this out, you will want to take into account how much deposit you have at the ready, your income and your partners income (if you are buying with somebody else). If you’re a first time buyer, you will need at least 5% of the overall house price as a deposit. Lenders will typically lend you between 4 – 4 ½ times your household annual income for a mortgage, which should help you work out how much you will be able to borrow.
Whether or not a mortgage lender will lend to you may depend on your credit score, so it may be worth checking up on this. Be careful when checking your credit score as many services can leave a mark on your credit file for checking it. One good credit checker you could use is Check My File, but there are many options out there. When budgeting to work out what house values are in your price range, consider your monthly mortgage payments; what will they be?
To work out what you will pay each month in mortgage payments you will need to work out how much you need to borrow, and how long for. If you’re a first-time buyer, you may want to take out a longer mortgage term to make your monthly mortgage payments more affordable. Taking out a longer mortgage term seems daunting, but if it makes owning your home more affordable, it may be a wise choice for you. If after a number of years your financial situation has improved , you can always adjust your mortgage term and make it shorter through re-mortgaging options. Whenever you are thinking about buying a house, always put affordability to the forefront of your thoughts.
Step 2. Browse
Once you have worked out what houses are in your price range, you can begin your search. Look for houses that fit within your price range but don’t forget to consider things like Council Tax and other local charges. Council Tax fees often vary from area to area and can depend on house values. Before considering viewing a property, work out if the area in which that property is located is an affordable place to live. You can check council tax bands by using .Gov’s Council Band Checker.
One great way to make sure you don’t miss out on any relevant properties is to sign up to estate agents in your areas mailing lists. By doing this, you will receive alerts from estate agents when new properties which meet your criteria are listed on the market.
If you would like to receive updates on Open Door developments and available homes, sign up to our mailing list at the bottom of this page.
Once you have found some properties you like, arrange a viewing.
Step 3. Offer stage
Once you have viewed a property you like and think you’re ready to put in an offer, there a few things you should do first. Firstly, check you will be approved for a mortgage (if you require one) for the value of the house you are thinking about buying. There are various ways you can do this, you can speak to a bank or building society directly, or talk to a reputable mortgage advisor.
Secondly, you may also want to arrange a second viewing of the property before you make an offer. A second viewing is advisable as you may spot things or think of questions you want to ask that you didn’t on the first time around. Second viewings are a good way to avoid getting any nasty surprises after purchasing your home.
Once you have completed the above and are still happy with the home you have found, make an offer.
Step 4. Conveyancing
Once your offer on your new home has been accepted by the seller, you will need to contact a Conveyancer. A Conveyancer will help make sure your sale goes as smoothly as possible and all the necessary checks on your new home are carried out before the sale’s completion. This process is to make sure you are fully aware of what you are buying and have conducted all the necessary checks on the property to protect your interests.
Step 5. Exchange
Once your Conveyancer is happy all the necessary searches have been carried out and is satisfied with the results from these, you will progress onto the exchange of contracts stage. Exchanging contracts is the final stage in the home buying process and outlines exactly what you are buying.
Your solicitor will exchange contracts with your seller’s solicitors and once these documents are signed, the agreement between you and the sellers becomes legally binding. It is vital that you are happy with the home you are purchasing before you get to this stage in the sales process. If you pull out of a sale after the exchange of contracts, you could incur a fine.
Step 6. Completion
Once you have exchanged contracts you will arrange a completion date with the seller. You will not have completed on your property until your funds have been transferred to the seller’s solicitors. Transfer of funds is the final step in the house buying process.
If you are buying a house in a chain, going from transfer of funds to completion can sometimes take a little while. The seller in your chain will need to secure their next property before they can release the property to you.
To find more help and guidance on buying a home, visit The Money Advice Service.
OPTIMISE YOUR CHANCES OF SECURING A MORTGAGE
Looking to optimise your chances of securing a mortgage? Our friends from Metro Finance have come up with some fantastic advice to help!
