Buying Your First Home: Are You Ready?

Many of us look forward to buying our first home. However, getting on the property ladder isn’t easy. Not only do you need a lot of money saved up, but you also need to be sure that you meet other requirements in order to apply for a mortgage. You then need to find a suitable property that you can comfortably live in while being able to handle the bills and responsibilities that come with homeownership.

To help you get prepared, here are a few tips on getting ready to buy your first home.

Can you afford the deposit?

Most people can’t afford to buy their first home in cash and so have to rely on a mortgage. In order to take out a decent mortgage, you generally need a deposit of 20%. If you’re buying a home that costs £200k this could mean saving up a deposit of £40k.

There are mortgages and schemes out there that can allow you to buy a property with no more than 5% (it’s worth looking into the government’s Help To Buy scheme). A high interest savings account could allow you to grow your money more quickly. A deposit can become even more affordable if you’re buying a home with someone else – the two of you can each save up half the deposit (for a 5% deposit on a £200k home, this could mean saving up only £5k each).

You can also use an hdb loan calculator to help you work out a mortgage rate if you’re unsure how much you’ll be paying back each month. Just make sure that you know exactly how much you need for homes in your areas. A deposit for a property in rural Scotland is going to be a lot less than a deposit for a property in London.

Make sure you have a steady income

On top of having a deposit available, a mortgage lender will generally only lend to you if you have a stable and high enough income. This is so that they know you will be able to pay back the mortgage repayments.

You’ll need to have been in a job for several months (2 years if you’re self-employed) and you’ll need to be able to provide records of your income (usually bank statements dating back six months). If you’ve had several jobs in the last few months, it’s unlikely a lender will want to lend to you. As a result, try to stick it out with a job for a while before applying.

It’s also important that you haven’t got too many other payments going out (particularly debt payments – as this shows you’re living beyond your means). You may be earning a lot of money, but if you’re still overspending it could put off many mortgage lenders.

Work on improving your credit score

Taking out any loan requires a credit check. If you want to take out a good mortgage, you’ll generally need a high credit score.

Your credit score is determined by a number of factors – but the biggest factor is your ability to pay off debts and bills on time. If you often miss payments and are currently in arrears, it is likely that your credit score will be low. Try to get into a habit of paying bills on time and try not to live in your overdraft.

There are many other things that could lower your credit score. Signing up to the electoral register can often result in a better credit score and getting rid of any old unused credit cards can also make a difference. A number of apps exist out there that can help you to check your credit score as well as giving you advice on how to improve it.

Consider where you want to live

The location is a big aspect to consider. Some locations are more sought after than others – and as a result are more expensive to live in.

You don’t want to settle for a bad location with a high crime rate, noisy neighbours or poor local opportunities. Such areas will be cheaper, but you could find it difficult to live comfortably in such an area. As a result, understand what sacrifices you are truly willing to make.

Distance to friends and family members could be something to consider. If you’re a couple thinking of starting a family, you may also want to look into schools in the area and local opportunities for kids.

Consider the type of property

You also need to consider the type of property you’re willing to buy. An apartment could be the most affordable option, while a house will cost you more. Understand what your needs are – how many rooms do you need and do you need outdoor space?

Properties that are not in great condition will generally be cheaper. However, you could end up pouring a lot of time, money and energy into repairing and renovating them. Decide whether you’re up for the challenge of making home improvements.

Organising a few viewings will help you to see what is out there and what you can get for your money.

Shop around for mortgages

It’s important to not just settle for any mortgage. Some mortgages may be easier to get accepted for, but they could come with high variable interest rates. It’s important to also look out for hidden fees (for instance, some lenders may charge you for making early repayments).

A mortgage broker could be worth hiring to help you find the right mortgage.

Factor in extra costs

Beyond the deposit, there are likely to be many other costs involved when buying a home. These costs can add up, so it’s important to identify them and budget them in when saving up. A few costs include:

–          Mortgage valuation: A mortgage lender will usually charge a valuation fee to inspect your property before they lend to you. This could cost anywhere between £250 and £1500 depending on the property. A mortgage valuation is compulsory.

–          Legal fees: A lot of paperwork is required when buying a home. You’ll want to find a solicitor to handle this paperwork for you – this could cost anywhere between £850 and £1500. Handling this paperwork yourself is not recommended unless you have a thorough knowledge of property law.

–          Surveyor fees: A surveyor is worth hiring to assess the condition of your home and to determine if there are any costly repairs around the corner. A home survey can cost from £500 to £1300 depending on the size of the property and the level of inspection that you opt for.

–          Moving fees: You may need to hire a moving company or rent a van to help move your possessions into your new home. Moving companies typically charge £50 to £60 per hour, while renting your own van may cost as little as £20 per day.

–          Living costs: After you’ve moved in, there will be numerous living costs to consider. These include mortgage repayments, utility bills, council tax and maintenance. If you’ve already rented a home on your own, you may be used to these expenses, but if not it could be something to budget for.

Make sure it’s the right time

You need to be sure that it’s a good time to buy property. The time of the year can make a big impact on the amount of property that is out there – summer and autumn are generally the best times to buy, because there is a lot of property out there to choose from. Buying during a recession or national disaster is also not recommended (i.e. during the current corona virus chaos).

Understand the responsibilities

Buying a home is a big responsibility and you need to be sure that you’re ready for this. If you live with your parents and have never experienced living alone, it could be a much bigger jump in responsibility than someone who is already renting a home by themselves. Make sure that you can cook, clean and manage basic DIY as it will help you.

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