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Buying your first home is a surprisingly simple process. If you are patient and well-informed it is less stressful than you might have imagined. As a first-time buyer, life is easy for you. You don't have to worry about selling your house - and therefore having to make it totally clean and tidy so that random strangers can be shown around - as you don't own it. You probably either live with your parents or friends or you live in a rented flat or house. First-time buyers are essential to the housing market. They usually represent the end of a 'chain' of buyers. Without first-time buyers, very few people would be able to move.

Much of the process of buying your first house is probably fairly universal. However, some of what follows might be particularly relevant to people buying a house in England in the early 21st Century. If buying a house near you would be very different, I would love to hear how.


Location

Before you can look at houses, you have to find somewhere you want to live. Factors such as proximity to work, family and social life usually play a part. Cities, and even towns, are not the usually filled uniformly with identical housing. Different areas need to be investigated and visited so you know which locations you'd be happy to live in and which you'd rather avoid. An easy way to find out about an area is to drive around it different times of day. Is the rush hour traffic bad? How long would it take you to get to work? What are the local shops like?

A good website for researching and comparing different (UK) locations is www.upmystreet.co.uk. It can tell you pretty much everything you need to know about an area including such helpful information as the location of the closest train station, local crime figures and even socio-economic demographics. The Knowhere guide, at www.knowhere.co.uk is also a handy site for getting to know an area. It is full of brutally honest reviews, actually written by locals, of local amenities and attractions.


Estate Agent

The Estate agent node contains extra nifty information on handling estate agents and how to be the first to hear about new properties.

Next it's time to contact lots of estate agents who cover the locations(s) you're looking. Shop around. Get on the books of every estate agent you can. The local press is good for providing names and numbers of local estate agents. It's less good for spotting actual houses for sale (they have often sold before the weekly papers are even printed. More on this later) though it can be helpful for comparing prices and suggesting locations you might not otherwise have noticed. Consider walking down the local high street too. They're easy to overlook until you're buying a house, but estate agents offices litter high streets everywhere.

The first time I phoned an estate agent I was nervous. I had absolutely no idea what to say.

"Hello. I'd like to. Um. Buy a house please."

By the end of that day I was an expert. All the estate agent wants to do is record your contact details and a rough idea of what you're looking for. If they don't have anything which suits you when you call, they will use this data to contact you when a suitable property comes up. This contact will usually take the form of a letter containing the details of the property or - if you are very lucky - a phone call. Some particularly keen estate agents will take a mobile phone number and/or email address so they can send an SMS message or email when something suitable appears.

When you first phone them, the things they will ask (other than your name, phone number and current address) are:

  • The area(s) you're looking at
  • What kind of property you want. (flat, bungalow, house etc)
  • Whether a garden is important to you
  • How many bedrooms you require
  • Roughly how much you want to spend

If you don't know the answers to these questions, you're probably not ready to phone estate agents (who will only proceed to waste your time for weeks with houses it will turn out you don't want). The more accurate you can be at this stage, the better. If you have not yet started thinking about a mortgage, now is the time.


Mortgage

If you're not familiar with how different mortgages work, the Mortgage node is a good place to start.

The important questions you'll need to ask a mortgage advisor are:

  1. how much you can borrow
  2. how much will it cost you initially in upfront fees.
  3. what the repayments will cost
Most estate agents offer in-house mortgage advice. IFAs, or Independent Financial Advisors also exist. You should never pay anyone to find you a suitable mortgage because mortgage advisors get paid a 'finders fee' by the mortgage lender.

When you know what you can afford, you can narrow down your price range. Don't be afraid of telling the estate agent what you want to pay rather than what you know you can afford to pay. They tend to suggest properties up to 10% or 20% more than what you tell them you're willing to pay anyway. Don't forget, the estate agent works for the seller, not the buyer. Call me cynical but I'd be very nervous about telling the estate agent exactly what you can afford. If they know your absolute upper limit, they might use it to help the buyer decide which offers to accept and when to hold out for more.


Viewing

Once you have found the right location, given some thought to a mortgage and some estate agents are suggesting suitable properties for you, it will not be long before you want to visit one.

