When you’re buying your first home, there is so much to think about. The process can fill you with a mixture of both nerves and excitement. From getting together a deposit to investigating the different types of mortgage, and, of course, what kind of property should you buy, it’s decisions, decisions. And that’s before you’ve even considered where you might like to live.
Here are 11 tips to help you get started
Save up a deposit
Deposits to purchase a home usually start at as little as 5% and can go up to 20% and beyond, depending on your financial situation. Most of us have to buy our first home with the help of a mortgage – a loan that generally runs for 25 years. At the moment, most lenders may typically offer up to four-and-a-half times your salary for a mortgage.
Any shortfall between your mortgage and the price of the property you want to buy will have to be made up by you, which is why you need a mortgage deposit.
For a first-time buyer, the minimum deposit is usually 5% of the property value. If you can save up a larger deposit, you’ll be able to apply for mortgage deals that offer a more competitive rate of interest. Money given towards buying a house by parents, or grandparents, is called a gifted deposit. A family deposit mortgage can use family members savings in place of a cash deposit.
The government-backed mortgage scheme could help you secure a mortgage with just a 5% deposit. If you’re a first-time buyer, you may also be able buy a home for 30% to 50% less than its market value. The First Homes scheme is for new homes built by a developer, or a home you buy from someone else who originally bought it as part of the scheme. The First Homes scheme is only available in England.
Our guide to deposits explains this further
What’s the difference between a mortgage deposit and an exchange deposit?
Work out what you can afford
Your mortgage broker can help you determine how much you could borrow, but it’s important to know your own budget as well.
Don’t forget to factor in mortgage fees such as legal fees, property surveys, insurance and stamp duty.
If the affordability is tight you may want to consider a joint mortgage with your parents, a guarantor mortgage or a JBSP mortgage. Family offset mortgages are another useful option, although you will need a family member who has money in the bank!
When you’re trying to work out how much you could afford to pay in terms of monthly mortgage repayments, remember you’ll still have to cover everyday costs like energy bills, travel, council tax and food.
Use our calculators to work out some of the costs
Does a student loan affect your mortgage?
Does an overdraft affect a mortgage application?
Check your credit score
Your credit score is one of the most important factors lenders look at when assessing a loan application. Make sure you know where your score stands and take any necessary steps to improve it if necessary.
Get a copy of your credit report to make sure everything looks correct. Getting on the electoral roll, closing credit cards you no longer use and not missing any debt repayments will all help. This is all part of the bigger aim of being mortgage ready, where your finances are in the best possible shape.
Learn more in our credit report guide
Find the right mortgage
There are many different types of mortgages available, so be sure to choose one that fits your requirements. The mortgage market can be a confusing place full of options: fixed rate, variable, repayment, interest only – the list goes on.
A whole of market mortgage broker can help you to compare interest rates and terms from a huge variety of lenders.
First time buyer mortgage guide
Get an Agreement in Principle (AIP)
This is also called a ‘Decision in Principle’ or ‘Mortgage in Principle’.
An AIP is exactly what it sounds like – confirmation from a lender that they would, in principle, be willing to lend you a certain amount of money. As a first-time buyer it’s really useful to have one, as it proves you can afford to buy a property and gives you a good idea of which homes are within your budget.
You will find that many estate agents ask if you have an AIP when you start to register with them. Having one means that you are a bit more serious and organised.
Should you get more than one Decision in Principle?
Work out where you want to live
It’s a cliché but ‘location, location, location’ still rings true. When trying to work out the best area for you, there are many factors to consider, such as transportation, shops, schools, restaurants, green spaces, crime levels and more.
If you’ve found somewhere you like, it is worth just walking around the area to get a better feel of the place. Visit on different days and times. Sometimes you can even discover hidden gems and more affordable homes on the edge of sought after neighbourhoods.
View the property
Once you’ve found a property you’re interested in, there are some useful questions you should consider asking while you’re looking around:
- How long has the property been on the market?
- How old is it?
- Has it been renovated recently?
- Has there been a large insurance claim in the past five years?
- What’s the council tax?
- What’s the ownership – leasehold, freehold or part-freehold?
- If it’s leasehold, how long is the lease?
- Are there any service charges?
- Is there parking available?
Last but not least, have a good look around. Pay close attention to things like the windows (new-build UPVC windows keep the heat in better), signs of damp on the walls or ceilings, ventilation and the state of any drains and guttering. Check out the EPC rating of the property, this will affect your energy bills. Green mortgages are available for the most efficient homes.
What you should know before you buy a leasehold home
Make an offer
Once you’ve found your dream home, you’ll need to put in an offer. You do this by telling the estate agent selling the home what you can pay for it, and detailing the position you’re in. The agent will then pass your offer on to the homeowner. Your offer can be made in person, over the phone or via email.
You may need to provide proof that, as a first-time home buyer, you can secure the required mortgage. This might be by way of an ‘Agreement in Principle’, ‘Decision in Principle’ or ‘Mortgage in Principle’ from the lender that’s offering you the mortgage loan. As a first-time home buyer, you’re in a strong position to negotiate because you’re not part of a chain. And sellers like this.
Your initial offer may not be accepted but if you are still interested then it’s time to haggle. Don’t forget to keep an eye on your budget during this process.
When your offer has been accepted you will need to apply for your mortgage.
What to consider before making an offer on a house?
You’ll need a property solicitor
They might also be known as a conveyancer. Their job is to help you manage the legal side of buying a home. They’ll draw up the contract, deal with the Land Registry, the lender and manage the stamp duty charges.
What are the different stages of conveyancing?
Apply for a mortgage
Your broker will help you to apply for your mortgage. Initially they will provide you with a mortgage illustration or quote that will show the monthly repayments and fees for the mortgage deal you have chosen. They will need to gather some information and documents together such as:
- payslips/P60 or self-employed accounts
- CIS payslips or stubs
- proof of address and ID
- bank statements
- proof of deposit
You will also need to pay some fees at this point. These could be:
- mortgage product fee
- mortgage valuation fee
- broker advice fee
What is a Mortgage Illustration?
Do you need life insurance to get a mortgage?
Arrange a survey
The mortgage valuation arranged by the lender is not a survey. Although it may pick up on very obvious defects it is not designed to do so.
It’s not a legal requirement to have a survey on a property you’re buying, but it could end up saving you thousands of pounds in the long run. There are three types of survey available:
- a condition report (basic)
- a homebuyer report (suitable for buildings under 50 years old)
- building survey (very thorough)
We would suggest a number 2 option is suitable for most properties unless they are very old or have had substantial extensions and works done.
Do you need a survey to get a mortgage?
Who organises a survey when buying a house?
You may also find these articles interesting – 15 questions commonly asked by first-time buyers and How long does a mortgage offer last?
