It's still hard to believe that not too long ago we purchased our first home.
December 2017 was one of the greatest but also the scariest time of our lives, thankfully we received so much help and support from our family and friends.
It's all started with an idea when we returned from a holiday back in 2016.
One of my brother Adrian has been building his fairytale wooden house just outside of the noisy capital city of Hungary.
What better push do you need to start thinking of your first home, right? Well, that's how we felt. We did not think the whole idea through first, we just knew one thing, we are going to buy our first home!
We jumped into something new without knowing anything about financial advisor/mortgage broker/solicitor. All these grown-up things scared me in the beginning, but it's all worth the hassle in the end.
I know all the stress and confusion of buying your first home so let me try to iron some difficulties out for you.
I promise this post will help you to understand the process of buying your first home.
So grab a cup of tea, get cosy because this is going to be a long ride...
Finances
Before you jump into looking for your first dream home, think carefully about your finances before you make your first big adult decision.
There are two main things to consider. Your income and your spending each month. Add up all of your expenses: like bills, memberships, any direct debit (like a phone), food, transport and of course the extra like buying yourself some treats, your lifestyle.
Consider what you can give up and what is that you cannot live without. Any expensive hobby? Don't forget when you end up buying a house there would be more extra which you should minus ahead from your current budget.
Thinking of home/life insurance, maintenance fees, possibly higher electricity/water/gas bills, council tax and most importantly, what kind of mortgage payment can you afford.
Deposit
First-time buyers have an opportunity to put down only 5% of the cost of the home. However, it's entirely up to you and of course your wallet if you can afford a higher deposit.
For example, if you want to buy a home which cost £125,000, you'll need to save at least £6,250 (5%)- keep in mind that higher deposit = cheaper mortgage.
Fees
There are some other costs when buying a home, like survey costs, solicitor's fees, the home insurance which I have mentioned above and depending on your house price stamp duty.
Stamp duty changed on November 22, 2017, just before we purchased our home.
First-time buyers spending £300,000 or less on a property purchase will be free of duty.
If you are not too sure, just click here.
Extras
Purchasing a property is all about the potential never ever get scared of easily when you enter a haunted house which needs some improvements here and there. That will happen, this is why make sure you have that extra cash in your pocket for some decorating cost, buying the main appliances for a house like an oven, fridge, or washing machine.
And! Not to forget the moving cost!
I know how good it sounds to have your first stamp under your name, but make sure you are in the position right now to buy a house.
Credit Score
I have never actually cared about my credit history ( Silly me..), and when it came down to buying our first home, this was the only thing I cared about. Monthly payments, phone contracts, credit cards, loans, gas & electricity monthly payments and monthly insurance payments all affecting the credit score. Some apps show your score for free (like Clearscore), but it doesn't show the reason for your number. (this was our problem…)
So if you are looking for an accurate app, I would 100% recommend to sign up Experian, again this app offers a free version however if you pay a monthly fee of 14.99 you will able to track every little thing on your credit history which would help you to improve your score.
Don't forget: Keep saving…and saving
Priority list
Once you are there and have your deposit saved up, figured out what is your budget, write your priority list together which would help you to find your new home while also saving some time, so you know where/what to look for.
Make a decision on what do you want to buy a leasehold or freehold property?
The freehold property is: you are the freehold of the property, including the land it's built on.
You are responsible for maintaining both, so you need extra budget to cover these.
I found more benefits of a freehold property, so for us, this was our main guideline.
However, if you prefer a leasehold property: where you own the property and land for the length of your lease agreement with the freeholder so when the lease ends the ownership returns to the freeholder unless you extend the lease.
Would you like to have a conservatory or a garage? Terrace? Detached? Semi-detached? Or Bungalow?
Give some time to think about all of these because it's likely that you won't have it all in the price range you are looking for.
Investigate the mortgage market
This decision is going to be the mini-milestone. This is the time to get serious. Read, get advice and keep compering. Remember, do not rush into something silly. Consider if you prefer a variable rate mortgage or a fixed-rate one. If you are borrowing from a broker or bank.
My guideline is based on a bank mortgage process.
Variable-rate: The interest you pay can change anytime.
Sometimes for a lower amount but the next month could be a higher price.
Fixed-rate: You are charged the same amount for a certain number of years. Likely 2 or 5 years.
Before you make a decision on which type of mortgage you are applying for start collecting all the documents you will need for the mortgage application process. (a lot…)
Just to mention some:
Utility bills, last three months' payslips, bank/credit card statements, P60, show your outgoings.
Principal Agreement
This is a certificate from a lender to say that they would lend a certain amount to you based on some basic information.