Viewings are always arranged through the estate agent. Usually the office will send an agent to let you in and show you around the property. Sometimes an agent is unable to attend, meaning that the vendor (seller) might show you around. This kind of unattended viewing is quite good for you, the buyer; it gives you the chance to meet the seller and ask questions about the property without having to go thorough an estate agent. The seller, for example, will know instantly what the neighbours are like, how much it costs to heat in the Winter, whether cable is available in the area and how far it is to the nearest pub.

During a viewing you have only a relatively short time to absorb everything you can about the property. Some people will always tell you to look out for electrical sockets.

Not so long ago plug sockets in the UK were a different shape.
Everyone knows someone who had a friend whose Aunt moved into a house
before noticing the sockets were the old 2-pin plugs rather than the current standard.

Re-wiring an entire house is an expensive job but electrical sockets are only an example of what you should look out for. Imagine moving into a house before realising it has no central heating.

Important things like damp, subsidence and rotten roofs will be picked up by the Survey (more on this later), so a viewing is a time mainly to attempt to imagine yourself living in the property. Ideally, and usually, the house will be furnished and decorated when you view it. With bare rooms it is hard to picture yourself and all your stuff in there because it's difficult to judge how big each room is, so with a brand new house it is important to measure each room. Don't feel you have to turn up with a measuring tape to 'regular' viewings, in which the current owner occupies the property, though. The estate agent should be able to provide you with room dimensions.

Here are some obvious but important things you might want to look out for when viewing a property:

  • Central heating. Does it have any? Gas or electric?
  • Is there a radiator in all the rooms you'd expect (don't worry so much about the kitchen)
  • Hot water. Same system?
  • Nice windows? Are they double glazed?
  • Does it have roof space? How is it accessed?
  • Cooker. Is the cooker being sold with the property? Is there a gas bayonet fitting present?
  • Is anything else staying? Are they leaving behind a (rather heavy) nasty looking washing machine because they can't be bothered to move it? Are they going to be taking that nice fitted gas fire away with them?
  • Are telephone and television points fitted? Which TELCO do they use?
  • Electrical sockets. Plenty in the living room and bedroom? Are they 3 pin? :-)
  • Space and plumbing for a dishwasher?
  • Fitted wardrobes in the bedroom(s)?

the gazelle has a more complete list here.


Making an offer

After you've viewed enough properties you'll (hopefully) eventually find one you want to buy. This is when you make an offer. Technically there is nothing to stop you from making an offer on every place you see. Even making several offers at once. Personally, I'd avoid anything which makes estate agents think you're less than totally serious about the offer though.

When you make an offer you don't have to agree to offer the full asking price. You just tell the estate agent how much you are willing to pay. Sellers tend to get a valuation when they put the house on the market, round it up and add a little. Depending on the financial climate, they might add 5% or more to the valuation. If you don't think the property is worth what is being asked, don't be afraid to make what you think is a reasonable offer. The worst that can possibly happen is that they'll refuse your offer and wait for a better one. Some bartering may occur.

With certain types of property (especially the cheaper end of the market) sellers are likely to wait until they get an offer of the full asking price. In certain situations (the perfect place for you, several people are interested) you might even want to offer more than the asking price. However, don't feel pressured by an estate agent who claims that there will be three more viewings later that day, or that there was another viewing half-an-hour ago and that person really loved it. At times like that I don't believe a single word an estate agent utters.

If your offer is accepted, you should ensure that the property is taken immediately off the market. I can't stress this enough. The estate agent, as I've mentioned before, works for the seller. Until the seller tells the estate agent to take the property off the market, they can and must continue to give viewings and pass on other people's offers to the seller.

Once an offer is accepted, there is (in England currently) legally nothing to prevent the seller from waiting for a higher offer and accepting that instead. It's called 'gazumping' and being gazumped is about the most unpleasant thing that can happen when you're buying a house. To be fair, estate agents do their best to avoid it happening because it gives them a bad name. Incidently, gazumping is not a problem in Scotland, where accepting an offer takes the form of a legal agreement.

Consider homebuyers insurance to protect against gazumping.
It pays off your solicitors fees and the cost of the survey, so that even if
you are unfortunate enough to be gazumped at least you won't cost you dearly.



