The astute person's guide to first time buying
Buying a house for the first time might seem like a daunting task, but it doesn't have to be. The secret of First Time Buying is knowledge. The more you know about getting a mortgage and the quicker you learn it, the easier and less intimidating it can be.
Below, we explain the process from start to finish. You may know some of these things already, in which case just go directly to the parts you feel you might need to top up your knowledge on.
- Step 1: Work out your borrowing power
- Step 2: Identify your best mortgage option - and how you'll pay for it
- Step 3: Get an Approval in Principle
- Step 4: Find your dream place
- Step 5: Put an offer in (and hope it's accepted)
- Step 6: Apply for your final mortgage and start the legal work
- Step 7: Exchange and final completion
- Step 8: Getting the keys and moving in
- Applying made easy
Step 1: Work out your borrowing power
This is based on your salary and existing monthly commitments. Use our online mortgage calculators to help you get an idea of how much money we will realistically be able to lend you.
Step 2: Identify your best mortgage option - and how you'll pay for it
Different mortgages suit different circumstances so it's crucial you choose the one that's right for you. Giraffe has a range of different mortgages to suit your needs. From Standard Residential to Carbon Offset (see guide) and Self Cert (see guide).
Once you've identified your preferred mortgage type and deal, you'll need to request a Key Facts Illustration (KFI) that details in full the options you've chosen and tells you all the facts you need to know. As Giraffe is regulated by the Financial Services Authority (FSA) you must have a KFI before applying for any mortgage. You can get a KFI online, or contact us to get a quote.
How to pay us back
As a rule, you can usually repay a Giraffe mortgage in one of three ways: 'Repayment', 'Interest Only' or 'Part Repayment/Part Interest'.
Repayment (Highest monthly repayments)
Here you gradually pay off the amount of money you've borrowed plus the interest charged in monthly installments over an agreed term. In the early years, a high proportion of your repayments will go toward the interest, but as your overall capital balance reduces so does the proportion of interest. The mortgage will be fully repaid if you maintain the payments through the term of the mortgage.
Interest Only (Lowest monthly repayments)
Here your monthly repayments only cover the interest charged for the mortgage money borrowed. No money goes towards reducing your overall capital balance. If you choose this option you're responsible for ensuring you have the means to repay the full capital balance at the end of the agreed term. Ways to do this could include investment plans such as an endowment or ISA, shares. We recommend consulting an Independent Financial Advisor (IFA) to discuss the right repayment method for your circumstances.
Part Repayment/Part Interest Only (Medium monthly repayments)
Just what you'd expect. A combination of the two previous options. Please note, you need to remember that the interest only part of the mortgage will need to be repaid in full at the end of the mortgage term.
What other costs must you remember to factor in?
Don't forget to take the following into account when doing your overall maths...
- Deposit:
- Normally you'll need a minimum 10% deposit.
- Conveyance fees:
- To pay for a solicitor and/or conveyancer for his/her time in looking after the legal side of your house buying (see below).
- Local search fees:
- Fees your solicitor/conveyancer will incur to get information from the local authority on your intended property and its surrounding area. (To ensure there are no potential problems that could devalue the property e.g. new road plans or boundary disputes).
- Disbursement costs:
- Fees your solicitor/conveyancer will incur so they can get information from the land registry and from various other sources in the case of searches.
- Lender's valuation fee:
- We conduct a basic survey to assess the value of the property and to ensure its value will give sufficient security for the mortgage. (You may also want to pay for a Homebuyers Survey, a more thorough report giving more detail about the property's condition).
- Fund transfer fee:
- Transferring money electronically from one banking or finance institution to another can incur charges. Ensure you check what these may be in your circumstances.
- Higher Lending Charge:
- On some of our mortgages, if your borrowing exceeds 85% Loan to Value (LTV) of the lower of either the purchase price or valuation, you may have to pay the following additional security fee on the excess loan over 75% LTV:
- over 85%-90% LTV = 7.25
- Stamp Duty Land Tax:
- The Government tax on the purchase of most properties valued above £125,000.
- Moving costs:
- Remember to budget for packing, removal and potentially storage of your stuff.
- Peace of mind:
- It's also important to think about how you'd manage your repayments if the unexpected happen. Consider life insurance cover or Mortgage Payment Protection Insurance
Step 3: Get an Approval in Principle
If you're happy with your Key Facts Illustration (see Step 2) and want to progress, you need an Approval in Principle (AiP). This step allows us to check your eligibility for a Giraffe mortgage and confirms to you in writing if we can offer you a mortgage and for how much.
With Giraffe you can get an AiP answer quickly. Apply for an AiP online
Step 4: Find your dream place
But remember, be honest about budget. Know the maximum price you can afford to pay - so you can hunt realistically. Estate agents will take you more seriously if you do. They'll take you even more seriously if you have an Approval in Principle to show you can act fast. Without a chain, you're their ideal buyer.
