1. How much can you afford?

As a first-time buyer it can be difficult to know where to begin in trying to work out how much money you have for the deposit and how much to spend on your monthly mortgage repayments. Your monthly outgoings as a homeowner will differ from those of a rent-payer. So, what payment costs do you incur when you buy your first home and what kind of monthly outgoings do you need to budget for?
Before you begin your house-hunt in earnest, it is essential that you sit down and work out how much money you have for a deposit. This may not just be a question of the money you have saved towards the deposit so far, as you need to remember that you will have some one-off payments when buying your new home. These one-off payments will include:

• Legal cover
• Stamp duty
• Evaluation searches
• Solicitor's fee
• Mortgage arrangement fees

And may also include any payments you may have to make on:

• Furniture
• Decoration costs
• Yearly bills such as TV license

Once you have a clearer idea of how much money you have for your deposit you then need to calculate how much you will be able to afford to spend on your mortgage repayments each month.  In order to do this you need to take into account your monthly outgoings – these will differ from the ones you may have at the moment and also if you move out of your current area into a new area, say from Yorkshire to London. Use the checklist below to remind you of all the monthly payments you might incur:

• Bills (such as council tax, water, gas, electric, phone)
• House insurance
• Mortgage protection cover
• Food money
• Car/transport costs
• Gym membership
• Pension (if you have one)
• Clothes
• Money for socializing
• Annual service charges
• Grounds and property maintenance

Keeping your bills budget down is very important and insulation is key, as is fixing such as dripping taps and sealing drafts off. In some places grants can be obtained for roof insulation. Tips on reducing fuel bills through energy efficiency are easy to find, as is the order of priority. In theory first time buyers should be keener on keeping costs down but in actual fact all householders are keen on energy efficiency - it's in everyone's interest.

One of the most important things to consider is the effect of any increase in mortgage payment due to an increase in interest. If you take out a mortgage where the monthly repayment amount is tied in any way to interest rates then if they change (up or down), you will be affected. It's important you are aware of how an interest rate rise of say half a percent might increase your mortgage payments.

In terms of on-going property maintenance bills, it's always good to seek advice from parents, friends and professionals about property maintenance.  Not only will you want to protect the fabric of their property but also to enhance it as an investment. Probably the most important area is the roof as if there can be any water ingress; this can affect the whole property. Damp is also something that should be remedied sooner rather than later as the damage can be extensive and expensive - not to mention unsightly! Major items needing fixing should be identified in the survey or possibly in the home information pack depending on how comprehensive it is. Window frames, if wooden can also be a cause for concern, and it is a good idea considering switching to double glazing for lower maintenance or they may need repainting or re-varnishing every two or three years. Chimneys will need annual sweeping and the boiler will need an annual service.

These costs can all mount up and should be taken into consideration when looking at budgeting after moving in.

The best way to avoid spiraling into debt is to be aware of what costs you are likely to face and spread the outlay so it is manageable.  Decorating and furnishing can be spread so only the most urgent expenses occur at first. There are ways to reduce costs such as doing it yourself, also by purchasing second hand furniture.

In terms of decorating and furnishing your new home on a budget, this is all down the individual.  Too often we hear first time buyers say they can't afford what they want but in actual fact they might be being particularly fussy.  There are countless television programs these days about how to smarten a place up with paint and throws - these are a great first step. Achieving your perfect home takes years - if not decades. Parents are usually keen to help their children live in a nicer environment and can be an enormous help.

Our advice on keeping costs down are to buy second hand furniture - you can get some lovely items from e-bay, the local classifieds or friends and family. Also, the use of paint, rugs and throws can do an awful lot to make somewhere feel cozy and colour-co-ordinated. You may want to try and buy white goods such as washing machines from the previous owners of the property - they might throw them into the package. New home owners can gradually upgrade as they go on, leading to a home they are very happy to live in and come home to. Once you have calculated these monthly payments you will then have a better idea of how much you will be able to spend each month on your mortgage. You can then enter your deposit into an online mortgage calculator to give you an initial idea of how much you can afford to spend on the price of the house itself. This will help you when you speak to the mortgage advisor as more information helps them to find the best mortgage for you.

2. Choosing a property

Deciding on a Property
When you find a property you should arrange to look round it to make sure it is what you will need and to get some idea of whether or not you will have to spend any additional money on the property, for example, for repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.
Ask if there`s a Home Information Pack (HIP). This will give you important information about the property you`re thinking of buying, including an energy performance certificate, local authority searches and evidence that the person selling the property is entitled to do so.

Is the Property Leasehold, Freehold or Commonhold:
Freehold
Freehold gives the purchaser complete ownership of the land and all the buildings on it. A freehold gives the buyer the right to do as they like with their home, subject to the law and planning controls.
Any property that is freehold - or in the case of a flat has a share of the freehold - is likely to be more valuable.
Leasehold
A leasehold property is leased from the freeholder for a specified period of time. The lease usually includes a range of terms and conditions, specifying the leaseholder's responsibilities to the property and the freeholder.
Leases can be long or short term - a long-term lease, for example 999 years, is likely to be in demand from someone looking to buy a home. A short-term lease, say, for a few years, means the property is effectively being rented.
It is sometimes possible to extend the length of a lease or buy a share of the freehold - a process known as enfranchisement.
Commonhold properties
If a property is commonhold then you effectively own a share of the freehold of the land on which the building stands. You own this share together with other owners of flats in the building. You also share the responsibility with them for things like repairs and upkeep.

