House Buying Advice

Heres a quick checklist:

• 1.Establish a house buying budget
• 2.Find a mortgage broker or bank
• 3.Locate a House in this price range within your other criteria
• 4.Evaluate the house before making an offer
• 5.Find someone to transfer ownership (Conveyancing)

1.Establish the house purchasing budget:

Establishing a house buying budget before looking at any particular property will enable you to narrow and specialise your search, to establish your budget it is best to talk to a mortgage broker who will be able to quickly quantify what a sensible and easily manageble mortage will be. A mortage advisor will ask you what your salary is and if there are any other persons that you are purchasing the property with. If there are any other parties the mortage advisor will then ask if they have a salary and combine this to the total.

Most mortgages will only work on a 10% deposit minimum, which means that you will have to provide 10% of any requested amount of money from the bank.

Other factors that might be hidden to you when thinking about purchasing a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-

• survey fees
• land registry fee
• Stamp Duty Land Tax. From 3 September 2008, this is payable on properties costing more than £175,000 and is at least 1% of the buying price
• local authority search
• fees, if any, charged by the mortgage lender or someone who arranges the mortgage, for example, a mortgage broker
• the buyer’s solicitor’s costs
• VAT
• valuation fees
• removal expenses
• any final bills, for example, gas and electricity, from your present home which will have to be paid when you move.

These are also ongoing costs to setting up and running a home that will also add to the mortgage repayments and will have to be considered in your budget:

• community charge/council tax (in England and Wales)
• water rates (in England and Wales)
• ground rent, if the property is leasehold
• service charges, if the property is a leasehold flat
• insurance costs, including life insurance, buildings and contents insurance
• heating bills. An energy performance certificate can help you work out how energy efficient your property is.

For more information about Stamp Duty Land Tax, go to the HM Revenue and Customs (HMRC) website at www.hmrc.gov.uk/so, or ring the HMRC Stamp Office enquiry line on: 0845 603 0135.

On some properties, where the seller has to provide a Home Information Pack (HIP), the seller will pay for local authority searches.

2.Find a mortgage broker or bank:

A guide on the different types of mortgae can be found here: Mortgage types

A mortgage can be defined as a loan that is made to a property buyer by an organisation that has various different repayment schemes and interest rates. Some of the organisations that can provide a mortgage are:

A mortgage could be available from a number of different sources. Some of the available options are:-

• building societies
• banks
• insurance companies. They only provide endowment mortgages (see above)
• large building companies might arrange mortgages on their own new-build homes
• finance houses
• specialised mortgage companies.

Finding a good mortgage broker is essential or keeping an eye on the current banking schemes that are available is also a good idea.

It usually takes about three weeks to organise the application of the mortgage by the proprty buyers to the mortgage lenders formal offer being finalised.

Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Check to see if the buidling society offers this facility. Building societies state that this certificate may help you to have your offer accepted by the seller.

3.Locate a House in this price range within your other criteria.

Set out your other criteria for purchasing a house, such as the location that you would like to base yourself, whether you need public transport or any amenities with easy reach and what the local schools are lie are often some extra criteria that property buyers consider when they are looking for a house. This could also be what the property itself consists of, such as gas central heating, a garage and double glazing.

Some ideas to help you start to search for a house once you have narrowed your search to your chosen criteria and budget:

• The internet, property sites, estate agents websites in your local area
• Local newspapers and advertising papers
• Estate agent windows and arranging an interview
• House building companies that are developing in the area

4.Evaluate the house before making an offer

When looking around a property that you have found and arranged a viewing, look at the HIP which is known as a Home Improvement Pack and will contain important information about the property such as:

• Energy performance certificates
• Local Authority Searches
• Evidence that the person selling the property is entitled to do so.

If it is a new build then ensure that it has a Buildmark Warranty, which is organised by the NHBC. A Buildmark Warranty scheme will ensure things such as the protection of your money against the bankruptcy of a builder after contracts have been exchanged but before the completion of the build. It will also cover defects that might arise in a new build if the builder has not kept to the strict NHBC standards.

