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The UK House Buying Process Explained
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The mortgage Process
Decide on the maximum purchase price that you can afford
View suitable properties
Bid on suitable properties
Have an offer accepted
Complete mortgage application
Obtain mortgage offer
Appoint a solicitor
Exchange contracts
Complete the transaction
The average time from submitting a mortgage application to completion in the UK is around 13 weeks. The worst points in the process for the purchaser are the time lags between submitting the application and receiving the valuation report - 2-3 weeks, and between receiving the mortgage offer to exchanging contracts - 1 - 8 weeks. Decide on the maximum purchase price that you can afford.
Add the equity in your existing property, any cash you wish to commit, and the maximum that you can borrow, subtract all fees, and any cash you wish to retain, or earmark for home improvements. That is your maximum purchase price. Check using an online mortgage calculator, whether you can afford the monthly payments. If you can't, reduce your maximum. Bear in mind the stamp duty bands of 0% up to £120,000, 1% from 120,001 - £250,000, 3% from £250,001 - £500,000, and 4% from £500,001 upwards.
If you're a first time buyer, ignore the bit about equity in your existing property, and existing mortgages.
View Suitable Properties
There are three things that are important when selecting your new property - LOCATION, LOCATION, LOCATION.
Go for the worst property in the best area, rather than the best property in the worst area. Why?, you will find it easier to sell, when the time comes to move on.
View a number of properties to get an idea of what's available, and the prices being asked. You will get a feel for what represents value for money. Look for faults and problems with the structure and useability of the property. Most vendors will for example re-decorate areas where there are damp problems, in order to hide them. That's not to say that a re-decorated house has problems, just be aware, that it's a possibility.
Most viewers get a feel for a property, and know very quickly if they'd like to live there. It pays to go beyond your "gut feelings". Have a builder friend take a look around, or do it yourself. If the sockets are round, the electrical fixtures are old and the property will need re-wiring.
Check the heating. If there are storage heaters, you're going to have a large electric bill. If the central heating boiler is old, it will need replacing at some point. Either way you need to take account of this.
Flat roofs last 20-25 years if you're lucky, then they leak. When they are repaired, they leak. Ask how old the roof is. You will often find whole streets with flat roofs replaced by pitched roofs. If the property that you're interested in is the exception, bank on major cost soon.
Take a pair of binoculars, and if possible, have a good look at the pitched roofs. If the roof line sags, remedial work or a new roof may be necessary. If there extensive repairs to the tiles, it's because they have slipped, and the roof may be failing. Grants are sometimes available for roof repairs, check with the local council. Whilst your enhanced gaze is cast skywards, check the guttering, and facia board (wooden bits that are stuck on the edges of roofs) Are they rotting? if so that's more cost.
Any large trees near the property? The roots might be growing into the foundations, look for cracks in the walls, and bear in mind that the tree may need some attention.
Back inside, look for signs of damp and condensation, it will rot woodwork eventually. Sniff the air, you can smell damp sometimes, it smells musty. Whilst you're smelling around, try and detect any obnoxious odours, it may indicate problems with drains.
Take a good torch with you, and if you can, inspect the roof space. There will be an access hatch somewhere, usually above a landing. Be careful, don't try and walk on beams if the roof space is not boarded out, just poke your head in an shine the torch. Look at the woodwork for signs of damp and or woodworm. Is there any insulation?. If you can see the tiles, look at them then turn the torch off, can you see any daylight coming through small holes in the roof?.
Back outside, check for cracks in brickwork or render. Most older houses have them, usually spreading from the bottom corner of windows which are structural weakpoints. Do not be alarmed if there are small cracks, but anything you could get your finger into is a cause for concern.
View extensions with suspicion. Some will have been built without planning permission (It's not always necessary) and building regulations control. Does it look right?
Check window frames for rot. Open the windows if you can. Do they work, or will they need replacing?
Congratulations, you're now a surveyor. Actually, the surveyor will take the general condition of the property into account when valuing the property, and may make a one line comment. If you will only be paying for a mortgage valuation, don't rely on the survey to point out all these things. You might instead find a general comment on the valuation report along the lines of "the property needs general maintenance work carried out". Majors problems should be reported by the valuer, but if he misses them (and often he will not be able to properly inspect roofs, or the roof space) you have no comeback.