3. Making an offer
So, you've conducted your viewings and you've found the property you've been searching for. It's time to make an offer. Before you jump straight in with a figure, it's worth setting some ground rules that will help you in your negotiations and these will depend on your own circumstances and how keen you are to secure the purchase of the property:

• Decide the maximum value you are willing to offer for the property before negotiations start
• Decide on how low you want to start your offer on the property.

Arm yourself with as much information as possible about the property and the market before you start negotiations. The estate agent will be able to offer you advice, but you should always bear in mind that they are essentially working for the seller. You may want to find out:

• What is the asking price now and has it been lowered in the past?
• How much interest has there been in the property?
• How long has it been on the market for?
• Does the seller need to move quickly?
• Have they already found a flat or house to move to?
• Have they already received offers from other potential buyers?
• How much were they for and were they rejected? How long ago?
• How have prices in the area moved over the last few years?
• What planned developments in the area might influence values in the future?

Your own situation will influence a seller's decision to accept your offer over another one, too. Here are a few situations which may give you the edge in your negotiations:

• You are chain-free
  You have no property to sell, so you can move quickly
• You have exchanged on your existing property
  You're in a strong position to finance the purchase and are able to move quickly
• You have a mortgage offer already on the table
  You can get the financial ball rolling as soon as an offer has been accepted
• You are a cash buyer
  You can move faster than anyone relying on a mortgage to finance the purchase.

Once you have all the information you need, it's time to make the offer. This is usually done by calling the seller's estate agent, clarifying your current position and making an offer. The estate agent must notify the seller of any offer the property receives. Some buyers will instinctively offer much lower than the asking price to begin with in order to test the water and will then work upwards towards a mutually agreed price, but much will depend on the circumstances of all parties in the process.

Some buyers ask for the property to be removed from the market completely and for this to be confirmed in writing after an offer has been accepted. This is to avoid 'gazumping'. Gazumping occurs when the seller accepts a higher offer from another buyer after yours has already been accepted. Unfortunately, it is legal and can be very upsetting should it happen to you.

The seller's decision to remove it from the market will largely depend on your buying position - for example, if you're chain-free and can move quickly, or if you have exchanged on your existing property. Most will agree out of goodwill.

During your negotiations, always remember:

• Be calm and polite at all times
• Sell your own position if you believe it gives you an advantage
• Be confident in your offers
• Be patient
• Don't get too carried away and offer anything beyond your means.

In some cases, a property for sale will go to sealed bids. This is when a property receives multiple offers from prospective buyers. The final decision of who to sell to is usually based on the value of the offers and the circumstances of the buyers (whether they are cash buyers, chain-free, etc.). There are no rules about how high you can bid, it will come down to how much you can afford, the level of the competition and how much you're prepared to part with to secure the property.

4. When the offer has been accepted

When the Offer Becomes a Contract

Once the seller accepts your offer, the offer becomes a contract – you've contracted to buy a house. What's in a contract varies from state to state, but some common things you'll find include:

• Legal description
  This describes the property you are buying in terms of its dimensions relative to a fixed point (like a road) or in relation to a recorded subdivision plat or declaration of condominium. It often includes the street address of the property.

• Selling price and deposit
  This is the price you and the buyer agreed upon, as well as the amount of earnest money you'll pay when you sign the contract.
• Mortgage contingency
  A contingency protects you by stating that the sale depends on a lender approving you for a specific mortgage, rate, and term.
• Closing date and location
  The closing date (also called the settlement) can be several weeks to several months away to meet the seller's and your needs.

• Conveyances
  Double check these conveyances to make sure that the items are there and are what you and the seller agreed on in the offer.

• Home inspection
  If you've made the contract contingent on a home inspection, this will set an inspection date and provide an explanation of what will happen if the inspection identifies any problems.

• Possession date
  This is the date you can move in. It's usually the closing day or very soon after it.
• Property insurance
  This details the home insurance policy that will cover the property until the closing date. This can be the buyer's or seller's policy.
• Property disclosures
  This includes legal notification of any required information concerning the property (such as copies of documents from the homeowners' association), issues or problems with the property.

Choosing who is to do the Legal Work

• Use a solicitor; or
• Use a licensed conveyancer

conveyancing is the legal process by which ownership of a property is transferred from the seller to the buyer.
Whether you are a buyer, seller or both, in most cases you will want to hire a solicitor or licensed conveyancer as it can be complicated process.

The Law Society is the professional body for solicitors in England and Wales and they are bound by their code of practice. You can find a solicitor in your area that specializes in conveyancing on the Law Society website. You can also read its guidance about how to use a solicitor and what to do when things go wrong.

5. Shared ownership

Types of ownership

Under the law of England and Wales there are two types of property ownership. The first is legal ownership and the second is beneficial ownership. These are described below.

