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.
How to buy a house can be broken down to nine steps:
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.
According to recent mortgage statistics, 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 £292,000 (or £550,000 in London) you will need around £29,000-£43,000 (£55,000-£82,500 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 don't have a 10-20% deposit, you have a few options
Help to Buy - The Help to Buy equity loan is available to first time buyers in Wales and can effectively boost a 5% deposit to 25%. It closed for applicants in England in October 2022 and closes entirely in March 2023.
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.
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 (i.e. what repayments you already face)
Childcare costs (or maintenance payments)
Council tax and utility bills for the home you want to buy
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.
You will also need to factor in various fees and other mortgage costs when buying, such as:
Mortgage application fee
Estate agent fees
Solicitor's and conveyancing fees
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.
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.
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.
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.
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.
You can apply for a mortgage 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.
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.
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:
Set up a direct debit for your council tax and water bills
Get your bills set up as soon as possible - it can take weeks or months to set up a broadband connection
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.
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 should consider remortgaging and fixing a new rate.
Importantly, you need to remember when your mortgage's discounts or fixed periods come to an end to avoid seeing your rate hike.