The first thing you need to do is decide how much you can afford. You will need to look at how much deposit you have available and how much you can borrow. Usually you will apply to a building society or a bank for a mortgage.
It is advisable for any buyer to get pre-qualified or pre-approved for a mortgage. Getting pre-approved means that a mortgage will be available to you as the lender will already have gone through the credit checking process. This will always be subject to the property having a successful valuation which meets the lending criteria e.g. LTV (Loan to value).
This gives the buyer a clear idea of his target budget and the seller confidence that the buyer can afford the property and has facilities already in place to enable a purchase. A seller is more likely to choose someone who is already pre-approved than not.
Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-
- Survey fees
- Valuation fees
Stamp Duty Land Tax. This is payable on properties costing more than £125,000 and is at least 1% of the purchase price (in a limited number of areas, designated as 'disadvantaged', it is only payable on properties costing £150 000 or more) – for more information please see www.hmrc.gov.uk
- Land registry fee
- Local authority search
- Fees, if any, charged by the mortgage lender or your mortgage broker
- The buyer’s solicitor’s costs
- Removal expenses
- Any final bills, for example, gas and electricity, from your present address which will have to be paid when you move.
You should also take into account the running expenses of the property you wish to buy. These may include:-
- Heating, lighting and water rates
- Community charge/council tax (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.
You will also have to pay a deposit on exchange of contracts, which can be anything from 10% to 40% of the purchase price in the current market. This would normally be payable, via your solicitor, a few weeks before the purchase is completed and the money is received from the mortgage.
Deciding on a property
It is important when you find a prospective property you wish to purchase that you arrange to view the property at least once more after the initial viewing. This second viewing should be a cold hard look at the property to get some idea of whether or not you will have to spend any additional money on repairs, alterations or decoration. When you are completely happy, you may then decide to make an offer.