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Buying a house: absolutely clueless

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Hi,

My wife and I want to buy a house this year. However neither of us have any idea whatsoever what to do, despite reading stuff on this website. I find all the information qhite overwhelming.

Should we see a financial advisor first to find out what our situation is and how things will be different from renting as we currently do?
I have never bought a house before but because I was left half a property in a will, I am apparently no longer a first time buyer (even though I simply sold my share to the other owner and have never actually bought a house) but my wife is.

So does that mean first time buyer mortgages are no longer available to us?

I personally have 30 grand which I want to use for a deposit for the house we will own jointly. We are trying to increase this amount by adding a few thousand pounds of joint savings to it.

I am utterly lost where to start with sorting out the financial organisation of the whole thing. Do mortgage advisors help with financial advice or should we do that first, draw up contracts that protect my 30 grand in case of divorce (we are in agreement of this being the sensible thing) and then look at mortgages? Are we allowed to look at first time buyer things?

I feel quite panicked about ending up buying a house we cannot afford because of not knowing the right path to walk in the process.

Dutchcloggie
«13

Comments

  • libf
    libf Posts: 1,008 Forumite
    Firstly, you need to work out what your house buying budget is. If you're using your £30k as deposit, and then you can potentially look for houses up to the £300k mark, but that will depend on your salaries supporting a mortgage for £270k whilst also paying other bills. You would then need to save for stamp duty, solicitors fees and moving costs.

    Starting point would be to setup a budget of your current money in and out goings to see what you would be comfortable with for a mortgage payment. You can find templates online if you're not comfortable doing that yourself.
  • drdpj
    drdpj Posts: 152 Forumite
    Part of the Furniture Combo Breaker
    In a nutshell:

    1. Breath :)

    2. Start by playing with a few mortgage calculators:
    http://www.halifax.co.uk/mortgages/forms/minicalc/container.asp
    https://personal.natwest.com/personal/mortgages/secure/how-much-can-i-borrow.html
    http://www.nationwide.co.uk/products/mortgages/our-mortgages/tools-and-calculators

    (I'm not endorsing any of these, just pulled them off google)

    That should give you an idea of how much you could borrow and hence what sort of ball-park you should be looking at.

    - don't forget additional costs of broker, survey, stamp duty and solicitor.

    3. Start looking at houses, and at the same time find an independent, whole of market mortgage broker that you like (not one from the estate agents). They'll help you work out the best product for you.

    4. Get a solicitor lined up who can work with the mortgage provider you selected with your broker. This is referred to as being "on the lender's panel". Your broker can probably advise here.

    5. Put in an offer and start the ball rolling :)

    With regard to protecting the 30k - that's something you'd need to discuss with a solicitor but others here will be able to advise.
  • Also - don't forget that interest rates can go up. I know the bank of England rate is 0.5% now - but it could easily go up to 4% in the next 5 to 10 years, or higher.
  • Also - don't forget that interest rates can go up. I know the bank of England rate is 0.5% now - but it could easily go up to 4% in the next 5 to 10 years, or higher.

    This is my biggest fear. Being a nurse, my salary is not likely to rise much beyond £25k (I am newly qualified at 40!) and my wife makes around £20k on an annual contract that gets renewed every year. I am terrified one day her contract won't be renewed so am almost thinking we should only get a mortgage that can be supported on my salary alone, in case of hardship....

    I can see why people stay with renting all their lives. Much less stressful :-/
  • Malmo
    Malmo Posts: 710 Forumite
    Part of the Furniture Combo Breaker
    Preparation

    Budget
    I would start by pulling together an income/expenditure budget and establishing what your approximate maximum monthly mortgage budget could be, as this will be a useful figure when you come to discussing your circumstances and requirements with a mortgage broker (I will come on to the use of a broker in a bit). If you are familiar with spreadsheets, then great. If not, have a look into how to use them - it's not essential, but it makes life a LOT easier for tabulating and calculating numbers and keeping records. Plenty of free options are available, such as Google Sheets.

    Review Credit Reports
    I'd urge you to take the time to thoroughly review your credit files/reports from all 3 Credit Reference Agencies (Experian, Equifax, Callcredit/Noddle). I've read countless threads here where buyers haven't done this in preparation ahead of time and have had problems either obtaining a mortgage agreement / decision in principle (AIP / DIP - they're the same thing) or have been refused at full application or underwriting. Take a look at this post for what you should do with regards to your credit reports.

    Search for an independent Whole of Market mortgage broker
    Find a good, independent whole of market mortgage broker who will hand hold you through the process. Avoid brokers based in estate agents. Also, do not place your faith in what estate agents tell you. They do not work in your best interests and they act for the vendor / seller, who pays their fee. Agents are not your friend when you are a buyer. As well as asking friends and family for broker recommendations and using Google, another method is to use the unbiased.co.uk directory. Suggested steps are posted here. Speak to a few and get a feel for whether or not you could work with one of them. Give your chosen broker copies of all the credit reports so that they have visibility of your credit history and can place your case with the right lender.

