Securing your grip on the property ladder

Feb 22 2006

By Narin Bahar

Getting a foot on the property ladder is a big step. It's a great way to invest in your future and can be an exciting (although occasionally frustrating and stressful) time. But whether you're buying alone or with someone else, it's important to find out as much as possible about the housing market, mortgages and all your options before you get carried away. So you're no Kirstie Allsopp or Phil Spencer. Don't panic. Planning and research is the key. Before you start doing the rounds of estate agents, you need to know how large a mortgage you can get - there's no point searching for the house of your dreams if it's out of your price range. Start by approaching several lenders and ask how much they will let you borrow and request an 'agreement in principle' that confirms this amount. You can use this to add leverage to any offer you make on a home. The amount you can borrow will be based on the size of your deposit and how much you earn. Lenders are usually prepared to lend you around three times your annual earnings, or if you are buying as a couple, this rises to three times the first income plus the second income, or two and a half times your joint income. Research available mortgages by reading specialist magazines like What Mortgage and Home Buyer & Mortgage Advisor available in newsagents, and money sections in magazines, newspapers and on the web. But the mortgage is just the first outlay. If the price of the property you plan to buy is more than £120,000, then bear in mind you're also going to have to pay a government tax called Stamp Duty. The lender will need to carry out a valuation of your prospective home to check it is worth the money it is lending you. This will cost you from around £150. Lenders may also charge an arrangement or completion fee. Legal fees are a major expense. Your solicitor or conveyancer will charge a fee for its services, starting at £400. The land registry costs, a local search (usually between £80 and £150) and other disbursements are also on the solicitor's bill on which you have to pay VAT. You'll also need to set aside money for insurance, moving costs and furnishing costs.  Once you've got your money sorted, it's time to head out and find your new home. Location is crucial - investigate areas where you might like to live and get an idea of what your money will buy. Register with local estate agents, telling them your price range and preferred areas / streets. Keep in regular contact so you don't miss opportunities. Don't forget to scour local papers too. Once you've found your dream home, it's time to put in an offer (via your estate agent). As a rule, start below the asking price - if the vendor says no, it allows room to move upwards. The only exception is if the market is ultra competitive, or it's an undisputed bargain. Remember, if you're a first time buyer you have extra bargaining power, especially if you can move straight away. Once your offer's accepted, you'll need to give your chosen mortgage company details of the property and proof of your income for the green light. Ideally, get an agreement in principle before this stage so everything is already in place. You'll also need a surveyor. The mortgage company's surveyor will do a valuation to ensure the property is worth the amount they're coughing up. However, for your own piece of mind get something more in depth, like a Homebuyer's Report too - especially if the house is old. This will give the lowdown on things like damp, rot or structural problems. Next you'll need a solicitor who will help transfer the property from the seller's name into your own. They'll also check with the Land Registry to ensure the vendor has the right to sell, do local authority searches to check, for example, no major roadworks are planned behind your new home, and make sure leases are acceptable. The last part involves 'exchanging contracts'. Basically you and the seller sign a special legal contract that's been drawn up, and agree a completion date when the property becomes yours - and you finally get handed the keys to your new home.