First-Time Home Buyers Guide

Taking that first step onto the property ladder and buying your first home can be daunting. There is so much planning to be done and for most of us, this will be the most expensive purchase we ever make.

The following guide will take you through the process of buying your first property.

How Much Mortgage Can I Afford?

Firstly, you must look at your circumstances and decide if you are truly ready to buy a property. Have a look at the average house prices in your area and work out a rough guide price in your head. Next, you should look at your income and how much you can afford to pay, per month, in a mortgage.

As rent prices have risen in many areas of the country, you may find that your average mortgage payment may be slightly cheaper than what you typically pay for one month’s rent in a major city.  But don’t forget, you will also need to factor in all of your other expenditures including bills, food, transport, subscriptions, credit cards, debts etc..

You should also take some time to look at your credit report online. Is there anything you can do to improve your rating?

This guide will give you some handy hints on how you can ‘tune it up’, before applying for a mortgage.

Quick Tip: Take your time with this first step, as the more carefully you examine your financial position, the more informed you’ll be in deciding which mortgages and properties best suit your needs.

This guide to mortgages for first-time buyers outlines in more detail the different factors lenders may consider and some of the documentation you will need to provide in making your first-time buyer mortgage application.

How Much Deposit Do I Need To Buy a House?

When it comes to raising the deposit to buy your first house, you may have to be very strict with your spending and saving habits. But as well as tightening your belt, there is outside help available for raising the money.  For instance, there’s the government’s Help to Buy Scheme.

Ideally, lenders would want you to have around 25% of a home’s value saved as a deposit. This percentage will give you access to the better mortgage rates, however, you can still get mortgages for 80-95% of a home’s value.  

If Help to Buy isn’t for you and you are still struggling to raise a sizable deposit yourself, you could try looking at guarantor mortgages. This is where a family member can act as a guarantor for your mortgage and give you access to the better lender rates.

Take a look at the Guarantor Mortgage guide if you are lucky enough to have someone in your life who can help you get on the property ladder.

Further, there are also Family Mortgage deals you could seek as an option, as well as Joint Mortgages (which you can take up with a partner/relative/friend, see more in this guide).

When applying for a mortgage, providers, among other factors, will lend based on the value of the property you want to buy and your total deposit funds. This calculation is known as ‘Loan to Value’ and the more deposit you have available, the lower this percentage will be.

How Much Will My Mortgage Cost?

There are a number of extra costs involved in securing a mortgage.

See our Mortgage Application Guide for a detailed break-down of these fees.

Further, you will need to pay for a solicitor/conveyancer to carry out the legal work. Additional fees associated with buying a home include;

  • Stamp Duty – Tax payable to the Land Registry for property transactions over £125,000. You will be charged a certain percentage of the home’s value (either 2, 5, 10 or 12%).
  • Home Buyer’s Report – This is a general inspection of the property’s condition. For properties built in the last 40 years, a Home Buyer’s report is typically sufficient, as the building should still be in a good state of repair and not require any major works before you move in. These reports could cost a few hundred pounds to carry out. 
  • Full Structural Survey – This is an in-depth survey examining carefully the condition of the property. These are typically required for purchases of old or unusually designed properties. These may cost over £1000 to conduct.
  • Removal Costs – You may need to pay for a removal company to move your belongings.
  • Maintenance – You may need to pay for things like broadband installation or boiler repairs in the first few weeks of you moving in, so it is always wise to keep some money put back for unexpected costs.

What Type of Mortgage Do I Need?

There are many types of mortgage products available, check out our Guide to Mortgage Types for more on this. The main thing to consider when making this decision is figuring out how you want to pay it back and over how many years. Also, consider whether you may want to move to a bigger place in a few years. Transferring your mortgage when you move is called ‘porting,’ and with some mortgage products, you may be charged an admin fee for moving your mortgage to the new property. Seeking financial advice from an independent source is wise for this.

Read more about The Benefits of Using Mortgage Brokers here.

How Do I Agree A Mortgage in Principle?

