First-time home buyer guide: How to buy a house in the UK

This first-time buyer’s guide to buying a house, or flat, will guide you through all the hoops that you need to jump through to get your foot on the property ladder. The process of buying a house can feel daunting, but it’s easier when you know how.

First things first…

How long does it take to buy a house?

We’re going to give it to you straight, buying a house is a long, and often complicated process, much longer than it should be. According to the UK Government, the average time it takes from offer to completion is 12-14 weeks. Here we break it down into 5 steps with time estimates so you know exactly what you’re getting in to:

Click on the links below to jump straight to the step you need information on.

STEP 1: Savings and money – ongoing

STEP 2: House hunting and viewing – 12 weeks

STEP 3: Committing to the purchase – 4 weeks

STEP 4: Conveyancing and exchanging contracts – 8 – 10 weeks

STEP 5: Completion and ownership – 1 week

 

 

STEP 1: Savings and money

How much do I need for a deposit?

There is no set amount of money you need to get your foot on the property ladder. However, the more money you have for a deposit, the better rate you will get on a mortgage. If you want a competitive deal, then a 25% deposit would be a good savings target. However, you can still get a reasonable mortgage rate with a 10% deposit and Help to Buy schemes allow you just 5% deposit (more on this below).

 

Right now, the average price paid for a first home is £207,693, and according to Halifax, the average first time buyer deposit is £32,899, which equates to a 16% deposit.

What government schemes are there to help get me on the property ladder?

Help to Buy – ISA

If you are saving to buy a house, you should get yourself a Help to Buy ISA. The government will boost your savings with a bonus of 25%, so for every £200 you save, you get a £50 top up. The maximum bonus you can receive is £3,000. You can then use the money towards any house under £250,000 (under £450,000 in London) in conjunction with any mortgage.

Help to Buy – equity loan

The Help to Buy equity loan scheme is available to help those with a 5% deposit get on the property ladder. The government will lend you 20% of the purchase price on new build properties worth up to £600,000. It’s interest-free for 5 years and then when you eventually sell the property, the government will take 20% of the sale price.

Shared ownership

The government’s shared ownership scheme allows you to buy a share of 25% to 75% of your home from the local housing association and then pay subsidised rent on the remainder. This is available to non-home owners who earn £80,000 a year or less and you must pay a 10% deposit on the value of your share.

How do I know what kind of house I can afford?

To find out what you can buy, you should get a mortgage in principle, also known as an agreement in principle (AIP) or a decision in principle (DIP), to find out how much you can afford to borrow. You can do this directly through lenders (banks and building societies) or you can go to a mortgage adviser who can do the applications for you.

 

Beware of doing too many applications for a mortgage though: each application leaves a ‘footprint’ as you are essentially applying for a loan. If too many AIPs show up on your credit history it could damage your credit score as it makes you look like you’re applying for lots of loans. This in turn will mean you won’t get a good offer for a mortgage as it looks like multiple lenders have turned you down, even if you’re only checking – it’s a vicious cycle!

 

To avoid damaging your credit score with unnecessary AIPs, try using the Money Advice Service’s Mortgage Affordability Calculator.

STEP 2: House hunting and viewing

What area do you want to live in?

Location, location, location: we’ve all heard the phrase and seen the programme. Phil, Kirsty and 65% of Brits will tell you that location is the most important factor when purchasing a new home.

 

Think about what’s important to you: 33% of people see being close to their place of work as the top priority, while 28% of people want to find somewhere close to public transport links, and 19% of people look for a property in the catchment area of a good school.

 

The location you buy in can have a monumental effect on the price of your home. For example, according to Rightmove the average price of a house in London is presently £629,611, whereas in the North East the average price is £144,616 – a substantial difference!

 

It can be helpful to approach estate agents at this stage as they can tell you what houses you can afford in the area based on your budget. Countrywide is the UK’s largest estate agency network, so there will likely be one of their offices on your high street. It’s also valuable to sign up to online estate agents such as eMoov, Purplebricks and Yopa for instant email updates during your house hunting phase.

What should I look for when viewing a property?