Legal ownership
The legal owners of a property are the ones who are named on the title document. The number of owners in a legal ownership does never exceed four. When the property is registered at the land registry these legal owners are listed as the registered proprietors. If the property hasn’t been registered then the owners in law are listed on a document called the conveyance which ‘conveys’ the property from the previous owner to the current owner.

Beneficial ownership
Beneficial ownership is quite simply, the right to enjoy the benefits of a property, to live in and use that property. The beneficial owner also has the right to share in the proceeds if the property goes up for sale. On occasion there can be instances where there are beneficial owners that you are unaware of when you purchase a property. This could be problematic because the person in theory still has the right to beneficial ownership of that property even after you have legal ownership.

If someone has legal ownership of a property, then they automatically have beneficial ownership as well. Where this occurs it gives rise to an arrangement called a trust. This can be set up by a deed or written arrangement, it may be imposed by law or it may be automatic. If there are at least two legal owners, there is always a type of trust called a "trust of land". This occurs even if the beneficial owners are the same people as both owners have legal rights against each other. It is possible to have two or more legal owners holding the property on behalf of only one beneficial owner, or one legal owner holding it on behalf of any number of beneficial owners.

6. Legal work

Steps in the legal work of buying a property.
Although it is impossible to give a precise idea of how long the legal work involved in buying a property takes, it is possible to offer guidelines. From having an offer accepted to exchange of contracts can take up to seven weeks and from exchange of contracts to completion can take up to four weeks. However, if there are any problems the time taken may be longer.

Enquiries made by the solicitor or, in England and Wales, licensed conveyancer
Once you have instructed the solicitor or, in England and Wales, a conveyancer, the seller’s solicitor or the licensed conveyancer draws up a contract which will eventually be signed by you and the seller.

However, before the contract can be signed, your solicitor or licensed conveyancer must make sure that there are no problems with the ownership of the property, rights of way, access, or future developments in the area that might affect the property.

This is called making enquiries and searches. The solicitor or licensed conveyancer makes the enquiries and searches as follows:

• Local searches. These are enquiries made to the local authority (or in Northern Ireland, the appropriate government department) about any matters which affect the property and involve the local authority, such as whether there is a compulsory purchase order on the property.
  Local searches also include questions about any proposed changes or development in the area that might affect the property such as roads, housing, shops. During the local search, the local Land Charges Register (Registry of Deeds in Northern Ireland) is also checked. This gives information about any matter which affects the property such as tree preservation orders, if it is a listed building or in a conservation area; and
• Enquiries made to the seller by the solicitor or, in England and Wales, a licensed conveyancer. These are a set of standard questions about the property, boundaries, neighbor disputes and fixtures and fittings that will remain in the property. There may also be additional questions that the solicitor or licensed conveyancer thinks are necessary, such as the transferability of guarantees for any work done on the house, for example, a damp proof course; and from the Land Registry.
• Arranging to pay the 10% deposit
  Whilst the solicitor or, in England and Wales, a licensed conveyancer is making the enquiries, you should sort out how you will pay the deposit that has to be made when the contracts are exchanged.
  This deposit is usually 10% of the price of the home. However, it is sometimes possible to come to an agreement to pay a smaller deposit. If you are also selling a house it is usually possible to put the 10% deposit on the property being sold towards the deposit on the property you are buying.
  If you are unable to provide the 10% deposit it is possible to use a deposit guarantee scheme. Your solicitor or licensed conveyancer can arrange this with an insurance company.
  If raising the deposit may be a problem, you should discuss the options with your solicitor or licensed conveyancer.
  Alternatively, you could consider borrowing the money for the deposit from elsewhere, for example, from relatives or a bridging loan from a bank. However, the amount of interest you will have to pay for a bridging loan will be high and you should check how much this arrangement will cost.
• Insuring the property
  You should make sure that buildings insurance is arranged from the date of exchange, because once contracts have been exchanged you are responsible for the property.
  You may be able to get information on buildings insurance from your mortgage lender, solicitor or, in England and Wales, a licensed conveyancer.
• Exchange of contracts
  The final contract between you and the seller is prepared when:-
  • the solicitor (or licensed conveyancer) and you are satisfied with the final outcome of all the enquiries
  • any surveyor's report has been received and any necessary action taken
  • the formal mortgage offer has been received
  • arrangements about the payment of the 10% deposit have been made
  • the date of completion has been agreed.
  You and the seller each have a copy of the final contract which you must sign. These signed contracts are then exchanged. At exchange of contracts both you and the seller are legally bound by the contract and the sale of the house has to go ahead. If you drop out, you will lose your deposit.
  You should make arrangements for the supply of gas, electricity and telephone service and make sure that the seller is arranging for final meter readings to be made.
  Completion
  Completion of the purchase usually takes place about four weeks after exchange of contracts, although it can be earlier. On the day agreed for completion:-
  • the mortgage lender releases the money
  • the deeds to the property are handed over to your solicitor or licensed conveyancer
  • the seller must hand over the keys and leave the property by an agreed time.
  The solicitor or licensed conveyancer (in England and Wales only) will usually send their account to you on, or soon after, the completion date.