In the Know | Provided by Nationwide Building Society - First time buyer's guide

First time buyer guide - Scotland

12th November 2007

Step 1 Working out your budget

How much can you afford to pay for your first home? How much will it cost in the end? Set your sights realistically and remember never to borrow more than you can comfortably pay back.

First, work out how much you could afford to pay each month for your mortgage. To help you we've included a handy Mortgage Budget Planner (PDF - 28KB). Simply use it to list all your current monthly outgoings and then subtract the total from your monthly income.

You'll also need to save as much money as you can in advance for a deposit. The more you save the less you'll need to borrow and the less interest you'll pay. It's important to remember that if you only have a small deposit to put towards the purchase of your new home, some lenders will impose a "higher lending charge". This could add as much as £2,283* to the cost of buying your new home.

* Higher lending charge is based on a mean average first time buyer loan size of £135,539 at an LTV of 95% and assumes the higher lending charge is paid upfront costing a borrower £2,283 with Abbey.

Step 2 Other costs to remember

When you're working out your budget, you will also need to remember there are a lot of other costs involved in buying a home. These can include:

Solicitor's fees
Valuation/Survey
Searches
Stamp duty
Home insurance

As a rough guide the key costs could add up to nearly £4,000 on a property of £200,000*

*Source: Survey taken by www.whatprice.co.uk 29.10.2007

Step 3 Choosing the right mortgage

With so many lenders and so many different products, choosing the right mortgage can be confusing. Two of the key things to consider are:

How to pay back your mortgage?

With a repayment mortgage you will pay both capital and interest back with each monthly payment. On an interest only mortgage, you only pay the interest each month. You will therefore need to make provisions for a suitable repayment plan to repay the capital.

What type of mortgage to choose?

With a fixed rate mortgage you'll have the security of knowing exactly what your payments are going to be each month while with a variable rate mortgage you will take the risk that your monthly payments may move up or down.

Step 4 Agreement in principle

As a first time buyer you may be asked by the estate agent to provide evidence to show how much you can afford to borrow. You can do this by getting an agreement in principle from your mortgage provider, which is based on your income, employment status and the sort of property you are looking to buy. It shows that a lender is prepared to give you a mortgage and how much you could borrow from them.

Step 5 Getting the right solicitor

Once you have found the right property you will need to appoint a solicitor or licensed conveyancer who will in turn contact the seller's representative to note your interest.

Word of mouth is a common way to hear about a good local solicitor, but to find a specialist in your area check out:

www.thelawsociety.org.uk
www.conveyancer.org.uk

Step 6 Getting a survey done

You will need to have the property valued prior to making an offer. This will allow you to check that the property is worth the asking price.

The valuation is a basic check of the property. It won't necessarily highlight all the aspects which might cause you problems so it is advisable to arrange your own Home Buyers Report. This may be more costly, but it's also a lot more detailed and can give you extra peace of mind.

If you're buying an older or unusually designed property, you may also need to have a full structural survey carried out.

Step 7 Making an offer

Once you're happy with everything, including the results of the survey, you would then normally contact your solicitor/conveyancer who will make the offer on your behalf.

Don't be afraid to negotiate

With no home to sell, a first time buyer like you is very appealing to sellers. That's because you're not part of a 'chain' of buyers and sellers all dependent on each others' sales going through. This puts you in a very strong bargaining position and you could be able to make an offer at a lower price than other prospective buyers.

Step 8 Full mortgage application

When you've decided to buy a particular property and had your offer accepted, you're ready to make a full mortgage application.

Your lender will want to see proof of your identity, income and current address.

Once your lender is completely satisfied with everything, a formal offer will be made to you.

Step 9 Conclusion of Missives

This is the period during which the sale and purchase of the property, including the Settlement Date, are confirmed. It is at this stage that you and the seller become legally bound.

You will be required to sign the mortgage document known as the Standard Security and also the document to transfer the ownership of the property over to you. So make sure you discuss everything with your solicitor. If you don't understand something then ask.

At this stage don't forget to consider how you're going to protect your home and mortgage.

Step 10 Moving into your home

The Settlement Date is the day when your solicitor arranges for the money to be transferred, and the estate agent hands over the keys to your first home!

To make sure moving in is stress-free, be sure to plan ahead as thoroughly as you can. The easiest way is to make a simple checklist to help ensure you don't overlook anything important. Your list needs to include things like: