First Time Buyer Guide

Buying your first property is a seminal moment in your life, but it can also be incredibly confusing. Almost from the start, you are inundated with jargon and find yourself in a process which can seem archaic and confusing.

So with the help of some Frequently Asked Questions, I wanted to write a short guide to help with some of the terminology and to offer a timeline so you can see the stages from beginning to end.

So what is a mortgage? It is an agreement that allows you to borrow money from a bank or building society, to buy a property. In return for lending the money, the bank will take a legal charge over the property. This means that if you don't pay they can sell the property to get their money back. Once you have repaid the loan back to the bank/building society, the charge ends and the property is yours.

Where do I start? The first step it to speak to a qualified mortgage adviser who will help you work out how much you can borrow and what you can afford.

How much can I borrow? All lenders have a responsibility to ensure that you can afford the monthly repayments. To establish this, most will use an affordability calculator. They look at your income and expenditure and work out how much you can pay, and in turn, how much you can borrow.

Will I need a deposit? Normally yes. Most lenders require a minimum deposit of between 5-10% of the purchase price.

What's an agreement in principle? Once you know how much you can borrow and that the repayments are affordable your mortgage adviser can obtain an agreement in principle from your chosen lender. The bank will carry out a credit search and if you pass, agree (in principle) to lend you the money. Now you're ready to start viewing property.

What's an estate agent? Seems a silly question, because they are everywhere right!? Estate agents sell houses. But they act for the person whose house they are selling. It's important you remember that. They can be invaluable in terms of helping you find what you are looking for but don't forget they work for (and are paid by) the house seller and not you.

I've viewed a house I like, now what? Make an offer. You call the estate agent and tell them you would like to make an offer. You can explain that your mortgage is agreed and you are ready to go. The agent talks to the seller and the negotiation begins. If the seller accepts your offer the property will be described as sold subject to contract.

What happens next? In England and Wales making an offer is not binding. Neither is accepting an offer. So both you and the seller can walk away from the deal. The deal only becomes binding when you "exchange contracts". And to get to that point you need a formal mortgage agreement and confirmation that the title of the property is good (i.e. confirmation that you are buying what you think you are buying) The first step is to make a full mortgage application.

How long does the mortgage application take? Typically around 2-3 weeks assuming you have already obtained the agreement in principle. The lender will ask for proof of what you have told them and will arrange for a surveyor to look at the house. You can have a more detailed inspection carried out if you would like. Once the lender is happy with you and the house, they issue a formal mortgage offer which is normally valid for 6 months.

Do I need a solicitor? Normally - yes. Now the finance is in place you need someone to check the legalities. Does the seller really own it? Did they get planning permission for the extension? Your solicitor will check that everything is as it should be. They work for you and your bank and need to be able to confirm they are happy with what you are buying. The legal work will normally take between 4-6 weeks.

How long will it all take? Typically around 12 weeks from when your offer is accepted.

When do I move in? You own the property on completion. When you exchange contracts, you enter a legally binding agreement to buy. At this point, a completion date will be set. Once completion has taken place (typically a week after exchange of contracts) you get the keys and the property is yours.

What is the Help to Buy scheme? This is a government scheme to help people buy new build houses and is offered via the house builder on homes costing up to £600,000. You provide a 5% deposit. The government provides a 20% equity loan and you obtain a conventional mortgage for the balance. The government loan is repayable when you sell. Interest payments on the loan start after 5 years.

And what about Shared Ownership?

Shared ownership can also be described as part buy/part rent. Properties are usually offered via housing associations and enable you to buy part of the property and pay a rent for the other part. Because you are only buying part of the property, you need a smaller mortgage and this can often be a more affordable way of buying your first home. Shared ownership can be available for both new build houses and existing property.