Step by Step Guide to House Buying

The issues below are typical of those that arise upon a house purchase. They may not all be legal matters but are integral to the process.

  1. Work out how much you can borrow – when calculating how much you need to borrow, bear in mind that interest rates can change. Make sure you can actually afford your “dream house”.


  1. Check your credit rating- it pays to improve your credit rating – it can lead to cheaper loans. Setting up direct debits to pay your bills and making sure you are on the Electoral Register make a big difference to your score.  It is generally best not to apply for other loans or credit cards in the period before applying for a mortgage.


  1. Prepare a financial self-assessment. A lender or mortgage broker will need to see this to assess suitable loans. Have statements; supporting documents (wage slips, deposit account balances,etc) and accounts available. If you are self-employed make sure you have up to date formal/audited accounts for inspection


  1. Make sure you are prepared for all costs of the transaction. It’s not just legal fees:-


  • A mortgage booking fee can be charged for applying for the loan of up to £200.
  • A mortgage arrangement fee for setting up the loan can be up to £2,500.
  • A mortgage valuation fee covers the cost of your lender’s survey on the property which on average is between £300 and £400. If you choose to have your own survey this can cost in the range of £400 to £700 depending on the detail you need.
  • Legal fees can vary and search fees and disbursements will be in addition to the legal costs.
  • Moving costs can range from £300 to £1,000. (Can you hire a van and do it yourself?)
  • Stamp duty is 0% on the first £125,000 rising to 12% on any amount above £1,500,000. Use the HM Revenue and Customs calculator to work out how much to put aside.  Do you qualify for stamp duty exemption or reliefs? Are you a first-time buyer?


  1. Do you qualify for Government Schemes? Do some research in case you are eligible for any schemes such as a Help to Buy Equity Loan Scheme or a First Time Buyer ISA. Make sure you know how quickly you can get access to your saved funds.


  1. Find the right mortgage- searching online first gives you a good idea of what is available. An Independent Mortgage Broker can provide a more in-depth search. Make sure you are aware of all fees and up-front charges. Make sure you include all usual insurance charges – life; property and contents


  1. Arrange a “mortgage in principle” (MIP). Proof of deposit and MIP can be an advantage when putting in an offer. You will be a more attractive proposition for a seller if you have this in place.


  1. Are you buying freehold or leasehold- if it is leasehold, how long is the lease? Less than 80 years is a red flag.  Can you buy the freehold if you want?  What are the service charges if any? How much is the ground rent? If the ground rent can increase, by how much and when?


  1. What is included in the sale- for example, white goods? Curtains? Have you agreed any extra payments for the washing machine? How old are any of the goods you are buying? When will you need to replace it?


  1. Is there a chain? If so, this can delay exchange and completion of Contracts. Be prepared for the frustration of trying to fix a convenient date for all the people in the chain.


  1. Exchanging contacts- 10% deposits are paid and both the buyer and the seller are committed to the sale. Make sure you have buildings insurance in place from the date of exchange as that is when your responsibility usually begins. The same goes for contents insurance as you do not want the stress of arranging the insurance on the day of the move.


  1. Completion- this usually takes place a couple of weeks after exchange but you can decide to make it sooner than this and if things get really tight, they can both be done on the same day. Take meter readings and agree them upon completion.

Next Steps

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