So how do you put yourself in the best position for a mortgage lender? Not just to get a mortgage, but to get the best possible deal. Here’s some useful tips, to help put you in the best position for a mortgage:
Who lives at your house?
When a lender does their credit search, they want to see you on the voters roll, not Tommy Smith who lived there 3 years ago. It’s easy, check for yourself and get yourself registered, this will gain you some valuable credit score points.
Who’s taking all the risk?
The lender wants you to take some risk too, in the form of your deposit. For Shared Ownership there are 14 lenders out of 26 who accept a 5% deposit. The best bit, with Shared Ownership it’s 5% of the share not the full value e.g. for a 25% share of a £350,000 home, the deposit can be as low as £4375
How much do you spend on coffee? Maybe £3.50 per day, which equates to £1277 per year! Yes, its nice to have a fancy coffee but what’s better, a shiny new home or a beverage? The more deposit you save, the better the rate will be
How do you look on paper?
This is really important, use a service like checkmyfile.com it provides three different credit reports in one, just how lenders would see you on paper. You might think yourself a low risk, but if the credit file says otherwise, that’s all that matters.
See how much you owe, having credit is good for your score, but too much and you’ll look overcommitted.
Check for errors, if anything doesn’t look right, contact the lender or the credit reference agency.
Look for missed payments, bring them up to date and try to keep everything paid on time. Mortgage lenders can still lend with minor blips, but the fewer the better.
No score or low score?
So, you’ve checked your credit file and your credit score is in the poor category. You might not need to worry, some lenders, especially the Building Societies operate a more manual approach, ignoring the credit score and focusing more on you as an individual.
Bank statements are boring?
Not to a Mortgage lender, they like to see how you run your account, this gives them an idea of how you’ll run your mortgage. Try to stay within any overdraft facility, try not to miss any regular outbound payments. Usually a lender will ask to see the last three months statements
Know your income?
Nowadays its rare to find someone with pure basic salary, make it your job to understand your payslips, the bonus, the overtime – are they regular or guaranteed? This makes a big difference to borrowing capacity. You’ll need the last three months payslips, be ready to explain how your income is derived. Same for Self-employed, it’s likely you’ll need two years tax calculations and tax overviews.
At Metro we speak to around 1600 Shared Ownership buyers each month, so we get a good idea of what lenders like and don’t like. You don’t have to be perfect, but you can help yourself and improve your credit score.
In a nutshell:
Prove where you live – get on the voters roll and get your name on some bills
Low utilisation of credit – e.g. if your card has a £1000 limit, using just £500 of that would be 50% utilisation
Pay on time – don’t be late with your regular outgoings, even arranged late payments have a poor effect Fix stuff – any mistakes on your credit file, identify and fix
Don’t overdo it – credit is good for your score, but not too much
Be prepared – keep your payslips, P60’s, bank statements, utility bills etc
Don’t get too many searches – applying for any type of finance or mortgage results in a credit search, too many can lower your score
And finally, the best advice – speak to a Mortgage Adviser. Why? There are usually around 270 different Shared Ownership Mortgage products, designed to help many walks of life. One or more could be right for you.
HELPING YOU ON THE PROPERTY LADDER
Many people think they can’t afford a new home, are you one of them?
Well, with Help to Buy, which is a Government-backed scheme, you might be surprised. This great initiative is designed for those with a smaller deposit but still with a desire to own their own home.
Here at Open Door we’ve got several great developments offering the Help To Buy scheme but before we tell you about them here’s the facts on Help To Buy:
It’s only available on new build homes – perfect for Open Door schemes.
You put down a deposit of at least 5% of the value of the property.
The Government lends you up to 20% of the property’s value as an equity loan (after 5 years you start paying interest on this loan).
You take out a mortgage on the rest of the property’s value.
Here’s an example: A house is priced at 182,500.
With Help To Buy, this could be how it would work:
Government loan: £36,500
*illustrative purposes only and dependent on your own financial position.