Mortgage Pirate guide for first time buyers.
If you are thinking about purchasing a home for the first time the experience can feel daunting. Estate agents, surveyors, mortgage lenders and solicitors all have their own jargon and processes to learn. Our guide for first time buyers aims to help simplify the process and cover off some of the most common events that you are likely to experience. We hope to streamline 5 simple steps into a chronological order to make everything a little easier to get your head around.
Today we will cover:
The key people involved in a search for your first home include:
- A mortgage broker
Will work out your affordable budget, advise on the likely costs, check you can obtain a mortgage and have your finances confirmed so that others can see you are serious about buying. - The estate agent.
Show you the property available and negotiate a purchase price with the seller. - The mortgage lender.
Will grant your mortgage finance to purchase the house. A mortgage broker will deal with them on your behalf. - A solicitor or conveyancer.
Facilitates the legal elements of a purchase. Including checking there are no legal restrictions, that local laws and planning permission have been adhered to and by moving the various sources of money around. - A surveyor.
Inspects the property you would like to buy and brings any defects to your attention. This is optional but recommended.
Step 1, Guide for first time buyers – Be confident of your financial position.
Firstly, book an appointment with a mortgage advisor.
In the UK, almost all mortgage lenders need you to have some deposit before they can consider a mortgage application. So be sure to have an idea in mind of how much deposit you may be able to find. This may be from savings, a gift from a parent, inheritance, or from some other source. Let your mortgage broker know your level of deposit when you speak with them as it affects which mortgages will be available.
Before you start viewing properties you should have a good idea of what your budget will be. This includes how large a mortgage you could obtain, and what the monthly repayments will be. Estate agents and sellers like to know that you are in a position to afford the property you enquire about. Plus, they may check you will have the necessary deposit available. Having everything in place beforehand shows that you are serious and have done your homework.
Speak to a good mortgage adviser and they will be able to cover off all of the early requirements so that you are clear on your options and have a good idea of the monthly repayments you will be making once you move in. They will complete a budget planner with you to check that you will be comfortable with the ongoing cost of living. Finally, don’t forget to include the costs of legal work and any stamp duty when working out your finances. These can often catch people out further down the line.
Can I be pre-agreed for a mortgage?
Your mortgage broker will also be able to provide an agreement in principle to confirm you can proceed. This can be shown to an estate agent as evidence that you are serious about a property. When sending your agreement in principle it is important not to give your game away regarding the amount you are willing or able to spend. Some agreements in principle show your maximum borrowing amount. Unfortunately, this tells the estate agent that they could possibly squeeze you for a higher offer. Showing them just enough for the property in question is perfect.
Finally, a broker can provide a letter confirming a lower mortgage limit if this helps. You will have peace of mind that you can offer higher if you need to. Especially in case you become caught up in a bidding war.
Step 2, Guide for first time buyers – Start viewing property.
Once you have a good idea of your budget you can now start using Rightmove, Zoopla etc to locate suitable properties. These large sites should have all available property listed. However, check with individual estate agents websites just in case they do not subscribe to those online services.
Estate agents recommend viewing homes a little above your limit as they know that a deal can be done. Having all the financial groundwork in place will put you in a stronger position when it comes to negotiation.
Give them a call or drop them an email to say that you would like to view a property. They can then book this in when convenient for you.
During the property viewing itself ask plenty of questions if you are interested. play it cool and ask if they know what the energy rating for the house is, what the typical monthly bill is for utilities, what the broadband is like and if there are any problems with noise or neighbours etc. It is also worth asking what the position of the seller is as they may indicate if they are looking for a quick sale, or if they haven’t yet found somewhere to move into.
Don’t be afraid to take parents or a friend with you as an extra pair of eyes is always useful.
I’ve found a house I like, how to I make an offer?
Before making an offer it’s recommended to view the property for a second time. This gives you a chance to compare it to other property you have seen. Also, take more time to inspect details you may have missed before. Using the time in between the first and second viewings to carry out your research is a good idea. You will be able to double-check your finances and formulate a plan. Also, if you would like any third parties to carry out checks of the house this is also a good time i.e. have an electrician check the wiring etc.
If you are ready proceed:
- Begin by contacting the estate agent with your offer. Also drop them an email so that there is a record of the offer and any conditions attached to it i.e. to include fixtures and fittings or to remove from the market once agreed.
- Remind them of your position. As a first-time buyer you are not in a chain because you do not have a property to sell. This is seen as a big positive as it can speed the process along. You may be able to negotiate a cheaper price because of this.