Things to bear in mind
Location is everything:
But it usually brings a price premium. So be prepared to be flexible and consider looking around the edge of your desired area as well as in it.
Buying methods:
The usual way is via an estate agent. These usually charge the seller a fee, not the buyer. Online property portals can give you a good feel for the market and different agents.
Research is vital:
Recce the neighbourhood and visit the property more than once; at different times and on different days. Make a list of questions for the selling agent, and ask them all.
Get a second opinion:
From someone whose view you trust. (especially if you're buying alone).
Step 5: Put an offer in (and hope it's accepted)
Decide how much you'd like to offer for the property and contact the seller's agent. If the seller accepts your offer, it will be yours 'subject to contract' (i.e both you and the seller have agreed in principle to proceed with the deal, but neither of you are legally bound - yet).
Step 6: Apply for your final mortgage and start the legal work
As soon as your offer is accepted you need to apply for your final mortgage in full and appoint a solicitor/conveyancer to act on your behalf in checking all the legal documents and processes and generally protecting your interests.
As your lender, our next step is to arrange a valuation report, which you will usually have to pay for. This report ensures the property is worth the amount you want to borrow. (See Step 2, 'What other costs must I factor in?') If you wish, you can also arrange you own, more comprehensive survey to give you a clear indication of the property's condition.
The three main types of survey are...
Valuation report (The bare minimum we insist on)
Performed by one of our own valuers or an independent panel valuer, its purpose is to prove to us that the current value the property will provide sufficient security for your borrowing. We'll send you a copy of this report, the findings of which will only be based on a limited inspection. Any issues like decay or potential structural problems won't necessarily be covered. We strongly recommend you get a more detailed report to fully inform you about the property's condition. (See below).
Homebuyers' survey & valuation (Also called a Property Purchase Survey and Valuation).
This is a more detailed report approved by the Royal Institution of Chartered Surveyors (RICS). It will give you information on the property's state of repair, the significant aspects of its condition and the surveyor's/valuer's opinion as to its market value. It doesn't inspect parts of the property that are covered, unexposed or inaccessible. Fees are more than for a mortgage valuation report. However, at Giraffe, we can usually arrange for the same surveyor/valuer to do both to try and keep costs down.
Building survey (formerly known as a Structural Survey)
This is a full investigation and assessment of the construction and condition of a building. The extent and cost of the survey will depend on the agreement between you and the surveyor. Please note this does not include a valuation, so we will still require a separate valuation report. Whatever survey you choose to have, we advise you to speak to the surveyor first and find out what they involve, both in terms of cost and checks carried out.
What if the survey highlights issues?
You can try to negotiate the price down to compensate you for any necessary work. Remember, the amount you agree to pay for the property is not finalised until you exchange contracts.
Getting the final rubber stamp from us
Once the survey's done, you've completed your final mortgage application and we've made all our checks (e.g. confirming you can afford to repay your borrowing) we'll send you a formal Offer of Loan.
Step 7: Exchange and final completion
Once your solicitor/conveyancer has completed all their checks, both you and the people selling the property are ready to exchange contracts. (you literally sign identical contracts for sale and your respective solicitors then swap them). At this point, both parties are legally bound to proceed with the transaction and you have to pay any deposit through your solicitor. You must also have any buildings and/or contents insurance in place.
If you pull out now, the seller is entitled to keep this deposit.
At exchange, you also set the date for completion - the date you actually take ownership of the property and can move in. Before you can complete, you must sign the mortgage deed and the document that legally transfers the property over to you. Your solicitor should arrange this.
Step 8: Getting the keys and moving in
Before the big day arrives and you crack open the bubbly, inform the utility companies of your move. You'll need to redirect mail and inform other people of your new address (e.g your bank, employer, mobile phone company).
Remember also that your home may be repossessed if you do not keep up repayments on your mortgage. So you might want to pre-arrange Mortgage Payment Protection or life assurance to help cover the cost of repayments should the unexpected happen.
How long should it take to reach this stage?
It mainly depends on how many people are in your chain. Most sellers are also buyers - buying from someone else who is selling to buy elsewhere, and so on. If the chain breaks somewhere up the line it can affect everyone.
Applying made easy
If you're happy that you know what you're doing, and sure you've chosen the right mortgage for you, it's time to grab a Giraffe before it's gone.
Good news. As Giraffe is a direct mortgage provider you can get everything you need to complete your application here online - from a Key Facts Illustration quote to a full application. Simply log into our secure application system.
Or you can speak to one of our mortgage specialists who will be able to talk you through the next steps. Just call 0845 603 9273*.