How does the house buying process work?

The idea of buying your first home can be terrifying, it’s almost certainly the most expensive thing you’ve ever bought in your life. And it’s not something most people do on a regular basis, so it’s hard to get advice on what to do.Hence, this cheeky little house buying process guide for you. Weirdly, I do tend to buy houses quite often, but not as often as I help clients do it. So I’m in a pretty good position to help you through the process.

As a previous estate agent (don’t hold it against me), and a Chartered Surveyor, and a mortgage advisor, I’ve experienced pretty much everything possible in the house buying process. This guide will highlight all the major steps you’ll need to take to go from;

“I think I want to buy a house”, through to

“Oh crap, when did I become an adult?! I own a house now!”.

House Buying Process Easy Navigation

Decide what you want

What priced house can I afford?

Search for properties you like

Arrange viewings

View and make an offer

Negotiate and agree a price

Your offer was accepted!

Get a survey carried out

Carry out legal due diligence

Pick an exchange date

Choose a completion date 

Pick up keys

Decide what you want

Sensible place to start is at the beginning I’ve always found, so first let’s decide if you actually want to buy a property for yourself. It’s often just an assumption that it’s something you SHOULD do, and our parents are always encouraging us to do it. But do YOU want to?

Pros

  • Security – you know where you live and are unlikely to get kicked out
  • No longer paying rent to a faceless landlord
  • You can make the place exactly how you want
  • You can add value to the property by doing work to it
  • It’s possible, but not guaranteed, it’ll go up in value while you own it
  • It’s grown up AF

Cons

  • It ties up a lot of your money
  • You are committing to staying in the same property and area (not forever, but more than if you’re renting)
  • Your home may be repossessed if you don’t keep up the repayments
  • You are responsible for everything that goes wrong with the property
  • It’s grown up AF

I’m not here to say which is right for you. All I want to highlight is that just because you’ve grown up being told it’s something you should do, doesn’t mean you have to.

But, the rest of this article is written on the basis you want to buy your own place, so let’s look into…

Back to the top

What priced house can I afford?

Houses are really, really expensive things. And saving up the cash to buy one would take AGES! So long in fact that people stopped doing that centuries ago. Instead, you save up what you can. Then get a rich group of people to give you a shed load of money, and in return you pay them back over a really long time.

This makes up how you pay for your first house;

Deposit

This is the money you save up yourself. Nowadays, for first time buyers it’s not uncommon to get a helping hand from family. Either way, it’s money you’ve somehow scraped together all by your onesies.

Mortgage

This is the sum of money you borrow from a bank or building society that will make up the remainder of the purchase price of the property you want to buy. It can be anything up to 95% of the purchase price of the property.

For example, if a property costs £200,000. You could potentially get a mortgage of £190,000, meaning you need a deposit of £10,000.

So… what can I afford?

How much you have in savings is hopefully something you know. If it’s a possibility that your parents or family members might be able to help with the deposit, it’s probably worth letting them know you’re now seriously considering buying a property. You can then establish what you have available for your deposit.

Once you’ve got that part sorted, it’s time to look at how much you can borrow from a bank or building society.

There are two ways to look at it. If you know what your deposit is, and this is going to represent 5% of the purchase price (because you plan to get a 95% mortgage), then you can do the maths on that.

  • Deposit / 0.05 = Maximum purchase price
  • 10,000 / 0.05 = 200,000

If you want a 90% mortgage, then you divide by 0.1. An 85% mortgage, then divide by 0.15. etc.

Maximum Borrowing

But just because you could in theory borrow say £190,000 because you have a £10,000 deposit. If you only earn £4,000 per year, then it’s unlikely anyone will lend you that much money. The other thing to consider is how much a lender will lend to you.

Now, this used to be relatively straight forward. It was simply a case of multiplying your salary by a random number – and that would generally be what you could borrow. However, it’s not as easy as that anymore.

Lenders, reasonably so, want to make sure you can genuinely afford the mortgage you’re going to take out, so they assess the affordability of the loan. Each lender has its own criteria and will take into account different types of income differently. Hence the need to speak with a mortgage broker. Someone who is “whole of market” (i.e. they can look at every single lender out there) and help you find the most suitable lender out there.

BUT, that’s not all that much use right now for you. So, as a very – and I can’t stress how VERY this is – loose guide, you can still get away with working off 4.5x either your sole income or the combined income if you’re buying the place with your partner.

Let’s say you earn £40,000. Then you may be eligible to borrow up to £180,000. If your partner also earns £40k, then that number goes up to £360,000.

Be warned though. Someone who has £30,000 worth of credit card debt will probably be able to borrow less than someone with a perfect credit score. So it really is important to speak with a professional and qualified mortgage advisor.

Back to the top

Arrange viewings

How long it takes you to find a shortlist of properties you like will depend on how picky you are, but once you have it, then it’s time to start booking viewings on the properties.

When you call the agents to arrange them, don’t be surprised if they ask you if you’ve spoken to a mortgage advisor. They often have their own in-house broker and will be trying to get you to have a meeting with them. They are also trying to establish that you are serious about buying a place and not just wanting to wander round other people’s homes.

Estate Agents tend to speak their own language, so the person selling the house will often be referred to as the ‘vendor’, and never forget that is the person the Agent works for. They are trying to get the highest possible price for the property they are selling.

You can expect a viewing to take around 10 – 30 minutes, so give yourself plenty of time if you’re going to block view properties on the same day.

Back to the top

View and make an offer

When you carry out your viewings, try to play it a little bit cool (no squealing and saying ‘I gotta have it!’). Ask if they’ve had much interest so far in the property, and if there are any offers on the table. Take whatever the agents say with a pinch of salt, but try to get a feel for if this property is hot stuffs and about to fly off the market or if it’s a bit of a dog and nobody wants it.

Feel free to ignore all the agent speak of;

  • Offers In the Region Of (OIRO)
  • Offers In Excess Of
  • Fixed Price
  • Offers Invited

It’s all made up talk. Whatever the number is, that’s the price the vendor would ideally love to get. Depending on the area and what state the market is in, they might happily take below that, but equally they may only accept the asking price or above.

My general opinion is don’t worry about offending either the agent or the vendor. Offer what you think it’s worth (minus a little bit) to give yourself some room to negotiate. It’s much harder to come down in price than it is to go up in price, so give it a try. You never know, you might get yourself a bargain!

When you make an offer

When you do make an offer, put your best foot forward. Let them know you’re a first-time buyer, you’ve spoken with your mortgage advisor already (you have done, right?), you’re not in a chain – which just means you don’t have another property to sell in order to buy this one, and you can work to their timetable.

You might not be making the highest price offer, but if you’re in a much better position than someone else, you might still get the property. So be sure to spell out exactly why you would be a great buyer.

You can always try and play on people’s heart strings. I’ve never personally tried it (I’ve been accused of being dead inside, so that might be why), but if you’re buying from a sentimental type it might work. I’ll leave that to you to decide.

Make your offer over the phone so you can try to gauge the reaction of the other person, but always follow it up with an email just so you’ve got a record of it. The agent is obliged to put forward any offer you put in, so if you do make a low offer, make sure the agent knows you know they are obliged to put it to the vendor.

Back to the top

Negotiate and agree a price

You never know, you might get lucky and they accept your first offer, but there may be some back and forth to be done. If your first offer is rejected, ask what price would be acceptable to the seller. They might just say “Full asking price is what they are after”. And sometimes that’s reasonable – if it’s a really hot market and prices are going up quickly, or if it’s a really popular house for example.

Otherwise, you’ll get a number from them. You can then just play the game. They want £300k, you offered £280k, you offer £285k, they ask for £295k, you offer £287k, they ask for £290k, you offer £289k and they agree.

At some stage you’ll hit your absolute maximum purchase price. It’s OK to go up to that, but make sure you tell the agent this really is your best and final offer. Even if they reject it (they might think you’re using it as a tactic), just stick to your guns and walk away. You’ll be surprised how often you then hear back from them and agree the purchase.

Now as we talked about earlier, the agent works for the vendor, but on the other hand the difference of £10,000 in the sale price will usually only equate to around £100 for the Agent. If they think you are serious about buying, they are likely to try and press the vendor into accepting the offer just so they can sell it and get their commission. So be sure to get the agents on your side during the negotiation phase.

Back to the top

Your offer was accepted!

Now this is the stage everything just got a little bit real. It’s scary and you’ll be excited and terrified in equal measure. Stay with me though and I’ll talk you through the next few stages, so you can be more YAY than EEK.

First thing to note is that even though they have accepted your offer, neither you nor they are legally committed to buying the place yet. So they might change their mind, and you can still pull out if you need / want to. But I wouldn’t recommend doing this regularly or you’ll end up blacklisted by estate agents as a time waster.

Back to the top

Get a survey carried out

Your mortgage lender will want a valuation survey to be carried out to make sure the property is worth what you are paying for it, and they are safe to lend you the money against the property. Although you will be paying for it, it’s for the lender’s benefit and not yours.

Without going into too much detail of the other types of survey you can basically choose between;

  • Homebuyers Report – a traffic light system to give you a heads up of anything that might be potentially wrong with the property
  • Full Building Survey – an indepth assessment of the property from a structural perspective.

Usually the Royal Institution of Chartered Surveyors (RICS) recommends a Full Building Survey for properties that are in poor condition or that are quite old – think 60+ years, not 3 years.

It’s up to you what you go for, but it’s probably not a bad idea to have someone look at the property to give you some additional peace of mind for your first ever purchase.

Back to the top

Pick an exchange date – pay exchange money

Once the solicitors, the lender and you are all happy that the legal side of things are above board, and the valuation survey has been carried out and come back fine – now you get to pick the date you want to exchange contracts.

This is the scary part, because once you’ve exchanged contracts you’re legally obliged to purchase the property. At this stage you need to have some buildings insurance in place, because if it burns down – it’s kind of your problem.

