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How to buy a house

To buy a house you need to set a budget, find a home you can afford, apply for a mortgage and transfer funds to the seller

Buying a house is a complicated process and can seem daunting to first time buyers, our step by step guide explains what you need to do to buy a house.

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How to buy a house can be broken down to nine steps:

1. Set your budget

Setting your budget is the first step. It might be a bit dispiriting if you’re starting out, but it’s important to be realistic and not overstretch yourself – especially while rates are low.

Deposit

You will typically need 10-20% of the value of a home saved up before you can be eligible for a mortgage. So taking the average UK house price of around £190,000 (or £500,000 in London) you will need around £19,000-£38,000 (£50,000-£100,000 in London) in savings.

But bear in mind that typically the bigger your deposit the lower your interest rate will be. But the brackets for lower rates are usually in multiples of 5%, so if you’re a few thousand off hitting 20% it’s worth trying to save to push your deposit over the edge.

If you’re struggling to get a deposit

If you don’t have a 10-20% deposit, you have a few options

  • Help to Buy scheme –  The Help to Buy equity loan is available to first time buyers in England and Wales and can effectively boost a 5% deposit to 25%.
  • Guarantor mortgage – A guarantor mortgage could enable you to borrow without a deposit as friends or family can provide your security, but be wary this option is not for everyone.
  • Shared ownership – This government scheme enables you to purchase a share of a property and rent the remaining share from the local housing association.

 Affordability criteria

Traditionally you’d be offered a mortgage four times your income, if you earned £25,000 a year, a lender might multiply this figure by four to arrive at a mortgage offer of £100,000.

If you’re applying with a partner your income may be combined together in one of two ways:

  • Add the lowest income on top of the highest after it has been multiplied.
  • Add both incomes together and use a lower multiplier figure.

Lenders tend to use whichever method results in the higher figure.

But many mortgage lenders often take your outgoings into account when analysing how much you can borrow. These include things like:

  • Existing debts and liabilities (ie what repayments you already face)
  • Childcare costs (or maintenance payments)
  • Council tax and utility bills for the home you want to buy
  • Insurance payments

Simply put, the affordability criteria exist to help ensure that you can meet your monthly repayments. Our guide on the size of mortgage you can get explains this in more detail.

Other costs

You will also need to factor in various fees and other costs when buying, such as:

  • Mortgage application fee
  • Estate agent fees
  • Surveyor fees
  • Solicitor’s and conveyancing fees
  • Stamp duty
  • Removals costs

2. Compare properties

Once you have an idea of a your budget you have a better idea of what properties you can afford to buy. Get a feel for the market and scout out areas you’d like to live in.

Property comparison websites like Zoopla offer statistics and information on neighbourhoods to help you make a decision.

3. Get an agreement in principle for a mortgage

An agreement in principle will help when making an offer, sellers will take you more seriously as you are more likely to be able to complete on the deal.

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Compare a huge range of first time buyer mortgages on our comparison tables

First time buyer mortgages

Check your credit report is in order before you apply as lenders will examine your credit file when making a decision on whether to lend. Applying for an agreement in principle will leave a mark on your credit report, so it’s best not to apply for one multiple times as this may damage your credit score.

Also note this is not same as a formal offer and is not a cast iron guarantee that you will retrieve this mortgage for this rate.

4. Find a home – approach sellers and estate agents

If you find a home you like online you will need to contact the estate agent, but you may need to contact the seller directly and make an offer with them.

In either case you will also need to find a solicitor who offers property services and ‘conveyancing’, before you proceed further.

5. Make an offer

Before you make an offer you should ask and research a few key questions about the property and area:

  • Are the sellers in a chain (are they buying another home)?
  • Has there been any building work done recently?
  • What will be included in the sale (ie furniture and fittings)?
  • How long have the sellers been in this home (ie how often has the property been bought and sold?)
  • Is it a freehold or leasehold property?
  • What council tax band is it in?
  • Are there any major developments planned in the area?
  • Is it at risk of flooding or other natural disasters?

Make sure that when you make an offer you make it clear that it is both subject to contract and subject to survey, which means your offer can change once the building survey has been completed

Make sure they remove the house from the market if they accept your offer. Also bear in mind nothing is legally binding until you exchange contracts and the seller can withdraw at any time.

6. Formally apply for a mortgage

You can do this either directly with a lender or through a broker (though a broker may charge you a fee).

If you are a first time buyer, you’ll likely be pleased to just get a mortgage, but make sure you get the best rate you can. You should also think about:

  • The type of mortgage you want – fixed, variable or tracker
  • If there are any booking or early repayment fees
  • The customer service offered by the lender

Once your application is approved you can proceed with exchanging contracts.

7. Exchange contracts and transfer funds

You will need your solicitor to handle the exchanging of contracts and transfer of money from your mortgage lender to the seller. This process is known as conveyancing.

Once this is completed you now legally own the home and the only thing left to do is arrange moving in.

8. Get ready to live in your new home

You will now have to make monthly repayments on your mortgage for the duration of the term (typically 25 years).

But you should also waste no time in sorting a few utilities and bills:

If you would like to borrow to make some home improvements a personal loan may help, or if you just want to spread the cost of moving a 0% purchase card could help you get some breathing space.

9. When to remortgage

Keep an eye on your rate, if you have a variable rate this can be affected by the base rate set by the Bank of England and other market forces, if it starts to rise you could consider fixing a rate.

Importantly, you need to remember when your mortgage’s discounts or fixed periods come to an end to avoid seeing your rate hike.

Read more…

  • Home Buying Costs Buying a home is the single biggest financial commitment you’re likely to make so make sure you understand the costs.
  • Rent To Buy What is Rent to Buy? Read our guide to learn if Rent to Buy is right for you.
  • First Time Buyer Guide If you’re looking for your first home the mortgage market can be daunting.

Compare first time buyer mortgages

Compare a huge range of first time buyer mortgages on our comparison tables

First time buyer mortgages