First Time Buyers Advice
Conveyancer Jane Meldrum gives tips to first time buyers in the current subdued housing market..
We are all aware that the housing market all but ground to a halt in the wake of the banking crisis of 2008. Confidence plummeted and banks were unwilling to lend to all but the safest borrowers, and then only those with a large deposit to put down. This excluded most first time buyers from the housing market for quite a long time. However, things are now changing. 2010 could be the big opportunity to get on the property ladder that many first time buyers have been waiting for. A number of factors have converged to make entering the housing market significantly easier than in recent years.
A combination of the correction in house prices and low interest rates means that affordability for first time buyers is at one of its lowest levels for many years. In June 2007 a buyer on average pay would have had to spend 50% of their disposable income on mortgage payments, whereas that level now stands at 27%, also well below the long term average of 34%.
Many lenders have also now relaxed their lending criteria somewhat, particularly in respect of the size of deposit that they require from buyers.
These factors, together with the predicted stability in house prices, means that now may be a good opportunity for first time buyers to take the plunge.
Jane Meldrum from Norrie Waite & Slater's conveyancing department, gives us her top tips for prospective first time buyers.
- Get your mortgage approved before you start to look at properties. There is no point getting your heart set on a property only to find that you cannot borrow the money to buy it. Lenders will confirm your income and credit history and give you a decision, in principle, for a set loan amount. This will also put you in a good position to negotiate with sellers.
- Negotiate hard on the purchase price. Being a first time buyer puts you in a position of strength. For a seller or their estate agent you are the ideal buyer as you are not involved in a chain. Chains can fall apart at the last minute leading to abortive transactions. Also, because you do not have a property to sell you are usually in a position to move quickly, which can be very attractive to sellers. As a first time buyer the sellers know that the transaction will be straightforward with less likelihood of problems. Use this to your advantage when negotiating a price.
- Ask for an all inclusive conveyancing quote. Conveyancing costs are made up of legal fees and expenses such as searches. Some firms advertise very low rates but may add on additional costs later on for things such as leasehold properties (which are common in Sheffield) or dealing with mortgage lenders. A first time buyer should also be aware that a Stamp Duty Land Tax Return Form will have to be submitted on their behalf even if they are below the threshold where such tax is payable. Some firms of solicitors will again make an additional charge for this service and this can be an unpleasant surprise at the end of a transaction. We offer a strict "no hidden fees" policy to reassure clients that this will not happen.
- Protect yourself if you are unmarried and contributing different amounts to the deposit. If you are an unmarried couple and are buying a property together, one of you may have a larger deposit than the other. It is becoming very common for family members to help out their children with house deposits due to the increasingly large deposits which lenders require since the credit crunch. If one of you has a larger deposit to contribute to your new home, it is possible to protect this deposit in the event of separation. A declaration of trust, or trust deed, is a legal document which a solicitor can draw up which describes who has contributed what and also how this will be divided up on the sale of the property. A declaration of trust can be tailor made to suit your circumstances. For example, it could indicate that a fixed sum is to be repaid to one party, or it could state that more than 50% of the property is owned by a single party.
- Don"t let Estate Agents bulldoze you into using their "in house" conveyancing service. When moving home you will usually deal with an Estate Agent first. Many Estate Agents will recommend that you use their "in house" solicitors. Some will quote you a combined price for marketing your property and carrying out the conveyancing work. They are often selling your conveyancing job on to a firm of solicitors and receiving a referral fee, which you could be paying over and above the real cost of the conveyancing work. In many cases this can make their conveyancing fees very expensive. This practice also raises the question of whose interests those solicitors are then serving, yours or the estate agents who they rely on for their work? Contact a solicitor direct for your conveyancing work so that you can be sure that your interests come first.
- Get the most detailed survey you can afford, particularly on older properties. Surveys carried out by mortgage lenders are usually superficial and are aimed at protecting the lenders investment only, not your interests. This type of survey will only usually show up the most obvious problems with the property. As a first time buyer you have the option of having a survey done which will provide you with more detailed information about the property you want to buy, and it may highlight any problems with the property that you should be aware of.
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