Other thins to evaluate are how the property sits and whether the property is:

• Freehold- You also buy the land that the property is built on and do not need to pay ground rent
• Leasehold- You will need to pay ground rent to the freeholder of the land.
• Commonhold- You are buying the freehold and common parts of a building but may need to contribute to the upkeep and maintenance of the common areas. (Such as a block of flats)

Also make sure on what the general state of the property and whether any repairs or decoration need to be done, get a professional second opinion and even get a property surveyor to look at the property, this outlay may very well save against purchasing a potential money pit! Usually this is done after an offer has been accepted but might be good for bargaining leverage and putting in a lower offer. It is ok to request more than one viewing of a property but do take in to consideration that the market does move quite fast sometimes.

5.Find someone to transfer ownership (Conveyancing)

Once you have made an offer and this has been accepted then these are the steps to consider:

• whether a holding deposit is payable.
• arranging a mortgage.
• whether a survey is necessary.
• who will do the necessary legal work.
• whether you want to buy with someone else.

These steps might have already been partially covered and you will have a clearer idea of arrainging a mortgage if you have already looked at this when budgeting.

The mortgage lending organisation that you wish to go with will definitely want the property valued. This is to secure the loan for the lender and reassure them that they could get a return on sale of the property of their loan if you decided to stop paying your mortgage. This will result in the lender "re-possessing" your property as it effectively their money.

You will have to pay for the valuation, which will be done by a surveyor for the lender.

The valuation is often a neccessary and is required by all mortgage lenders.

You can also organise a Property Survey for yourself if you have not already done so. This can be either:

• a full structural survey. This is suitable for a property which is large, more than 80/90 years old or in doubtful condition.
• an intermediate or ‘house/flat buyers report’ that gives a report on the condition of the parts of the house that are easy to see and to get at and may recommend further tests or investigations, for example, a specialist check for woodworm. This is particularly suitable for properties built this century which appear reasonably sound. It is much cheaper than a full structural survey.

If the survey sheds new light on anything that might be wrong with the property such as subsidence then this will give you a chance to re-evaluate whether you wish to go ahead and buy. This is also a good time to negotiate furhter with the seller about the price. A surveyor will advise on how many problems they have encountered, what they consist of and the costs that could be involved in fixing them.

The Conveyancing of the property is usually managed by a Solicitor or a Licensed Conveyancer. Investigate the fees and whether:

• check whether the figure quoted is a fixed fee or depends on how much work is involved
• check that the figure includes stamp duty, search fees, land registration fees, expenses and VAT and get a breakdown of these costs
• find out what charges, if any, will be made if the sale falls through before contracts are exchanged.

Exchange of contracts

The final contract between you and the seller is prepared when:-

• the solicitor (or licensed conveyancer) and you are satisfied with the final outcome of all the enquiries
• any surveyor’s report has been received and any necessary action taken
• the formal mortgage offer has been received
• arrangements about the payment of the 10% deposit have been made
• the date of completion has been agreed.

You and the seller each have a copy of the final contract which you must sign. These signed contracts are then exchanged. At exchange of contracts both you and the seller are legally bound by the contract and the sale of the house has to go ahead. If you drop out at this stage for any reason, you are likely to lose your deposit.

As well as taking over the house, you should make arrangements for the supply of gas, electricity and telephone service and make sure that the seller is arranging for final meter readings to be made.

Completion

Completion of the house buying stage usually takes place about four weeks after exchange of contracts, although it can be earlier. On the day agreed for completion:-

• the mortgage lender releases the money
• the deeds to the property are handed over to your solicitor or licensed conveyancer
• the seller must hand over the keys and leave the property by an agreed time.

The solicitor or licensed conveyancer (in England and Wales only) will usually send their account to you on, or soon after, the completion date.

Welcome to your new house!