How to Buy a House - Part One

A heart or head decision?

Thinking about buying a house? We're currently in the process of doing just that so I thought I’d share a step-by-step guide on how it all works starting with making the decision in the first place and how to know what you’re looking for. Then I’ll tell you how to ignore all the conventional advice and make what is possibly a truly stupid decision.

What are your goals?

This is your chance to dream big. Don’t worry about the budget for now. Just ask yourself if you won the lottery, where would you want to live? Already this gets complicated, even before the money stuff. I’d love to live on a ranch in Montana (I may have watched too much Yellowstone) but I don’t really want to leave my family behind and I suspect ranching is harder than it looks so that’s probably out. But, speaking of family, if you live with anyone else it would be helpful to know what everyone dreams of. The boys in our household (my husband and son) would like a fancy modern glass-fronted apartment in the city or maybe overlooking the sea. While the girls (my daughter and I) would like a quirky old cottage or possibly a French castle. It’s difficult to keep everyone happy!

But there are all the other practical considerations to take into account as well. Location for schools and work, access to things like towns for shopping and amenities, internet access, utilities, privacy, living space, outdoor space, building or renovation potential and style of the house. Sit down and actually have a discussion about what everyone wants. We did this recently while on holiday and it's amazing how much you assume about what everyone else is thinking. Also, as you go through life things change and you don’t always want the same things you did 10 years ago. That’s fine, but no one will know if you don’t talk about it. So, have the discussion and then make a list. Now prioritise that list according to everyone’s wants and needs. You’re most likely going to have to compromise, so the list will help keep you on track when it comes to actually looking at houses.

(You’ll notice I don’t mention anything about selling your current property here. We’re renting so haven’t had to worry about that but presumably, you’d figure that part out at this stage.)

Know your numbers

Sadly sooner or later you have to take the budget into account. If you’re the sort of organised person I aspire to be then you’ll already know exactly how much you earn and spend each month, what you spend it on and what all your assets and liabilities are. If not you’ll have to work all that out. It’s boring and complicated but very necessary. After endless arguments, my husband and I have arrived at a place where we manage this between us. (Sort of and we still argue but it’s better!) He runs a highly complicated Excel spreadsheet that takes care of all the assets, debts and budget forecasting. I use a cute little app called Emma to monitor our monthly budget and day-to-day spending. It works pretty well for us and it’s getting better. Whatever you use though, even if it's a pen and paper you will have to figure all this stuff out so you can take the next step and talk to a mortgage broker.

You could I suppose go straight to the banks or lenders and do your own research on mortgage providers. But, if your situation is in any way complicated I’d highly recommend a broker who can talk you through all the options. We used John Charcol and got a decision in principle before we went to any viewings. This is a letter to say that you’ve discussed your financial situation with the broker and that on that basis they agree to you borrowing £X amount. It’s not a guarantee but it puts you in a stronger position when making an offer if the agents know that you are eligible for the mortgage that you’ll need. At this point, you’ll have to fill out a ton of forms and all those spreadsheets and budgeting that you worked out earlier will make your life easier.

Finding the property

So, now you have your wishlist and you’ve figured out what you can afford it’s time to go shopping. Right? Well, sort of. You should definitely be trolling Rightmove by now and have a good idea of what’s available in your chosen area and for what price. You’ll soon be able to spot something that seems over or underpriced and be able to figure out the reasons why. I’ve gotten quite good at finding properties on Google maps, searching with street view and checking for planning applications with the local councils.

Then, it’s worth thinking about what’s happening with trends in the housing market, interest rates and the economy as a whole. Are we heading for a housing market crash? Will you still be able to afford that mortgage when the fixed rate period ends? Personally, I hate these discussions. You go round and round in circles and everyone has a point but no one really knows what will happen. It seems to me that it’s either a great time to invest in property and a terrible time to borrow the money to do so or vice versa. I think you’ve just got to be aware of the situation and mitigate your risks where possible. We decided that by buying a property with potential for improvement and therefore an increase in value, we can offset any downturn in house prices should we need to sell. We would hope that we’ll be in this property for long enough that we will still see an increase in the value in the long term. But we could be wrong, investing large sums of money is rarely without risk and you definitely shouldn’t take my word for it!

A heart or head decision?

So, after all the list-making, discussions and endless maths you will sooner or later fall in love with a house. You will imagine yourself waking up there and making coffee in the kitchen. You’ll see yourself planting in the garden and decorating the Christmas tree in the hall. You’ll visualise yourself a life and what was a house now becomes your future home. Of course, you might not actually be able to purchase this one and you try not to get too excited but it happens anyway.

I’ve read countless articles about buying houses with endless sensible advice. This is a huge investment and you should try to remove any emotion and make only practical decisions. You can use scoring systems to evaluate the potential and you must be ruthless with your budget. I’m sorry, but maybe that would be possible if this was purely an investment property that we were going to flip for profit but it’s not. We’re talking about a home and that’s important to me. I know the sensible thing is to buy a much smaller house in a town with good public transport links and hope the neighbours are nice. But honestly, if we’re spending all our money shouldn’t we be just a bit overexcited about what we’re buying? Shouldn’t we be jumping up and down and popping champagne if we can just pull this off? I think so, but truthfully, we’ve never been very good at making sensible decisions and no one would ever describe us as risk-averse. We usually make it work somehow and that’s just how we live our lives. I’ve made my peace with it.

So after all that thinking, and maths, basically it comes down to listening to your heart and maybe some gut instinct. Feel all the feelings and let yourself be thrilled when it works and devastated when it doesn’t. Because I think that’s the only way to really live, for us anyway. Go big or go home. So, I’ll let you know how it works out. Subscribe to follow along with the journey. Next week I’ll be talking about what to look for at viewings, questions to ask and what happens next.