A home is one of the most significant purchases you’ll make and it can be a particularly overwhelming process. This guide is designed to help you navigate buying a home from start to finish and answer frequently asked questions.
The minimum deposit required for a first-time buyer is 5% of the value of your property. However, the larger your deposit the better mortgage rates and mortgage offers will be available to you.
A mortgage is a loan specifically taken out to purchase land or property. Normally you will pay a deposit and borrow the rest of the money from a lender. Mortgages are then paid back monthly for around 25 years.
Before a mortgage is confirmed the lender will need to assess your circumstances. They will look at your salary, outgoings and check your credit history to make sure financially you are reliable.
There are many types of mortgages available so we have written an article to help you understand which one might be best for you.
Help to Buy Schemes
The “help to buy” scheme is a government initiative put in place to support first time buyers. The initiative available are:
Help To Buy Equity Loan
In this situation if your 5% deposit is not enough to secure a mortgage for the Help to Buy equity loan. The Government will lend you 20% of the purchase price and after 5 years you’ll have to begin repayments.
Shared Ownership allows you to buy a share of your home (between 25 and 75%) and pay rent on the remaining share. The scheme is for non-homeowners who earn less than £80,000 a year.
New Build Home
Starter Homes is a new scheme to help first-time buyers under the age of 40 get on the property ladder. You’ll get a 20% discount on the market value of the property however you cannot sell or let the house at open market value for 15 years.
This is a brand new scheme and there may be limited homes currently available.
Stamp duty is the type of tax you need to pay when purchasing a property. First-time buyers do not pay stamp duty on properties under £300,0000
A gifted deposit is money given to you that you do not have to pay back. Whoever is gifting the deposit will need to write a letter to confirm they are gifting the money and how much they are giving.
Similarly to renting a home you can now have a close relative act as a guarantor on your mortgage. When calculating the mortgage the Guarantors income will be taken into account when working out how much you can borrow.
This means you may be able to borrow more. However, it also means if you miss any payments the guarantor will be expected to pay on your behalf. Therefore the guarantor would need to be able to afford all their own expenses as well as pay for yours.
Decision in Principle
A decision in principle gives you a clear idea of how much you might be able to borrow and is the first step in the mortgage process. You can apply for one online, with your bank or with a mortgage broker. When making an offer on a property the estate agent will need to see this.
The buying process
Leasehold vs Freehold
Now you understand the amount you can borrow, you can begin looking for a house.
Consider the different types of home you can buy: a flat is likely to be leasehold and a house is likely to be freehold. If it is freehold you own the home and the land it is on. If it is leasehold you own the property but not the land it sits on.
When buying a leasehold you will be leasing the land from the freeholder and this normally comes with a charge. It is important to look at how many years are left on the lease and how this might affect getting a mortgage and the resale value.
When you have Zumped a property and the owner is interested in selling you can book a viewing.
When looking at a property consider the area, take someone with you for a second opinion. Be thorough! This is the biggest purchase of your life so far so it's okay to be nosey. Ask about the bills, look out for damp or other issues, and ask what work they have recently carried out.
If you find a home you like, you will be able to make an offer. A Zump advisor will be happy to discuss your offer and answer any questions you may have.
When you make your offer we would need to see proof of finance (such as deposit and your decision in principle) and have a copy of your ID. If the offer is accepted we will contact both solicitors with all relevant information.
Complete your mortgage
When your offer has been accepted you can apply for your mortgage. Here the mortgage company will carry out all necessary checks on you and your property.
The mortgage lender will carry out a standard valuation on your property to confirm its value. Most lenders will offer an in depth survey of the property for an additional price or you can book a local surveyor.
We highly advise you to have a survey carried out on the property as this will highlight any work that needs to be done, especially work on the roof or damp which needs to be fixed. .
You’ll need to appoint a solicitor or conveyancer to represent you. We are happy to recommend a solicitor and have also created an easy to follow guide on how to pick one and what they do for you.
Solicitors will help carry out all legal checks on your property such as searches and making enquiries.
Around this time you should receive your mortgage offer along with all the terms and conditions surrounding your mortgage.
Insurance and Utilities
Now is the time to purchase all necessary insurances, update your utilities and registered address.
Once the solicitor has completed all the legal checks you can then agree on a completion date (the day you move in) and exchange of contracts. There is nomaly a 7 day break in between to give time to arrange mortgage payments.
When you exchange contracts you are legally bound to purchasing the property. Your deposit will be sent to the seller's solicitor along with signed contracts.
Contact a removal company with as much notice as possible.
On completion your solicitor will pay the balance of the purchase property to the seller's solicitor. Once the money is received the home is yours. This is normally around lunchtime. We can then meet you at the property to give you the keys.
So there it is, your complete guide to buying your first home. It’s not straightforward and there are lots of things to do at every stage of the process so persevere and reach out with any questions you have.