You can apply for this later in the process however we have experienced that some estate agent requires this statement before viewing the property so we wouldn't waste their time. (Fair enough)
The other plus to having this document is that after a viewing a house and you are confident that this is the one, this is your home you will able to make an offer straight away as the agents will certainly ask for this Principal agreement when you are making your offer.
( Keep in mind you are allowed to get several principal agreements if you want to via online or face to face at any branch)
Now the next step is to look for your perfect home. Once you have found the one, get accepted.
If the seller is happy with your offer (mini celebration) time to get back to your lender.
Whoever you picked to sign up for a mortgage with.
I believe it's time to grab another cuppa as we still have a long way to go..and the boring paperwork just begins!
But don't forget the prize at the end, you will have your first home!
Mortgage interview: ( 1-3 hours)
This is the real deal. This time your mortgage advisor will ask everything to make sure you can afford your repayments without stretching yourself to the limits.
Don't forget to bring all the documents that you should have by now to start the process.
Have your answers ready about your commitments, income, outgoings, plans and the property details.
Another thing the lender will check at this part of the process is the credit history that you worked so hard to get your scores up.
This check most likely will be visible on your credit history, so make sure everything is ready to go ahead.
You will receive the answer at this interview if they find no fault with your application the process will begin.
Solicitor
Some of the lenders (banks) will give you the option to find your solicitor through theirs. As we picked one of our lender's solicitors, unfortunately, I have no experience of getting your own one.
By the time we got back home from the bank, we had an email confirmation about the interview and the list of the solicitors that they work with. We picked ours by the reviews that other happy new homeowners left.
We emailed back to our mortgage advisor with the decision who forwarded the email straight to the solicitors.
They were extremely fast by posting a welcome package. Fill out, return as quickly as you can so they can registrate you in their system.
Now you will be waiting...
The solicitor has to request some documents from the seller's solicitor. (contact pack)
Once they have received this, the valuation will begin.
Meanwhile, any relevant searches such as Usually Local Authority Search, Water and Drainage Search, Environmental Search, and depending on the area, a Coal Mining Report can be carried out.
These are also extra fees for you...
Valuation
Again, you can either pick one from your lender or sign up with your own surveyor.
There are 3 different types of valuation you can choose from.
Level 1:
A basic property valuation for the bank. This helps to make a decision if the lender will lend you the money to buy the property. It will give minimal information about the property.
Level 2:
This is a survey for you, detailing the essential things you need to know about the property. A surveyor will visit to assess the inside and outside of the property. This could help to give you a clearer picture of the property, such as defects and problems that are serious or even help you to knock the price down.
Level 3:
This is the most detailed survey you can get. You can tailor the report. As this is a customised report, you get to choose what is included in the report. Obviously, the more you would like to know about the property, the price of the valuation will increase.
As soon as the surveyor has attended to check the property, you will receive your report.
Choices
1) Accepted
If there is no fault with the property, which could affect the price, the process will continue. (Celebration time )
2) Agreement
If there is a fault which possible could cost you let's say 5000£ to fix there are two things you can do.
Get back to the seller with the report (if they are nice) will accept it, and they will knock the price down for you with 5000£ (Perfect ! You saved some money for yourself!)
However, this is where the story also could get sad…
3) Refused
Your lender only gives you the amount what was on the offer that you have made previously to the seller.
For example, the house you want to purchase is 200.000£, but the report has come back that this property is only worth 195.000£.
Your bank (if you put 5% down=10.000£) only will lend you the 185.000£ .(195.000£-10.000£=185.000£).
(you will find yourself in a situation where you need to make a big decision.)
So you can either make up that 5000£ with your own money or you can move on to the next property so the process can start again.
This is why you need to be careful, not too loose so much money on the valuation and only go for it if you are so sure about your decision.
Let's continue with a happy ending!
Legal work
By now, you should have the results for the searches that I have mentioned above.
These searches are to ensure there is no issue which could affect you living in your property.
You will also receive a bunch of documents stating any verifying planning, building regulations, later extensions or alterations made, or information about past flooding.
Meanwhile, your mortgage offer should be issued.
You will also receive your contract to sign.
Then if there is no legal reason not to proceed with the purchase and everyone is happy you can return your signed form, stating your preferred moving date and it's time to pay big money.
Exchange contracts
From the exchange of contracts, you will become legally obliged to buy the property on the agreed date.
Congratulation!
The property is legally yours!
Cannot believe that we survived this post.
Ahh, my hands are actually hurting because of the typing.
I really hope that this has actually worth the hassle and gave you a better idea of the process of buying your first home.
If you have any tips or would like to mention anything I may have missed, please don't be shy and leave a comment below.
Until that, see you next time!