You may have as little as 20 minutes to look around a house or flat to decide if it’s the one for you. You will of course have your own criteria for what you’re looking for in terms of number of bedrooms, whether it has a garden, or the state of the kitchen or bathroom.

 

But there are lots of things to think about, so it’s worth writing a list to take with you. If you want to make sure you haven’t missed anything, try using Which?’s free viewing checklist – it’s pretty comprehensive and you can add any of your own extra specifications.

 

Research from Which? found that 26% of people viewed their current home once before buying it, 43% twice, 21% three times and 11% four or more times. Try to view it at different times of the day and week to get a feel for what the surrounding area is like.

What should I ask the estate agent when viewing a property?

Check out our blog on questions to ask when viewing a property so that you don’t run into any nasty surprises when you make an offer on the property.

 

STEP 3: Committing to the purchase

How do I make an offer on a house?

To make an offer, approach the estate agent who you viewed the property with and ask them to pass on your offer to the seller.

You can call up the estate agent to discuss this, but you should put your offer in writing via letter or email as evidence. It is a legal requirement for estate agents to pass on any offers that they receive to the seller, but they will usually tell you if someone has put in a higher offer to give you an opportunity to make a higher bid.

Most people do not offer the full asking price straight away, and go for a first offer of around 10% below the market value. This then gives you room to negotiate with the seller. First time buyers will be particularly attractive as they have no chain, so can commit to buying quickly, so long as their mortgage is in order.

How do I apply for a mortgage?

You should already have applied for your mortgage in principle (AIP) to get a good idea of what kind of mortgage you can afford to get. So now you need to finalise this as the AIP is not a legally binding offer, but most lenders will honour the AIP for 30 – 90 days.

 

You can apply directly to the lender, or you can instruct a mortgage broker to find the best rate for you. Online mortgage brokers, Habito and Nested can help find the right mortgage for you with quotes sent directly to your phone.

 

When you apply for your mortgage, you will need to provide copies of the following documents to your lender:

  • Your last three months of payslips
  • P60 form from your employer
  • Bank statements of your current account for the last three to six months
  • Statements from your savings accounts
  • Any loans you have taken out
  • Utility bills
  • Passport or driving license
  • Proof of benefits received (if you’re on benefits)
  • Statement of two to three years’ accounts from an accountant (if you’re self employed)
  • Details of the property you are planning to purchase
  • Estate agent details and your solicitor’s details

Once the lender has examined all these documents, they will establish whether your incomings and outgoings are sufficient to support the loan you are requesting. They will also ask questions about your financial situation and any future plans that could impact your finances, such as having a baby. As previously mentioned, the bigger your deposit, a better mortgage rate you’ll be able to get.

If the lender decides that you are suitable for a mortgage, they will need to see the property that you want to buy to carry out a valuation survey. This is to ensure that you are borrowing the right amount of money for your property: they don’t want to lend you £600,000 for a house worth £200,000. They also may not want to lend you money if your house is deemed “high risk”, i.e. it’s very run down or located in a flood risk area.

The property also acts as a security deposit for the lender, so if you fail to make back your payments, the property will be held as collateral. It sounds scary, but this is why the mortgage process is long and thorough – to ensure you don’t get yourself into a situation where you can’t afford to pay for your home!

Do I need insurance if I’m buying a house?

If you’re getting a mortgage, your provider will insist you have buildings insurance. However, you don’t necessarily need to buy your buildings insurance from them, shop around instead to get the best deal.

Do I need a survey on the house I’m buying?

A survey is advisable, but not essential. The valuation survey for your lender will just give an overview of the property and only flags serious issues, whereas a survey such as a Home Buyer’s Report can flag up any issues that could be costly to you in the long run.

Only 20% of people get a professional property survey before committing to the purchase as they are expensive and time consuming, so can add weeks to an already long process. However, purchasing a property is the biggest financial commitment you will make in your life, so a survey is a good precautionary measure to ensure there are no hidden problems.

There are three surveys of varying cost and detail that you can opt for: a Condition Report, a HomeBuyer’s Report or a Building Survey. You can find out more through The Home Owners’ Alliance. If the survey does unveil any serious problems with the property, but you still want to go ahead with the purchase, you can use it as a bargaining chip with the seller to get some money knocked off the price.