The solicitors will be looking for 5 – 10% as an exchange amount, and the money will sit with your solicitor not theirs. This date can be whenever suits you, but if you’re worried the vendor will change their mind, then you might want this to be done as soon as possible.

Back to the top

Pick a completion date – pay remaining money & mortgage

Between exchange and completion, not a great deal happens to be honest. You’ve already committed to buying the place, so all that’s left is to pick a date that works for everyone involved, and ask your solicitor to request the rest of the money from the lender.

Lenders take about 4 days to release money to the solicitors (although it can be done quicker, it just tends not to be), so it’s not unusual to exchange on a Monday and complete on a Friday or the following Monday.

Remember once you complete, the property is yours. This is more of an issue when you’re selling a property as you need to make sure all your stuff is out of the place. There’s no going back to pick up your sofa.

We mentioned ‘chains’ before, this is when you’re buying a house off someone – who is buying a house off someone else – who is buying a house off someone else – who is buying a house off someone else. The completion date therefore sometimes has to be coordinated between a handful of people.

If you’re paying someone £200k, that person needs that £200k to pass it along to the next person, who needs it to pass it along to the next, etc.

Now do you see how valuable it is not being in a chain?!

Sometimes things can go wrong at the last minute and the whole deal can collapse if someone else pulls out of the chain or a sale falls through. This can suck, but it’s just one of those things. Often the person who screwed it up for everyone else will scramble around to sell their house as soon as they can, often at a reduced price just to keep things going.

The day before completion you will have to make sure your solicitor has all of the money from you for the rest of your deposit. If the exchange money was everything you’re paying, then no worries. But there may be some more to pay.

You’ll also have to pay any other fees before you can complete. Things like Stamp Duty, the solicitors fees (they aren’t daft and WILL hold up the sale if you haven’t paid this), and anything else you need to pay out. You will receive a “completion statement” from the solicitors after you’ve exchanged and before you complete to give you a fixed figure that you need to pay over. Once you have done…

Back to the top

Pick a completion date – pay remaining money & mortgage

Between exchange and completion, not a great deal happens to be honest. You’ve already committed to buying the place, so all that’s left is to pick a date that works for everyone involved, and ask your solicitor to request the rest of the money from the lender.

Lenders take about 4 days to release money to the solicitors (although it can be done quicker, it just tends not to be), so it’s not unusual to exchange on a Monday and complete on a Friday or the following Monday.

Remember once you complete, the property is yours. This is more of an issue when you’re selling a property as you need to make sure all your stuff is out of the place. There’s no going back to pick up your sofa.

We mentioned ‘chains’ before, this is when you’re buying a house off someone – who is buying a house off someone else – who is buying a house off someone else – who is buying a house off someone else. The completion date therefore sometimes has to be coordinated between a handful of people.

If you’re paying someone £200k, that person needs that £200k to pass it along to the next person, who needs it to pass it along to the next, etc.

Now do you see how valuable it is not being in a chain?!

Sometimes things can go wrong at the last minute and the whole deal can collapse if someone else pulls out of the chain or a sale falls through. This can suck, but it’s just one of those things. Often the person who screwed it up for everyone else will scramble around to sell their house as soon as they can, often at a reduced price just to keep things going.

The day before completion you will have to make sure your solicitor has all of the money from you for the rest of your deposit. If the exchange money was everything you’re paying, then no worries. But there may be some more to pay.

You’ll also have to pay any other fees before you can complete. Things like Stamp Duty, the solicitors fees (they aren’t daft and WILL hold up the sale if you haven’t paid this), and anything else you need to pay out. You will receive a “completion statement” from the solicitors after you’ve exchanged and before you complete to give you a fixed figure that you need to pay over. Once you have done…

Back to the top

Pick up keys

Arrange a time with the estate agent to pick up the keys! This for some weird reason often happens at 2pm. But it can happen at random times to be honest. If the agent is nice, they might meet you there, but usually you’ll pick them up from the estate agents office. In some circumstances it might be from the solicitors office.

But either way, you’re now the proud owner of your very first home. Seriously, it’s a huge achievement and one that not everyone gets to experience, so you should be proud of yourself and celebrate.

Summary

So that’s the whirlwind tour of the buying process for first-time buyers. Hopefully this hasn’t put you off the process. There will be people to help you every step of the way, there just isn’t always one person who can help you along every step of the way.

That’s what I aim to do at Fogg Financial.

I’ve been a first-time buyer and helped other first-time buyers. I’ve carried out building surveys and I’ve arranged first-time buyer mortgages.

So if buying your first property is something you’re considering, I’m more than happy to have a chat with you quite early on in the process to give you some guidance, and will help you throughout the process and see you pick up the keys to your first place.

Just get in touch and I’ll hold your hand throughout the whole process (but not in a creepy way, that’d be weird).

Back to the top of the house buying process guide

 

Ready to take the next step? Get in touch!

3 + 13 =