Solicitor

A solicitor is an essential part of buying a house. As soon as your offer is accepted you should arrange a solicitor to undertake the conveyancing. Your solicitor is responsible for completing 'searches', usually a local search, - in which the solicitor checks public records for planned developments which would affect the value of the property (such as a new motorway through the back garden) - and possibly an environmental search which includes checks on flooding, pollution and so on. Conveyancing also involves checking contracts and deeds and, once everything is ready, liasing with the seller's solicitor to arrange a 'completion date' on which keys and deeds will be exchanged.

Since the solicitor collects all of the money involved in buying a house there are many different costs which need to be understood.

  • The solicitor's conveyancing fees - usually in the region of £500
  • Land registry - around £200, depending on the location
  • Local search - around £150. The only fee usually paid in advance.
  • Environmental search - optional. Around £50?
  • Stamp duty - A tax on property purchases. For houses between £60,000 and £250,000, the cost is 1% of the purchase price. A bigger percentage for more expensive properties.
With the exception of the local search, which is paid in advance, the solicitor collects all of these monies on completion of the sale.

Most of the fees will be the same regardless of which solicitor you use. For example, the Land Registry Fee and Stamp Duty are paid to the local council and the government respectively, and are simply passes on by the solicitor. Be prepared to shop around for a good deal on conveyancing though. Some solicitors will charge you more, but offer regular status updates (even by SMS or a personal website).


Applying for the mortgage

This is where it stops being fun. The mortgage company want to know everything about you. Things even you've forgotten. Where did you live 3 years ago? Can you prove it?

The documentation required for a mortgage application form is ridiculous. You may be expected to send between 3 and 6 months (depending on the lender) of bank statements and pay slips and your last (1 or 2) P60s. Originals, not photocopies. I even had to send my degree certificate (and again, a photocopy was not good enough). It's horrible. If you are patient and methodical though, you'll get through it. Incidently, if you have been throwing away your bank statements (tut tut) and you don't want to wait another 3 to 6 months before applying for the mortgage, banks often issue duplicate statements for a small fee.

Other things you'll need to know when you fill in the form..

The information regarding the property can all be retrieved from the estate agent.


Survey

Since the mortgage company is lending you a large sum of money with which to buy a house, they want to be sure the property is worth their money. To this end one condition of the loan is that a valuation is undertaken before the mortgage is agreed. Usually you'll pay for the valuation survey, but in an increasingly competitive market it's often waived.

The buyer actually has a choice of which survey they wish to have. A valuation is required, but more detailed surveys can also be commissioned. In order of detail (and cost) they are:

  • Valuation - very basic survey which gives the value of the property. The only survey you need if buying a newly built property.
  • Homebuyers report - more detailed survey.
  • Structural survey - very detailed survey which includes carful examination of the structure of the property. Recommended for old houses, or properties which you intend to renovate.
If you opt for a more detailed survey than the standard valuation survey (the homebuyers report is the most common choice) it does not have to be done through the mortgage lender; commissioning an additional homebuyers report independently can be cheaper. (Stavr0 suggests that it is always best to seek an independent valuation, since the lender cares only about conforming the value of the property).

The survey results (the valuation at least) will be forwarded to the mortgage company. The mortgage lender will normally only lend you the worth of the house according to the valuation. Usually though, the valuation matches the agreed offer price with unnerving accuracy, and the lender will want to proceed. Assuming you are also happy with the results, you are nearly there. Incidently, the seller does not have a right to be shown the results of any valuation or survey. They always seem to want to see it though. I would personally ask them to pay half before handing it over, though you might feel more charitable. Of course, you will certainly want to reveal the results of the survey to the seller to leverage a price reduction if they suggest that some work on the property will be required.

Before you move in, there is just time to sort out three kinds of insurance for you and your new home:

  • Life insurance

    Mortgages usually require life insurance to be in place. This way the mortgage is protected if you die without the mortgage lender having to repossess and sell your house (not pleasant for any grieving next-of-kin and pretty bad press for the lender).