- The seller will consider your offer. In a lot of cases they will reject the first offer as they are assuming you will be testing them with a lower sum to start with. Don’t be disheartened if this happens.
- Negotiate if you need to. Have a second offer figure in mind from the start and know where your limit lies. If the first offer is rejected, take your time before offering more and emphasise reasons why you are offering that amount i.e. you have seen similar cheaper houses, condition, time on the market etc.
- Finally, get it in writing. Purchase price and conditions agreed. Always ensure that the estate agent confirm this to you in writing. This avoids any later confusion.
Step 3, Guide for first time buyers – Get your mortgage application going.
Once you have agreed a purchase price with the estate agent, the next step will be to update your mortgage broker and choose a solicitor.
Your mortgage broker will be able to use the agreed price to confirm your deposit, amount of mortgage required and source you the best deal available on the day. If you are happy with the costs, the broker can help you make the formal application to the chosen lender and secure the mortgage product.
To start with you will probably need to provide up to date paperwork at this point so be sure to have at least the following:
- Your last 3 months payslips and bank statements.
- A bank statement or utility bill dated within the last 3 months to prove your address.
- A copy of your ID i.e. a passport or driving licence.
- Proof of your deposit i.e. savings statement or a letter from someone gifting you the deposit (your broker can provide a template for this).
- The full property address, name and contact details of the estate agent and your solicitors details.
Next your mortgage application will be assessed by an underwriter at the chosen lender. Your broker will work with them to fully agree the application as fast as possible. 1-3 weeks is reasonable for this stage, but it could be longer if the lender is busy or the case complex.
Step 3, Guide for first time buyers – Instruct your solicitor.
When choosing your solicitor, you will need to take into account the service they offer and the fees they are charging.
Begin by comparing costs of at least 2 local firms and one other from a national selection. Local firms can cost more than a remote conveyancer and can increase costs when they are busy to control the flow of business. Local firms may have knowledge of the house or any known concerns to look out for which is handy. However, they may not be able to progress your case quickly in the event of certain staff absence.
Next, ask friends or family for recommendations as they will often know a good firm or two that they have dealt with in the past.
In either case you are free to choose who you use as your legal representative. Estate agents should never force you to use their recommendation. Let your mortgage broker / lender know as soon as you have instructed your solicitor. Solicitors information will be added to the mortgage application.
Lastly, once you have instructed a firm, they will begin to set up your case and issue you with a welcome pack. This often includes their terms of business, a questionnaire and some declarations to sign. They may also request a small amount of funds to place on account. Out of these they can authorise small payments on your behalf without having to keep coming back to you. Expect around £300 – £500. The deposit funds, remainder of the legal fees and anything else will be sorted out further along the process.
Step 4, Instruct a surveyor if required.
Most of the time properties will be marketed in a perfectly habitable condition. However, there will be occasions where a property will be old, in need of renovation or have some clear defects that require further investigation. In these cases a buyer can arrange a survey with a local company. They will commission a detailed report for the buyer to highlight any problems. The surveyor will also make recommendations for any work required and provide estimate costs.
A report can be arranged at any point but the earlier in the process the better. This is because if you need to pull out from the purchase due to something serious on the survey, you may be able to mitigate incurred legal and mortgage costs. You may also be able to renegotiate the price of the property if there are problems that the seller may not have been aware of. So, in this respect a survey could be a useful tool to have.
Mortgage lenders arrange their own basic mortgage valuation to check if the property is suitable for their security. However, this is purely for their benefit and in many cases the inspection is not carried out physically. Therefore, for your own peace of mind, an independent survey could save you a lot of money.
Step 5, Move in.
Finally once the mortgage has been formally agreed, the solicitors have competed their checks, and you are happy with any survey results, you can now look to agree a moving in date with the sellers. Once everyone has agreed a suitable date you are able to send your deposit monies to the solicitor. They will make arrangements for the mortgage funds to be released on the day of the move.
On the day itself you can expect a call from the solicitor and the estate agent to confirm everything has been finalised and you can now collect the keys of your first home.
Congratulations. You are now a homeowner.
We hope that you have found this guide for first time buyers useful. If you feel we may have missed anything please let us know using the contact form below.
Post compiled by Grant Carpenter CeMAP, CeFA – 15 years of regulated mortgage advice.
Please note that the content listed within this remortgage guide is purely for information purposes only and does not constitute advice.
