Buying a new house is an exciting step in anyone’s life. It’s a chance to discover a new area, meet new people and create your own space. However, there are various stages involved with the process of buying a new house which can get confusing.
The average age of a first-time buyer is 34 years old, which means that many younger people will be more familiar with the renting process than that of buying a property. This can be an issue when first time buyers – or even individuals who haven’t bought a new property in a while.
In this article, we’ll look at the various stages that are involved with the process of buying a house, from first looking around properties to when you exchange contracts.
9 steps to buying a house
From deciding on your budget to getting a mortgage agreed, there are several steps to consider when buying a house.
Let’s take a look at each step in detail.
1. Deciding whether or not to buy
The number one thing you should do is think long and hard about whether or not you truly want to buy a house. Remember, unless you are buying outright, this is a long-term financial commitment. So make sure you are ready to make that commitment. This is especially important if you are making a joint mortgage application.
If you and your partner are making the move to buy, you need to make sure the foundation of your relationship is as solid as the building you want to buy. Otherwise, if you break up, you will continue to be linked together by a legally binding contract.
You should also weigh up the benefits and negatives of buying and lending. For example, if you enjoy the freedom of moving you may be better off renting. Conversely, if you enjoy the freedom to do whatever you want in your residence, you should buy. It is also important to weigh up whether or not you can afford to buy. Many people are unaware of the extra hidden charges in the house-buying process.
2. Decide your budget when buying a house
An essential part of the house-buying process is analysing your finances to see what you can afford. However, it is not as simple as just finding a house matching the asking price and voila. Of course, having money in hand to make a property purchase simplifies things as you do not need to deal with a mortgage provider. However, as stated, there are still extra costs involved.
For example, house buyers also need to factor in:
- Stamp Duty
- Conveyancing solicitor fees
- Property survey
- Removal costs
- Any furniture or white goods needed
- Utility bills
- Council Tax
- Buildings insurance
- Service charges
- Parking costs if applicable
People making a mortgage application to buy a house need to factor in other costs. For example, can you afford the mortgage? A mortgage lender may give you a 5% mortgage but in the long run, you pay more in mortgage payments than you would if you put down a larger deposit. You also need to pay a mortgage lender a valuation fee and a mortgage arrangement fee. Furthermore, if you have to sell your previous property you need to pay an estate agent fee unless you sell the property by yourself.
3. Decide where you want to live
You may already have a location in mind. You may, for example, just want to stay where you grew up, or you may be forced to live within commuting distance to where you work. However, remote workers have an unrestricted choice in where to live in the UK. As long as you can get an internet signal you can work there. Try and think about what kind of location suits your lifestyle.
For example, if you are an outdoors person who loves nature and has an introverted personality, you may prefer to live somewhere more rural. However, if you are a gregarious person who likes the hustle and bustle, perhaps a large town or city would be more beneficial. You also need to think about your hobbies and passions and the needs and wants of others in your circle. For example, you may be a fitness fanatic, so explore whether or not an area has good access to gyms. Does the location have good schools? Is there a low crime rate? Are house prices in the area affordable? These are all questions you should ask yourself.
Remember, if you accept a mortgage offer, you are legally bound by it. So, if you are unhappy in the area you could be stuck there for years in that unhappiness unless you choose to sell. It is important to thoroughly do your research about potential locations. You could talk to local estate agents for their advice, but keep in mind they will be actively trying to sell you property.
4. Decide what type of property you want to buy
As well the area you should decide which type of property you actually want to live in, should it be a house or flat for example. A first-time buyer may buy a cheap affordable one-bedroom flat. You may do this to make it onto the property leader and have an asset instead of filling the pockets of landlords. Then at a later date, you could rent this out and buy a larger place. In this case the rent could cover your mortgage repayments. Or you could sell the property and use the money to upgrade to a larger property.
If you have a family or are buying using a joint mortgage with friends you will need a property with an adequate amount of bedrooms. A house will likely be a better option for this. Also, think about your desires – do you want a property with a garden, for example?
Furthermore, you may also think about the property as an investment. So you need to think about whether it is re-sellable or likely to increase in value over time. For example, conventional properties will likely rise in value over time. However, less conventional homes like houseboats will not appreciate in value like brick and mortar houses. You also need to decide between freehold and leasehold properties. You do not ever truly own a leasehold property. You only own it for a set period which was usually around 90 years. However this has recently been reformed, and the new length can be extended to 990 years with zero ground rent.
5. Perform a property search
When you have locked down your budget, where you want to live, and what type of property you want to buy, it is time to search for your new house. You may have to make a few compromises when buying a property. However, you may just find your dream home. Talk to estate agents and give them your requirements and have them do some leg work for you.
However, you should not just rely on an estate agent. You should also do your own research. With social media, online marketplaces and the ability to have remote viewings, it is easier than ever to research properties.
6. Make a formal offer
When you have found a property you should then make a formal mortgage offer. It is a good idea to get a mortgage in principle before making an offer, as recommended by mortgage lenders and estate agents. Obviously, those buying outright can skip this process. Hopefully, you will then get an offer accepted and be on your way to home ownership. However, even when an offer is accepted, it is still not that simple.
This is because the purchase is not legally binding until you and the seller exchange contracts. Until this point the seller can pull out of the deal at any point. Moreover, you also need to deal with the possibility of gazumping. Gazumping is when a new buyer swoops in and offers more money for the property. Even if you have matched the property price and have an offer accepted, they can still choose to renege on your deal and take the new offer.
Gazanging is when the property owner chooses to keep the property instead. This may be because the housing market is experiencing a boom, and they want to keep the property longer and sell out when the market peaks.
7. Arrange a mortgage
If applicable, you will then have to arrange a mortgage agreement. Hopefully you have a mortgage agreement in principle which makes things easier. However, you should also shop around to see if you can get a better deal as well. Make sure you have your deposit amount in place and apply for a mortgage. A mortgage provider may take weeks or months to accept a mortgage offer, so be patient.
In the meantime you can arrange for all the necessary steps to be completed like the conveyancing process. You should hire a conveyancing solicitor to take care of the paperwork and make contact with the seller’s solicitor. You will also need a mortgage valuation survey before a lender will transfer any funds. It is also a good idea to get a separate structural survey on the house.
8. Exchange contracts
The next thing to do if all else goes smoothly is to exchange contracts. When you exchange contracts, the sale is legally binding. Before the exchange is made you should also agree on a completion date. A completion date is the date at which you can move into the property.
Usually mortgage deals are given with the condition that you have buildings insurance. You need to have this in place before the completion date. This is because you are legally responsible for the property once contracts have been exchanged.
You then need to make any final negotiations. For example, you may like to buy the seller’s appliances. You also need to take readings of the gas and electricity to make sure you are not charged for what you have not used. Solicitors will then complete the conveyancing process, informing the land registry of a change of ownership and transferring title deeds over to you.
9. Complete the sale and celebrate!
When the title deeds have been transferred and funds have been exchanged, there is only one thing left to do – collect the keys to your new home. At this point, you may wish to get straight down to celebrating, or you may wish to tie up all the loose ends first.
For example, you need to move all your stuff in and set it up how you like it. Make sure the Stamp Duty is paid if applicable and all legal fees are taken care of and double-check you are listed as the new owner on the land registry.
Finally, it is time to pop open the bubbly and celebrate your new venture.