    I'll just cover the basics here (Mandi goes in to great depth over at Life insurance), but you essentially have a choice of how comprehensive (and expensive) your cover is:

    • Death - pays off the mortgage if you die.
    • Death and critical illness - also pays out if you are unable to work through serious illness.
    • Death, critical illness and unemployment - additional cover for unemployment/redundancy
    The price goes up dramatically the better the cover. You should discuss the options with a financial advisor (the estate agent will often offer to provide this service. The mortgage company will also offer a quote).

  • Buildings insurance

    I won't dwell on this, because it's pretty straightforward. The mortgage company will almost always insist that buildings insurance is taken out to protect the property. They might offer a quote but you should also be allowed to shop around for a good deal. Watch out. Some mortgages are linked to particular life assurance and buildings insurance policies.

    When applying for buildings insurance you will be asked the cost to rebuild the property. An estimate of this value will have been included as part of your valuation.

  • Home contents insurance

    Buildings insurance covers the structure of the property, not your possessions. Home contents insurance is not a requirement when buying a house, but is usually a good idea.


Exchange of contracts

At this point you are very nearly there. A price has been agreed, a valuation and/or survey has been carried out and your mortgage has been approved. You have arranged insurance. Next, there will be an 'exchange of contracts'. When contracts are exchanged between the buyer and seller, it indicates a firm commitment by both parties to proceed with the sale. Pulling out now is difficult, as the transaction is legally binding.

At this time, a completion date will be set.

While you are waiting to move in, there are several things you can do. Packing is a chore, and even if you are hiring a removals van to load and transport your possessions they will charge you (a lot) extra to pack for you too. Starting to pack can relieve the stress, but there are plenty of other things to do too.

  • Contact your landlord and inform of your moving date. The paranoid will want to add a week or two
  • Prepare change of address cards/letters/emails to inform your friends of your new address and the date of the move.
  • Inform other relevant companies of your move:
  • Set up postal redirection. Especially useful if you don't trust the buyer / your current landlord to forward mail. The Post Office provides a very reasonable mail redirection service.
  • Begin to empty cupboards of long-uneaten tinned food


Completion

The date of completion is the date on which keys are given up and deeds are handed over from the seller to the buyer. This is the day the new property becomes yours, and you can move in.


I hope this has helped you to understand the complex process of buying a house, as well as clarify some of the terms involved. If you find any of this useful, or have suggestions for how it could be improved, I'd love to hear from you. I have recently undergone my first move, so this is written from memory with the help of the countless little notes I made during every phone call to my mortgage adviser and my estate agent.

Some topics I intentionally do not cover here, and fully expect to see covered in the following links, are selling a house and moving house.

Buying a house is very very strange*. The mechanics have been dispassionately laid out extremely well by TallRoo, but actually doing it is another thing entirely. Here is how it happened for fuzzy and blue and myself all wrapped up in a first and second person description of the process.

We saw a house for sale that looked really nice, and we were like "wouldn't it be neat if we could afford one of those", and then laughed and walked away. Then, on the sly, I did the math and figured out that if we were careful we could afford it.

Well. That changed everything. So we started looking around at houses. Unfortunately, the process we were about to embark on was going to be really painful - we could already tell. First, you have to deal with some frantic type A realtor who wants you to buy as huge a house as possible because their commission is a percentage of the sale price, then you have to find someone to lend you a pile of dollar bills that weighs more than you do, which will probably involve talking to some obsessive hyper-anal-retentive money person.

But whatever. We were initially willing to go through with it because why the hell not, right? The first step was to find a buyer's agent. After much searching, we found the hippiest buyer's agent we could find — this turned out to be the best decision we made in the whole process. Finding a good agent who you trust and work well with seems to be one of the keys to not getting screwed. After initial consultations with them and other money people, they put us on a daily email list that sends out new for sale listings as they come out.

And that's when homebuying starts to break your heart. Because you see listings like "beautiful house that is centrally located for $10,000 less than your max", so you go check it out 2 days later and find out that it sold on the first day for $15,000 more than the asking price because there were 10 offers made on it. Or you see "wonderful 2 bedroom house in your price range that isn't too far out and the price is right and the yard is huge" and you go check it out and it has 7 foot ceilings, which is great for hobbits, but not so much for 6'2" jongleurs. So you decide to not offer. A week later that listing reappears for $7,000 less and you have to suck it up and agonize into saying no, despite the fact that there is an awesome .5 scale pirate ship in the yard of the people across the street.

