The step by step guide for first time buyers
Part-1
Buying your own home is probably the ultimate sign of adulthood. It’s a big commitment and a massive financial responsibility. It can be challenging, particularly for first time buyers as the process is complex and a lot of time and effort are required.
First-time homebuyers can however enjoy some special advantages created to encourage new entrants into the housing market, including several government schemes that can support you in your decision to buy a home. Additionally, first-time buyers are entitled to relief for the first £300,000 of Stamp Duty on properties up to a value of £500,000.
In this two-part blog we will aim to demystify the process, so you get the most out of your purchase. This is a rundown of what to consider before you buy a home and the details of the buying process itself. This will help you make an informed decision about owning a home and make the process easier.
1- Preparing to Buy a Home
Decide if it is time to buy a home
Have a good look at your savings, your job and your financial stability. There is a lot to consider before you visit a mortgage broker. It’s a buyer’s market and interest rates are low, so you have that working for you. Regardless, a mortgage is a big financial commitment so only get into it if you are financially ready.
In most cases, when you buy a home, the interest on your monthly repayments will likely be less than the rent for a similar property, and with a repayment mortgage, you will start building up equity in the property, so it’s a wise investment.
An important reason for your decision to buy a home should be that you want to settle down and are ready to stay in the same place for a few years at least, as it could be difficult to just pack your bags and get moving when you own a home.
If you can afford a deposit and monthly payments, you are financially ready, and this shall not be a decision you will regret.
Plan your finances
A property is probably the most expensive thing you will buy. You need to plan how your next few years will pan out financially with mortgage monthly payments. Do you have enough for a deposit? If not, you need to save up before you go home shopping. The larger your deposit, the better mortgage deal you’re likely to get. Generally, we would advise you to have at least a 10% deposit (a bit more if possible) and bear in mind that 10% LTV mortgage deals are currently scarce in the Market due to Covid.
Do a serious audit of your financial health. There are other expenses and upfront costs to consider when you are buying a home like the conveyancing fees, land registry fee, valuation fee, removals and Stamp
Duty (Buyers are however currently exempt from Stamp Duty for properties valued less than £500,000 till 31st March 2021, and first-time buyers are anyways entitled to relief for the first £300,000 of Stamp Duty on properties up to a value of £500,000.)
When you plan to get a mortgage, you can rely on your savings or get help from your parents or grandparents. The “bank of Mum and Dad” can be a big help if you are short on money.
Strengthen your credit
Your credit has the strongest impact on your mortgage application. Get your credit report, pay your bills on time, try and pay off any personal loans and keep credit card balances as low as possible.
2- Finding a home
Get a Mortgage In principle (MIP)
Before you find your dream home, get a Mortgage In principle (MIP) to show estate agents that you are serious about purchasing a home. The document will say that a lender would ‘in principle’ lend you a certain amount of money to buy a property. A MIP will show an estate agent that you’ll be able to get a mortgage and pay the deposit and the monthly repayments.
Start Looking for a home
Do your research online, all the information you need about areas, prices, schools, commuting times, etc., should be available online. Additionally, speak to friends and family who have been through the process. Finalise the neighbourhoods you would want to live in and then start looking at homes in those areas. Depending on the mortgage you qualify for, decide the size of the property. Start contacting estate agents in that area and begin to view properties. You may be able to move further afield in neighbouring towns and buy a bigger property that is affordable.
Look at a range of homes. The perfect home may not be the first or the second. Have a couple of options to compare. Do be careful of the remodelling costs of the property. It will add to your expenses once you move in.
Make an offer
It is quite common to make an offer for less than the asking price. However, be reasonable about it and base it on the research into prices in the area and the general price trends. If it is a popular property in a prime area, and other people are interested, and you really want it then maybe make an offer close to the asking price, to ensure you don’t get outbid and lose out! Make sure you mention your offer is subject to a survey and the property being taken off the market.
Navigating the waters and buying your first home isn’t always easy, but we hope our tips help you. Stay tuned to this space for the second part of our guide to buying a home for first timers. In the meantime, if you have any questions, get in touch!