What happens if I get gazumped?

If the offer is accepted, the sale is not legally binding until the exchange of contracts. You should ask the seller to take the house off the market to avoid being gazumped – which is when someone makes a higher offer to the seller and they accept it despite already verbally accepting your original offer.

During this time, you will begin legal proceedings, which are expensive, and cannot be repaid if you are gazumped. You can buy Home Buyer’s Insurance for £35 to cover up to £2,500 in legal and mortgage fees in case your purchase falls through. For your Home Buyer’s Insurance to offer full protection, you must take out the policy within up to 14 days of the date that you instruct your solicitor.

 

STEP 4: Conveyancing and exchanging contracts

Do I need a solicitor to process my documents for buying a property?

There are a lot of legalities that you need to abide by in order to buy a property, so you will need to instruct a specialist property solicitor, also known as a conveyancer, to carry this out for you. As well as estate agents, Countrywide also has a roster of conveyancers to help you with your property purchase.

 

It is the responsibility of the conveyancer to gather and draw up all the property documents (including the contract on the property, conveyancing searches with the local authority and any security certifications). They also get all your money together in co-ordination with your mortgage lender ready to transfer to the seller before they legally transfer ownership of the property into your name.

 

Once you have instructed your conveyancer, they will send you a purchase questionnaire to fill in. This will provide them with everything they need to know about the property, you and your financial situation (mortgage plans, amount you have for a deposit, etc). We recommend using My Home Move, the UK’s leading provider of mover conveyancing services.

 

Your conveyancer will then request a copy of the draft contract from the seller’s solicitor, along with title deeds, a property information form, fittings and contents form. If you are purchasing a flat or a building where the land is owned by someone else (also known as leasehold) the conveyancer will also request a draft lease from the lease holder. The conveyancer will condense all of these documents into a summary written in plain English (so you don’t have to have a law degree to understand it!).

What searches need to be completed before exchanging contracts?

Searches ensure there are no impending plans or issues that could affect your property in the future. Your conveyancer will carry these out on your behalf. These include local authority searches, checking the Land Registry for the title register and title plan, an environmental search, water authority search and chancel repair search.

What does exchanging contracts mean?

You can go through the draft contract with your conveyancer to check everything’s covered. Then a final contract is drawn up by the seller’s conveyancer which contains all information about the property, like boundaries, buildings insurance and what contents and fittings are included in the purchase.

 

When you then exchange contracts, you are legally committed to buying the house, and the seller is legally committed to selling it to you: NOBODY can pull out. At this stage you will also have to pay a deposit, usually 10% of the agreed sale price. You transfer this money to the solicitor and they will pay it over to the seller on your behalf.

 

 

STEP 5: Completion and ownership

When do I officially own my new house?

When you exchange contracts, you will agree on a completion date. I.e. the day you pick up the keys to your new home. Your conveyancer will prepare a transfer deed, the document that gives you legal ownership of the property, and send it to the seller’s conveyancer to complete and send back to you. This process takes about a week, and it’s only when this has occurred and the fees for the house have been paid that you are officially the new owner of the house.

What do I need to do before completion on a house?

You need to ensure that you have signed your mortgage deed as your conveyancer will now need to apply to your lender for the mortgage advance so that it is ready to be transferred on the day of completion.

 

Your conveyancer will provide you with a completion statement with the final fees that you owe them for their services, Stamp Duty and the outstanding balance of the cost of the house. You need to transfer this money to the conveyancer’s account so they can transfer it to the seller on the completion date.

Remember, the latest rulings from the Budget means that first time buyers no longer have to pay Stamp Duty on property worth up to £300,000. But don’t worry, if your new home is worth over this amount, the first £300,000 is still tax free so you’ll still make a saving.

What happens on the day of completion?

Your conveyancer will pay the remaining cost of sale to the seller’s conveyancer. When all the funds have been received, keys to the property will be released to the estate agent for you to collect. Pop the champagne, you are now officially a home owner!

 

While you are celebrating in your new home, your conveyancer will pay the Stamp Duty land tax to HMRC and register the change of ownership of the property with the Land Registry on your behalf.

 

And that, in a (rather large) nutshell, is how to buy a house.

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