    At the appropriate time, when you are ready to search for a property, what you need to get the process started is an AIP / DIP from a lender. This isn't a mortgage. The purpose of the AIP is to validate your creditworthiness and based on that, indicates your maximum borrowing power taking into account income and commitments, subject to further affordability and other criteria. They generally expire after 90 days but varies by lender. Estate agents generally treat buyers as being serious if they have an AIP ready.

    An AIP is then turned into a full mortgage application when you have a property you want to secure the loan against. You can obtain the AIP either yourself direct from a lender assuming you have researched their criteria or via a mortgage broker. Just get one for the maximum amount the lender will allow based on your income/commitments. It doesn't mean you have to borrow that much later on.

    General Reading
    Have a read of this MSE article which describes a simplified timeline and milestones of the buying process. It doesn't really factor in the complexities of a chain and the impact of that on the end to end process, but it is still useful as a guide.

    Here is also a MSE guide that refers to the likely buying fees & costs to factor in and when they may be due.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
    Holiday Haggler
    edited 23 July 2015 at 11:08AM
    This is my biggest fear. Being a nurse, my salary is not likely to rise much beyond £25k (I am newly qualified at 40!) and my wife makes around £20k on an annual contract that gets renewed every year. I am terrified one day her contract won't be renewed so am almost thinking we should only get a mortgage that can be supported on my salary alone, in case of hardship....

    I can see why people stay with renting all their lives. Much less stressful :-/

    Well, that's why you can't mortgage yourself to the hilt. You need to leave a margin for rate changes. I've done that by extending my mortgage to it's max (They let me run it until I was 65.. so i got a 33 year term). You can always overpay in the times when you are 'comfortable' to reduce your capital. I'm guessing you can only get a 25 year term when you're 40 unfortunately.

    Renting would worry the hell out of me. One of my wife's friends rents an identical house to ours about 300 yards from us - we bought about 3 months before they moved in - and have seen our property rise in value by ~80k in the last 3 1/2 years. In that time, my mortgage went up £50 a month when i remortgaged to a 5 year fix - and i'm sure their rent has gone up by more. Not to mention i've paid off ~10k in mortgage debt in that time.

    Your financial predicament isn't great.. I don't think you'll find a property on your salary alone in many areas of the country.

    edit: Do you have many opportunities to do bank work to beef up your 'annual salary' ? If you're near London you can do nursing work at Wembley Stadium at the weekeds; it's good money [My wife's an A&E band 7...]
  • Your financial predicament isn't great.. I don't think you'll find a property on your salary alone in many areas of the country.

    edit: Do you have many opportunities to do bank work to beef up your 'annual salary' ? If you're near London you can do nursing work at Wembley Stadium at the weekeds; it's good money [My wife's an A&E band 7...]

    nobody wants to live in Northampton so hopefully i can get something here. Houses of around £150k are plenty good for us.

    I am only a newly qualified band 5 so not much expertise to get extra work yet ;-).

    Why is there not a person out there to whom i can say: here are three houses we are interested in, here are all our financial records and tell us which one we can afford and then go and sort everything out for us! actually, i am sure such people are available at a very tidy cost!
  • Malmo wrote: »
    Preparation

    Here is also a MSE guide that refers to the likely buying fees & costs to factor in and when they may be due.

    thank you taking the time to type all that up! Much appreciated and really helpful.
  • Malmo
    Malmo Posts: 710 Forumite
    Part of the Furniture Combo Breaker
    nobody wants to live in Northampton so hopefully i can get something here. Houses of around £150k are plenty good for us.

    We have sold in the town at asking price within half a week of listing the house, as the specific neighbourhood is in demand. People do want to live there and it does have plenty to offer, especially for commuters to London or Birmingham, which are both reachable in either direction. There is a lot of regeneration under way.

    I will PM you with a recommendation for a great Northampton-based mortgage broker that we are using.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
    Holiday Haggler
    edited 23 July 2015 at 11:34AM
    nobody wants to live in Northampton so hopefully i can get something here. Houses of around £150k are plenty good for us.

    I am only a newly qualified band 5 so not much expertise to get extra work yet ;-).

    Why is there not a person out there to whom i can say: here are three houses we are interested in, here are all our financial records and tell us which one we can afford and then go and sort everything out for us! actually, i am sure such people are available at a very tidy cost!
    Maybe a mortgage advisor would be that person - but this is all part of being an organised grown up :)

    I live in the south east so I'm use to shoebox-sized flats costing £200k upwards!

    If you go on your income alone then you can look at houses of about £130k (25*4 + 30). You'd be looking at a LTV of 77%. If I look at my own mortgage provider (First direct, you can't get it through a broker) then this would give you a mortgage of £479pm - on a 5 year fixed 3.09% repayment. This stuff takes minutes to work out when you get the knack of it.

    Now.. bare in mind your wife isn't included in this - doesn't that give you a lot of headroom for rate changes? Maybe if you include your wife you'll be able to borrow another 20k and still be ok for rate changes.

    Regarding the 'protection' of the deposit you'll need your solicitor to sort that out.
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