Now the game begins, or if you would rather not treat it as a game, now the stress starts. It is helpful to realise at this stage that there's a reason why it's called the "housing market". Property vendors (sellers) want the best price that they can get, whilst sellers would like to pay the lowest price possible. Ultimately, it's helpful to both parties, to agree a reasonable price.
What constitutes a reasonable price, will vary with the location and type of property, the property condition, the number of people interested in the property at any given time, current economic conditions, and the price asked.
Further, the market for property is not static, instead, it changes almost daily. Imagine buyers and sellers as being lined up opposite each other on conveyor belts. New people, and properties are being added to the coveyor belts daily. At the same time, other people and properties are being removed.
If you are a seller, you want the conveyor belt opposite you to be full of people - i.e. lots of buyers in the market. You also want your conveyor belt to have few properties on it - i.e. few sellers. This guarantees plenty of viewings and a probable "bidding war", with prospective purchasers trying to outbid each other to secure your property.
If you are a buyer, you want the opposite - i.e. many sellers, and few buyers. This means that you can place a few low bids on the properties that you like, in the knowlege that one seller will probably cave in, and agree to a bargain price.
Recognising what type of market you are in, is therefore a primary consideration. Bear in mind that the micro market - i.e. the local market, may be entirely different to the macro market - i.e. a regional or national market.
Also be aware that there may be a temporary uneven-ness in the ratio of buyers to sellers that may quickly pass.
Overall - decide on the price that you are prepared to pay, and try not to deviate from this too much.
For a detailed look at the process of bidding on properties - see my special report. Be warned, if you want to know how to manipulate this process to your advantage, you will find full instructions for doing so. Some of these techniques may not seem fair, in fact, they definately are not fair. However, if you are in a competition to purchase a property, they will help you to win it.
Have an offer accepted
Simple enough, if your offer is the highest, it should be accepted. One frustration that you may encounter here, is the seller, who insists on continuing to market the property after accepting your offer. This is quite common, and requires little effort on the sellers part, other than telling the estate agent, that they want to do so. Whilst the techniques that I reveal in my report, definately give the purchaser an advantage, this manouver definately favours the seller. All is not fair in Love, War, and Property transactions - you have been warned.
Complete a Mortgage Application
Time is now, not on your side. The Estate Agent, if they are on the ball, will almost immediately want to know who your lender is, and who your solicitor is. They want the sale to progress swiftly and smoothly to completion, so will gently pressure you to get things moving. From your point of view, you would be wise, generally to move quickly too. If you have had the foresight to discuss your situation with a mortgage broker, and have obtained an agreement in principle, it's now simply a matter of meeting your broker to complete the paperwork. From there on in, the broker should take care of things. If not, you're going to have to start the process of obtaining a suitable mortgage now.
Obtain a Mortgage Offer
Completing a mortgage application, even after obtaining a decision in principle, does not guarantee that you'll get a mortgage offer from the lender. Many difficulties can interupt the process. Most commonly, these would include: problems with the valuation, inability to provide the supporting documentation required by the lender, discrepencies between the information supplied on the application form, and the documentation that you provide, inability to PROVE ID, or address.
Common examples are: the property is valued by the valuer at less than the price offered, no wage slips or P60 available, accounts not finished, thinking that your "salary" includes overtime and/or bonuses/car allowance, driving licence still shows old address, no passport.
Appoint a solicitor
In reality, you should have done this before completing your mortgage application, in fact, you will not be able to complete your mortgage application, without knowing your solicitors details. In practice, you will have little contact with your solicitor, until the lender sends her a copy of your mortgage offer. Even then, unless you instructed the solicitor to apply for the "local searches" straight away (a speculative move which involves cost, before a mortgage offer has been obtained), a few more weeks will pass before your solicitor requires your prescence.
Exchange contracts
When both your solicitor, and the vendors solicitor have completed all of the legal work, you are ready to "exchange contracts". This involves you agreeing to purchase the property, as defined in the legal paperwork, for a set sum of money. The vendor, in turn agrees to sell you the property, similarly defined. A date is agreed for completion
Tony Scott is a UK Mortgage Broker with over 12 years experience arranging mortgage finance You can get more information on mortgages at his website yourukmortgage.co.uk
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