Buying a home can seem like a complicated process, but with the right amount of planning, and a helpful solicitor to guide you through the process, you’ll find that it is a very manageable procedure. Our guide below outlines the necessary preparatory measures that you must carry out, as well as helpful tips that you should implement, when looking to purchase a new property; everything from getting your financial affairs in order, to handing over the keys.
Before You Decide To Buy
1. Set a Budget
There are three things that should be taken into account in order to establish your potential budget: your current savings, investments and stocks or shares, and the potential for a mortgage. It is important to have an accurate picture of your finances before setting your budget. Sometimes buyers overlook crucial stages of the process, such as the cost of legal fees, insurance, and stamp duty, which must be covered in order to complete the process of buying a home. Stamp duty refers to the tax that you must pay when you purchase a property. When looking to buy a home, it is important to remain realistic and to keep your goals in line with your budget. Your budget should give you an idea of how much you can afford in monthly repayments. This knowledge is required to apply for a mortgage loan.
2. Get Your Finances in Order
After you have established an understanding of your financial situation, you will need to review all of your financial history in depth in order to successfully apply for a mortgage. Potential red flags for lenders include: missed credit card or loan repayments, betting transactions, or any behaviors associated with risky investment strategies. Generally, if you are a first-time buyer there will be a 90% limit on your mortgage. This means that you will need a deposit of at least 10%. If you are not a first-time buyer you can normally borrow up to 80% of the value of the property.
It is vital that you have a thorough understanding of your financial history in order to avoid unnecessary delays in your mortgage application. It is the duty of the mortgage provider to ensure that you will be able to afford the repayments, and as a result they will carry out in-depth searches of your financial history. If possible, pay off any outstanding debt on your account before submitting your application.
3. Applying for a Mortgage
Finding out how much you will be able to borrow is key step in your journey to buying your home. Approaching lenders to find out how much you should have saved for a deposit is useful so that you can budget accordingly. It is possible to apply for mortgage directly through a lender or using a mortgage broker.
The most important factor to consider when choosing a mortgage is the interest rate. There are a number of incentives available like ‘cashback’ which can seem appealing but it is vital to consider the complete cost of the mortgage and interest rate. It is a good idea to apply to a number of lenders. If you are offered multiple mortgages, you can compare the rates and choose the best deal for you.
Ideally you should have mortgage approval before you start to view properties so that you have a clear picture of how much you can spend. Having mortgage approval also adds authority to any potential offers on a property.
After you have your mortgage application approved it is necessary to apply for mortgage protection cover before you can drawdown the mortgage. This is insurance which will pay off your mortgage if you die within the policy’s coverage. This is a necessary step as legally your lender must ensure that you have this insurance before giving you your mortgage. A lender can however agree to provide you with a mortgage without the insurance if you are (a) buying an investment property, (b) over 50 years old, (c) you cannot get cover, or (d) you have life insurance already. Normally a mortgage lender will offer to arrange this insurance when you make your mortgage application. It is vital that you arrange this as soon as possible as it can take a few weeks to procure and may delay the sale of the property.
Choosing a Property
4. Ask Questions
Finding your new property is the fun part of the process. Make a list of essential qualities that you require from your new property. This might include the area, the amenities, the size of the property etc. Properties are sometimes advertised by the sellers themselves, but listings can also be found in newspapers or on real estate websites. If possible, speak to members of the local community about their area, this may be helpful in making your final decision. When you find a property you are interested in, ask the estate agent any questions relevant to your search. It is important to ask about the Building Energy Rating (BER). This is a certificate required by anyone selling or renting a home which certifies how energy efficient the dwelling is. A high BER Rating (such as A or B) will greatly reduce the cost of running your new home. Another helpful thing to know is whether the locale is in a High Radon Area. The Environmental Protection Agency recommends that you know if your home has been tested for radon.
5. Appoint a Solicitor
Appointing a competent solicitor can make your property buying journey much easier. The legal administrative work involved in the transferring of property ownership is called conveyancing. Having a solicitor before you find your dream home is helpful because as soon as your offer is accepted, the estate agent will need the details of your solicitor to give to the seller’s solicitor. Your solicitor will check if the sale of the property is legal i.e., that the person selling it has a right to do so. Your trusted solicitor will also open a file to put the transaction proceedings into motion. Before you sign your contract, your solicitor will raise relevant questions about the property with the seller’s solicitor. This procedure is referred to as “Raising Pre-Contract Enquiries” and involves specific questions arising from an examination of the Title Documents and Planning Documentation supplied with the draft Contract for Sale.
Solicitor’s fees in conveyancing transactions are not permitted to be calculated as a percentage of the property price, and are usually estimated in advance on the basis of the work that is likely to be involved in the transactions. Matters that can affect the level of fees involved tend to be whether there are issues on the Title that need to be rectified, whether a compulsory first registration in the Land Registry will be required, whether or not you are buying the property to live in or to rent, the price of the property, amongst other things. Services like calls, postage, registering deeds, and search fees could be an extra charge. Choosing a professional and responsible solicitor will streamline the process of buying and selling your property. They will guide you through the paperwork that needs to be completed, as well as helping you to understand when each step needs to be done.
6. Complete the Transaction
It is strongly advised that you hire an independent Architect or Engineer or Surveyor, (with the appropriate Professional Indemnity Insurance) to carry out a structural survey. This detailed survey should highlight any issues that might not have been highlighted when you made your offer. The results of this survey will greatly impact your decision about the property, for example if they discover “Rot” in the structure, you may not decide to purchase the property or to change your offer.
Before your mortgage can be drawn down you must get a valuation on your property and get home insurance. Your lender will require a professional valuation before they can officially lend you the money for the property. This will take into account the condition of the property and the area surrounding it. The lender will base their loan on the formal valuation. As well as this, you must have home insurance in place so that the house is covered by the time the deal is finished. If the property you are purchasing is an apartment, the insurance should be included in the building fees.
If you are buying a home that is newly built, you and your solicitor will receive a completion notice from the builder when the work is completed. After you receive this, you should have a snag list created. This is a list of things that are incomplete or need to be fixed i.e., loose wiring, the placement of skirting boards etc.
Once you have completed these processes, a closing date and time can be agreed upon by all relevant parties. Your solicitor will draft a statement that outlines the remaining balance required to complete the sale. The Purchase will usually be completed by exchange of funds and Title Documents between the solicitors and the ordering of closing searches (final checks) against the property, to ensure the property is not adversely affected by any judgments, loans, or other charges against any prior owner. The sale will be formally closed with the handing over of the keys. Congratulations you are now a homeowner! Once the sale has been completed, the deeds must be signed as soon as possible because of the stamp duty time limitations.
Buying a home doesn’t have to be a complicated affair. With the right guidance from a professional solicitor, as well as the appropriate budgeting and planning, you can become a homeowner in a few convenient steps!