For first time buyers looking to get on the property ladder, the buying process can appear daunting. From saving up for a deposit to navigating the mortgage minefield, the process can be complex. This guide will walk you through the process of buying your first property.
Saving a Deposit
The first step to getting on the property ladder is saving enough money to put a deposit down on your first property. Some lenders will offer mortgages to buyers with a deposit of as little as 5% of the property’s total value. However, to get the best mortgage rates (and save you money in the long term), you should aim for a minimum deposit of 10% of the property’s value.
This means, if you are looking to buy a property worth £150,000, you should have at least £15,000 saved up to put down as a deposit. If you can save even more, you can unlock better mortgage deals. A deposit of 20%-25% should give you access to the very best mortgage rates.
As a first-time buyer, you should be eligible for several government-run schemes which offer financial assistance to those looking to get on the property ladder. Help to Buy, Right to Buy, Affordable Housing, Shared Ownership, the Equity Loan for new build homes, and The Starter Home Scheme are all assistance programs which you could qualify for. Find out the criteria for each scheme to see if you qualify. You may find that they offer a small financial boost that might give you a slightly larger budget than you initially expected.
Getting a Mortgage
You will now need to find a lender that can offer you a mortgage. It is worth speaking to a mortgage adviser to help secure the best rates and find the right mortgage product for your situation. If you do seek mortgage advice, make sure you find an independent adviser who does not have an agenda. They will charge a fee but will save you money in the long-run.
When you are assessed for a mortgage, the lender will need to see evidence of your income and expenses. The mortgage assessment is there to ensure you will not encounter financial difficulty in the future and default on your mortgage repayments. Therefore, you may be asked for bank statements, payslips, recent bills, and evidence of other living costs. You will also have to declare any debt you may have.
Once the lender is satisfied with your ability to make the regular mortgage repayments, they will provide you with an agreement in principle. This means that the lender is satisfied with your financial situation and will lend you the agreed figure providing your financial circumstances do not change.
If you are struggling to get approved for a mortgage, it is possible to have someone guarantee your mortgage. This means that if you fall behind with repayments, the guarantor will be liable to make repayments on your behalf. They are legally binding, and your guarantor has to be able to afford your mortgage repayments if you get into difficulty. They should not be entered into lightly but will offer a solution for those struggling to get approval.
Factoring in Other Costs
When it comes to buying a property, the outlay for the property itself is only the tip of the iceberg. Before you can deduce your budget, you need to factor in the other costs involved in buying a property. These include solicitor’s fees, survey fees, removal fees, insurance, furniture costs (if you need to furnish the property), and stamp duty.
Although, as a first-time buyer, you are exempt from paying stamp duty on the first £300,000 of any property worth up to £500,000, you will need to calculate these extra costs before you can begin looking at properties.
Now you have your agreement in principle, and you know what your budget is and what government assistance schemes you qualify for, it is time to begin the search for your first home.
Start with the area. Where do you want to live? Once you have narrowed it down, think about your non-negotiables. These are the features that are absolutely necessary and cannot be compromised. This often includes the number of bedrooms, how far from work or school it needs to be, whether it has parking for a car or if you need a garden for pets and children.
Once you have these, you can begin looking at properties that meet your requirements. When viewing properties, take someone else with you. A friend or family member will offer an extra pair of eyes and may spot things you miss. Look for signs of damp, try out the plumbing fixtures, and don’t be afraid to ask questions about bills, council tax, and modifications that have been carried out on the property. This will likely be the most expensive purchase you ever make. You want to be thorough.
Make an Offer
When you have found the property that you can see yourself being happy in, you will need to make an offer to the vendor. You are in an excellent position as a first-time buyer. You are attractive to sellers because you are not waiting for the sale of your own property before you can complete.
This is where you need your agreement in principle. When you make an offer on the property, the seller will want to see evidence that you are in the financial position to complete the purchase before they proceed with the sale.
If the vendor accepts the offer, you will need to tell your mortgage lender. Your lender will process your mortgage application now. They will likely want to conduct a survey on the property to ensure it is in good condition before they agree to the loan.
Getting a Solicitor
Now the legal work begins. You will need a solicitor to manage the paperwork involved in legally transferring the ownership of the property to you. They will inform the Land Registry, organise the payment of Stamp Duty, and act as a go-between for you and your seller.
At this point, you may want to carry out your own survey of the property. Your mortgage lender will have carried out a survey, but they are often very basic and will only pick out major structural flaws with the property. Getting an independent survey of your own carried out will highlight any impending work which may need to be done on the property shortly after the purchase. If you discover these unexpected costs early, you may be able to negotiate a reduction in price to mitigate the costs.
Once the contracts are exchanged, the sale is legally binding. Neither you nor the seller can withdraw. All that now remains is to pick up the keys to your first property.
Congratulations. You are now a proud home-owner.