Purchasing a home for the first time is an exciting journey, filled with anticipation and dreams of the future. However, it can also be a complex process, where various steps and considerations come into play.
This guide aims to demystify the home buying process for first-time buyers in the UK, from the initial steps of obtaining an Agreement in Principle (AIP) to the joyous moment of receiving the keys to your new home.
Step 1. Saving for a Deposit
The deposit is a significant upfront payment towards the purchase price of your home, typically ranging from 5% to 20% of the property’s value. The larger your deposit, the better the mortgage rates you can access. Saving for a deposit can take time, so it’s wise to start as early as possible, exploring savings accounts with favourable interest rates or government schemes designed to help first-time buyers, such as the Lifetime ISA (LISA).
A Lifetime ISA lets you save up to £4,000 every tax year towards a first home (or your retirement), with the government adding a 25% bonus on top of what you save. However, you must be 18 or over, but under 40, to open a Lifetime ISA.
Step 2. The Fees: Budgeting for Additional Costs
Bear in mind that beyond the deposit, several additional fees are involved in buying a home. These can include:
- Stamp Duty Land Tax (SDLT): Stamp duty is a tax on properties over a certain value. First-time buyers often benefit from relief or reduced rates.
- Solicitor/Conveyancer Fees: For handling the legal work.
- Survey Costs: Depending on the type of survey you choose.
- Mortgage Arrangement and Valuation Fees: Charged by lenders for setting up the mortgage and valuing the property.
- Moving Costs: The practical aspect of moving your belongings.
Budgeting and financially preparing for these costs early on can prevent any surprises down the line.
Step 3. Understanding Mortgages and Your Agreement in Principle (AIP)
Mortgages: Before diving into property searches, it’s essential to understand how much you can afford. This involves looking into mortgages – loans specifically designed for purchasing property. Lenders will consider your income, expenses, credit score, and other financial commitments to determine how much they’re willing to lend you.
Agreement in Principle (AIP): An AIP is a statement from a lender indicating how much they might lend you, based on preliminary information. Obtaining an AIP is a crucial first step as it gives you a clearer idea of your budget and shows estate agents and sellers you are a serious buyer. However, remember, an AIP is not a guarantee of a mortgage offer.
Step 4. Property Searching: Prioritise What’s Most Important
Location and Budget: With your AIP in hand and a clear idea of your deposit, you can start searching for your dream home. Consider what’s most important to you – whether it’s location, size, or specific amenities. Use property search websites, estate agents, and even social media to find available properties. Remember to keep an open mind; sometimes compromises are necessary, especially when purchasing your first property.
Viewings: Attend as many viewings as possible to get a feel for what you like and what you don’t. Make a checklist of essential features to help you stay focused.
Step 5. Making an Offer
When you’ve found the right property and are ready to proceed, you’ll make an offer through the estate agent. If your offer is accepted, the buying process formally begins. This is also when you’ll formally apply for a mortgage, using your AIP as a basis.
Step 6. Home Buyer and Valuation Surveys
Once you’ve had your offer accepted, conducting valuation and home surveys are crucial. Your lender will carry out a valuation survey to determine how much the property is worth, this is usually a basic survey with only obvious problems highlighted. Additionally, you’ll have the option for a home buyer’s survey, carried out by a professional surveyor, who will evaluate the condition of the property in more depth, identifying any problems such as structural issues or damp. Surveys can range from basic ‘Condition Reports’ to more comprehensive ‘Building Surveys.’ Choosing the right survey depends on the property’s age, condition, and your peace of mind.
Step 7. Choosing a Solicitor
A solicitor or conveyancer will handle the legal aspects of purchasing your home. They play a pivotal role in the process, from conducting ‘searches’ to understand any external factors that might affect the property, to handling the exchange of contracts and completion. It’s important to choose someone experienced and communicative. Your estate agent should be able to provide quotes for their preferred solicitors.
Step 8. Exchange of Contracts
After your solicitor completes all necessary checks, arranges the mortgage, and you’re ready to proceed, you’ll reach the ‘exchange of contracts’ stage. This is where you and the seller commit to the sale, making it legally binding. A completion date is set, and you’ll usually pay a deposit at this point.
Step 9. Completion Day and Moving In
Completion day is when the property officially becomes yours. The remaining purchase price is transferred from your solicitor to the seller’s solicitor, and you can collect the keys to your new home. Congratulations are in order – you’re now a homeowner!
Step 10. Settling In
After moving in, take some time to settle into your new home. Register with local services including a new GP, dentist etc. if necessary. Update your address where necessary; the DVLA, banks, insurances, credit cards, store cards, local council, tv licensing, utility companies, broadband providers and most importantly, celebrate your achievement.
Purchasing a home for the first time can seem daunting, but with the right preparation and understanding of each step, it can also be an incredibly rewarding experience. Take each phase one at a time, seek professional advice from a mortgage advisor and estate agent when needed, and before you know it, you’ll be stepping through the door of your very own home.
If you’re ready to take your first step on your property journey, contact us today!
We have offices across Worcestershire and the West Midlands including Barnt Green, Bromsgrove, Redditch, Rubery, Solihull and Worcester, and our friendly team of experts are here to advise and help you every step of the way!