So you keep doing this. Again and again. You will see an open house opening up down the street when you go to drop your visiting friend off at the train station. When you return 1.5 hours later, the house is sold with 3 backup offers. As you ride your bike past, you have a brief conversation with the victorious sellers who provide you with the understatement of the year: "It's a seller's market".

After a month you start to despair. You saw the house with the beautiful 100 year old willow tree in the front yard go in less than 24 hours for a cash offer. Because it turns out that you are competing with people who have the ability to just write a check for a 50 foot stack of dollar bills. You see an inexpensive beautiful craftsman 2 story with a wonderful yard that is 5 miles out and you start thinking "We could buy this house and have enough left over to buy a car to commute with!" and then you stop, because those are bad thoughts. Eventually the despair enters your bones and you ask your realtor for a listing that contains every house on the market, which you go through one by one and realize that there isn't a house for you there.

When we got to this point, we were ready to quit. You might not have been, but we were. A week later, we got a call that there was a cute little house coming on the market on Friday, and wouldn't we like to ride by it and check it out. The initial ride-by goes well, so I checked out the inside with Hippie Realtor Lady on Saturday. That goes well, so fuzzy and blue checks it out with Hippie Realtor Lady on Sunday. After the Sunday viewing we decide that we like it. And if we like it, we should place an offer. So we head back to the office and we see Hippie Realtor Gentleman who starts to vacillate between friendly hippie when talking to us and real estate man when thinking of the offer. It is amazing. He has the ability to talk to us about money without giving us hives, but he is murderous at the bargaining table.

So here's how it goes: you make an offer and your realtor starts putting in high tech legal attacks. You learn about acceleration clauses - which make the bidding work like Ebay which is freaky in itself - and you learn how to borrow more than 80% without getting stuck with mortgage insurance. As you go home that night you start to ruminate on the rate at which things are happening: there was a slow burn until you decided you wanted a house, followed by a period of about 1/2 that figuring out that yes, you definitely CAN afford one, followed by a succession of periods where you look at more and more houses at an ever-increasing rate. Eventually you are revved up the the speed at which the market is operating, and you are able to see a house and decide to make an offer in one day, which is what is usually required. So you make an offer. At that point, events are moving extremely fast and the whole thing has been taken out of your hands and put into the hands of the professionals who know how to move fast. The next day your offer is presented, and you get a phone call "there's going to be another offer". Another offer? "Activate Plan B." So your offer is presented, and it all depends on your realtor's suaveness. You sit around at home clutching your stomach and getting phone calls that have nothing to do with the house. People call to say hello and you want to shout at them to go away and not talk to you. You get hangup phone calls - far more of them than is statistically likely. Finally you get a call: "Congratulations! Come to the office and sign stuff."

This is all moving much too fast.

But you do it anyway, at the speed of light, relatively speaking. Each successive interval has dropped by half; surely you have hit the singularity, right?!?

Nope.

The seller wants to close quickly. He took your offer over the other one because you said "we can't offer too much more money, but we can offer to close quickly". Which means that you now have 2 weeks to line up everything. 2 weeks to make sure you aren't getting screwed. 2 weeks to get an inspection and approve it. 2 weeks to verify that the neighborhood doesn't suck. 2 weeks to make sure the neighbors aren't operating a crack house. 2 weeks to bargain about any issues found in the inspection. 2 weeks to contact the city and find out about any easements or boundary issues or tax problems. 2 weeks to get house insurance. 2 weeks to get a loan finalized and your rate locked. On a per hour basis, these prove to be the most lucrative 2 weeks of your life. On average, I made $386 dollars in the hour it took to type this up - of course you never see any of this money. The money is electrons. But it's also all your life savings going to the down payment.

Surely it can get no faster, more tense, and more hectic than this? Well, finally, the answer seems to be yes. Once you get all the inspection issues sorted out, everything goes into hurry up and wait mode until the day of closing, when you are actually given the keys. Your keys. For your house.


* - tense in this description will also be strange

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