Buying your first home, a guide to

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Buying your first home is not all that complicated.If you are lucky enough that say your parents have gifted you the price of a house then the process is simple. Armed with a swollen bank account you can spend some pleasant days visiting estate agents and the various houses they are trying to sell. Then you simply pick one house and hire a solicitor to buy the property for you. You sign the contract, transfer the money to your solicitor and wait to receive the keys. Then you move into the property or you can rent it out.

So the steps when buying a property in cash are as follows:

  • Research the market – online through websites, physical visits to estate agents
  • Pick a property
  • Make an offer
  • Hire a solicitor
  • Transfer the money
  • Sign the contract
  • Move in or rent the property




But most people do not have the money to buy a house in cash like this. In fact most people will have less than 5% of the total value of the property they are seeking to buy. This is why people tend to borrow the money they need and pay it back over many years – this is a mortgage.

Buying a property with a mortgage
Stage one-Idea stage, feasibility

So at this stage you are starting to think about buying your own property. You could be living with your parents or maybe renting your own place. You will need to take a look at your finances and examine how much money you can save for a deposit for a mortgage and how much you can realistically afford to pay back every month. You will also have to think about whether you are actually an eligible candidate for a mortgage.

Questions to ask yourself

  • How much money do I have saved up?
  • How much money do I take in every month after tax?
  • How much money do I spend every month after tax?
  • How much can I afford to pay every month and still have an enjoyable, sustainable lifestyle




Stage 2 – Investigate how much money you can borrow for a mortgage

Armed with the financial information from stage one you can start visiting banks websites in your country. You can use their online mortgage calculator to figure out how much you can borrow and at what rate of interest and your likely monthly payments. You can also obtain an agreement in principle from some banks so that you have confidence you can get a mortgage for the amount you need.




Stage 3 – Start researching areas, viewing properties.

Once you know you can get a mortgage then you can start viewing properties. You can select several properties you are interested in and make offers on some of these properties. If one of the those offers is accepted you can go back to your bank and proceed with a full mortgage application. You cannot proceed with a full mortgage application until you know what house you want to proceed with.




Stage 4 – Submit all the information to your bank

Your bank will need all your financial information plus the details of the property you intend to purchase.  You will probably have to attend a meeting in person. While in person meetings are declining due to technology the banks will still need to confirm you identification to prevent fraud. They will go through the whole application and then submit the application internally for review and approval or rejection. The bank needs to ensure that 1) you are likely to pay back the mortgage 2) if you do not pay back the mortgage that the property you are buying can be sold quickly and the bank will still make money.

What sort of information will the bank require from you?
  • proof of income e.g. payslips and bank statements
  • details of any financial commitments e.g. bank statements
  • proof of your identity e.g passports, drivers licence, utility bills
  • details of the property you want to buy
What else will the bank sell to me ?

The bank will process your mortgage application but they will also try to upsell you the following products:

  • house insurance – you need this 100% but you do not need to buy if from your mortgage bank
  • Conveying service – this is the legal service required to complete the transaction – you should you use your own conveyancer
  • proof of your identity e.g passports, drivers licence, utility bills




Stage 5- Approval

Once your bank has approved your application the next step is the conveyancing. This is where your lawyer takes over the process and speaks to the lawyer of the seller.




Stage 6- Exchange contracts

You attend a meeting and read all of the documents.

The conveyance will ask you if you are happy to proceed and then you will sign the contract.

Contracts are exchanged usually over the phone between the two conveyancing.

You now have formed a binding legal contract to buy and sell the property.




Stage 7 – Pick up the keys

Once the contracts have been exchanged you will be asked by your conveyancer to sign the mortgage deed and the document which transfers the house to you. The conveyancer will then apply to the bank for the mortgage money which will be transferred to the sellers conveyancer. Once the conveyancer has completed the legal process you can then pick up the keys to the property.

 




 

Charlie Standen
Charlie Standen
Charlie started out as a quantity surveyor and project manager before moving into property development and property investment. He also enjoys all aspects of writing, videography, and new media. He writes content for the property development course on property development, property investment, and property finance.