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First Time Buyer Process
BUYING A PROPERTY REQUIRES A LARGE INVESTMENT, OF BOTH TIME AND
MONEY. IT IS ESSENTIAL YOU GET IT RIGHT AND KNOW HOW THE PROCESS
WORKS FROM THE OFFSET. WE TAKE YOU THROUGH THE F T AND B PROCESS TO
HELP GET YOU THROUGH THE DAUNTING TASK OF BUYING A NEW HOME
FINANCE
Too many people have fallen in love with the property they want,
only to find they have fallen at the next hurdle: getting a
mortgage. Finding out the amount of finance that can be secured
from a financial advisor or mortgage specialist should be the first
step to getting on the ladder. It's important to find out how much
deposit you will need, how much you can borrow, the fees involved,
and therefore how much you can spend on your purchase.
Mortgage brokers
There are two ways to get a mortgage: through a mortgage broker or
directly from the lender. In general, a broker will have experience
to advise you on how much you should be able to afford on a
property before applying for a mortgage. They will also have access
to products only available through them and not in the public
domain, so when you find a property you should be able to apply to
the right product for your circumstances and make sure the
application is filed properly. The drawback is that you may have to
pay an expensive fee (on average is about 1% of the value of the
loan). Brokers often get paid a fee from the lender for
recommending the mortgage, so this fee can be negotiable. However,
it costs nothing to just get advice from a broker.
Fixed or variable
The main products are split into fixed and variable rate
mortgages. A fixed rate stays consistent throughout the term,
despite changes in the Bank of England base rate. This type of
mortgage means you can plan your finances as the payments always
remain the same. A variable mortgage will track the base rate. It
is worth comparing variable products if it looks like the Bank of
England are going to drop their rates. There are also Flexible
Offset mortgages which are beneficial to those who have reasonable
savings in their current account. These mortgages pit all the money
in your account against mortgage payments, reducing the interest
you owe.
Repayment or interest only
A repayment mortgage is usually spread over 25 years in which time
you will pay off the capital of your loan. These repayments are
much higher than an interest-only mortgage, but mean that at the
end of the term, you will own your home outright. 'Interest only'
means your mortgage payments do nothing to reduce the capital sum.
These mortgages are preferable for those planning to live in the
property for a short time. It is often advised that this form of
mortgage is not sustainable unless you can find an alternative way
to repay the debt
Mortgage term
The term of a mortgage can be from two to five years. After the
mortgage term has ended, your mortgage will revert to the standard
variable rate (SVR). There are often redemption penalties for
exiting from your mortgage before the term.
THOROUGH RESEARCH
Buying a home is a big investment, not only because the new owner
may be living in their new home permanently and will have to choose
a property that fits their needs and wants, but buying a property
could be the biggest financial commitment you ever make.
Location is key
The first step is to shortlist locations that you feel you'd like
to live in and then check out if you can afford the house prices in
the area. It's also well worth visiting places you like, it may be
that there's an up and coming hotspot just down the road that is
much more affordable, which you never knew about. Ideally you will
have rented in the area before buying, but if this is not possible
then at least spend some time there, check out the commuting time
to work and do the journey, hang around the local cafes and get a
feel for the area and also check out the safety by asking.
Property search
Once you have found the right location, go online and check out
what's on offer. Most properties are listed online and there are
various property search sites. Most of the properties featured have
good pictures and descriptions, and some have a floor plan. Sign up
with as many estate agents as you can (and your local HomeBuy Agent
housing associations if you're looking at shared ownership
properties). They should send you new properties which match your
description but it is worth phoning agents reguarly.
Viewing
Once you see a property you like, arrange a viewing. Most people
see at least ten properties before putting in an offer. It's well
worth bringing a friend or relative, and also arranging a second
viewing to check out the bits you may have missed. Don't get taken
in by the furnishings and décor too much. Remember that a property
which is slightly run down can still be a great investment and may
only need a touch of paint and a change of furniture. Don't negate
your preferences: make sure the room sizes fit the furniture you
want to put in and if you're after a two double bedroom flat with
outside space, stick to your guns and keep looking.
Estate agents
It's a buyer's market, so make use of agents' legwork in finding
properties which fit your requirements. Be aware that estate agents
are paid commission by the seller on the sale, so try and inspect
the property yourself rather than just the parts the agent shows
you. Don't get sucked in by the hard sell.
BUYING PROCESS
An estimated one in three offers falls through, therefore the
buying process is crucial. It's important to negotiate the right
price and to keep track of your progress, so there are no delays.
For those living in Scotland, once the offer is made on the
property, it is binding.
Offer accepted, what next?
Once the offer is accepted, process your application with your
mortgage lender and arrange a date for a survey or valuation.
Surveys vary depending on how in-depth you want the report to be.
You need to have a simple valuation, which will tell your lender
how much the property is worth, or you can opt for a full
structural survey, especially vital for older properties. When the
survey or valuation results come back, it is possible to negotiate
on the sale price or ask the seller to repair areas of the property
before exchanging.
After the offer is accepted, you will also need to appoint a
solicitor or conveyancer who will be responsible for overseeing the
contract, dealing with the finances and exchanging the deeds.
Exchange and completion date
Once the mortgage offer is in place, the contract is satisfactory
and building insurance has been organised, then both parties will
agree on an exchange date, at which time a deposit is usually
payable and a completion date set, whereupon the mortgage loan is
released and the property is officially yours. The exchange can be
on the same date as the completion, but they are usually a week to
ten days apart. In most cases, a deposit given at exchange is only
redeemable under exceptional circumstance, such as the death of the
buyer. The seller may sue if you do not complete.
Timescale
In general, the time from offer to completion takes around six
weeks to three months, but don't feel pressured or rush into
anything you are not sure of just because the seller or estate
agent is putting pressure on you to exchange.