Find the criteria your lender needs for its assessment, and apply. If you are accepted, you will be issued a Mortgage in Principle. Please note, this is a preliminary approval from the lender. Many estate agents will want to use this as proof that you will be able to secure the mortgage you need to put offers on properties.

A mortgage in principle will typically be valid for three to six months. After this time, you may need to reapply for another, as the lender’s criteria or rates may have changed. It is also worth noting that these applications do appear on your credit report, so if you take out many of these, it may negatively affect your credit rating.  Once this is done you can look to finding your ideal home within your agreed price range.

What Kind Of Property Am I Looking For?

Everyone’s dream home criteria will be different, but as a guide, you should think about the condition of the home at the current time and how much it would cost you to get it up to your standards. If you plan to have children, or already do, you will need to consider the schools in your local catchment area.

Consider your transport needs too and if the area is ‘up-and-coming’. Are there any planned developments in your immediate area that could mean more houses, less green space, or an expansion of facilities? These factors may add value to your home, as time goes by.

Thinking about what you could potentially sell it for in the future is also a wise move, because you never know how your circumstances could change in the future. Ideally, you want your home to be worth more when the time comes to sell, this means factoring in any improvements you want to make (like new bathrooms, kitchen, maybe even a loft conversion).

Quick Tip: When it comes to things like ‘curb appeal’, you may be able to improve the property’s exterior over time, whereas you have no control of the area the house is situated in. In this case, choosing the ‘worst’ looking house on the ‘best’ street may be a wiser investment than vice versa (this is, of course, dependent on the cost of the work required to get it to your desired standard). 

What Do I Get For My Money?

A property for sale will either be leasehold or freehold.

Leasehold – Applicable to flats and maisonettes in the UK (excluding Scotland). This is where you own the house for the length of the lease. Once the lease has ended, ownership returns to the freeholder and you would have to reapply for an extension.

Before taking on a leasehold you should find out how many years are left on the agreement and how much it would cost to apply for an extension.  This is vital, as most lenders will want a window of around 30 years left on the leasehold after you have completed your mortgage term. The land the leasehold is situated on is maintained by the freeholder. This means they are responsible for maintenance of the building/exterior/ communal gardens etc. You may be asked to pay for service charges towards this, so make sure you are aware of exactly how much these will be and what work is carried out in return.

Freehold – Freehold is where you own the property and the land it is built on, outright. Most houses in the UK are of this type.

How Do I Get An Offer Accepted On A Property?

Before you make an offer, you will need to hire a solicitor or conveyancer to process the sale for you. Once you have had an offer accepted on a house, you will need to instruct them to move ahead with the legal work. Please note; at this stage, your sale is not assured and could still fall through.  After the offer is accepted, you will also need to pay for your survey and depending on this result, you may need to go back and renegotiate the price.

Once you have agreed on the asking price and have your Mortgage in Principle agreement, you must then instruct your lender to go ahead with the transfer of funds (this process may take four to eight weeks to complete).

You can read more about the process of Buying and Selling a Home here.

Please note: the more people involved in the buying and selling chain, the more of a chance your purchase could fall through. Assuming all goes to plan, you should have an agreed day for exchanging contracts and a confirmed moving in date.

At this stage, you will need to arrange building and contents insurance, as well as mortgage protection cover, to start from the day you move in.

And finally, once the sale is complete you will then have to pay any pre-agreed legal or mortgage fees and set up your utilities and council tax accounts.

Summary of the Home Buying Process  

  1. Save for a deposit
  2. Find a mortgage broker and legal representative
  3. Start the mortgage application process and get an Agreement in Principle
  4. Find and make an offer on a property
  5. Inform your legal representative, the process of buying begins
  6. Exchange contracts and complete the sale, mortgage funds are transferred
  7. Move in and start paying your mortgage

When buying your first property, perseverance is key, as it can be quite a long process with many twists and turns along the way. Getting good advice can be extremely helpful and could potentially save you hundreds, if not thousands of pounds. To take your first step on the property ladder, get in touch with an advisor today.

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