First Time Buyers – all you need to know

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First Time Buyers – all you need to know

This blog brings together all the information you need if you’re thinking about buying your first home.

When you tell people you’re looking for your first home, you often get lots of tips and advice from well-meaning family and friends, which, when added to news reports and media hype, can make taking the plunge with a property seem daunting.

We’re here to help guide you through the process and tell you more about what you can expect.

In this first time buyer guide

Money, finance and cost questions

Property search and buying process

Support for first time buyers

Contact details

Can I afford to buy a home?

Let’s start at the beginning, before you pick out your new furniture and curtains, ask yourself if you can afford your first home.

It sounds obvious but in the current economic climate this isn’t as simple a question as you would think. It’s not just the cost of the property and the potential monthly mortgage repayments that you will need to consider.

You will need a deposit (but this could be as small as 5%) and there will also be additional costs relating to the purchase that you will need to fund, so make sure you know what to expect before committing to anything.

You’ll need to factor in:

  • Mortgage arrangement and valuation fees
  • Buildings and home insurance
  • Stamp duty
  • Moving costs
  • Solicitor’s fees
  • Survey cost

So, what is a mortgage?

A mortgage is a loan secured against a property.  Unless you’re very lucky and have been gifted a large sum of money, it’s likely you’ll need a loan like this to buy your home.

In most cases the mortgage is secured on the home you live in.  These are referred to as ‘residential mortgages’ as they’re for a property where you ‘reside’.  There are other types of mortgages for property you plan to rent out to other people (‘buy to let’ mortgages) or use for a business (commercial mortgages) but we’ll focus on residential mortgages for now.

The loan made to buy your home is provided by a ‘lender’.  This could be a bank or building society – any institution which provides loans for people to buy homes with.

You’ll repay your mortgage over an agreed period of time with agreed rates of payment which are dependent on your needs and circumstances.

How does a lender decide what I can borrow?

Lenders place tight controls on lending and focus on ‘affordability’ (whether you can afford the repayments).

They will look very closely at your outstanding debt and current level of provable income before approving you for a loan. Even if you earn a sufficient salary, any outstanding debt and/or regular committed expenditure can weigh heavily on your application and the amount you can borrow.

We will review your budget with you and look for the right lenders for your circumstances.  As an impartial broker we can choose from a comprehensive range of mortgage providers and can even pick from some that aren’t available on the high street.

When should you contact a Mortgage Broker?

When buying your first home there’s a desire to start looking at properties immediately. In fact, the best place to start is by contacting us to find out if you can get a mortgage and how much you can borrow. There is nothing worse than falling in love with a property only to find you cannot get a mortgage.

After we’ve reviewed your finances and advised on the right product for you, we can get you a mortgage ‘agreement in principle’ which is a statement of your approved borrowing amount.

This will put you in a much better position when you start to look for a property as estate agents and vendors will know you are serious about making a purchase.  Having an ‘agreement in principle’ could give you the edge over other potential buyers who might also be interested in the home you’ve found.

What’s the best way to find a property?

Online property sites such as Right Move and Zoopla have dramatically changed the way we search for new homes.  They make searching quick and easy presenting all the options in your price range using a few simple search filters.  You can read about each property and look at pictures to give you an idea of whether it might be suitable.

Don’t forget your local estate agents in and around Bristol though. They are ideally placed to advise you on the area including up and coming streets, places you will get more for your budget and properties that haven’t yet hit the market. They can add real value to your search particularly if you do not know the area yourself.

Estate agents can also help you get a clear picture of your property needs and what things on your wish list you might need or be willing to compromise on.

However, don’t feel that you have to use their in-house mortgage broker even if you are buying through them.  It will not speed up the process and could restrict your choice of mortgage options as many in-house advisers are restricted on their choice of lenders.  Even brokers that say they are ‘whole of market’ can often work off a restricted panel of lenders so we would advise you to seek impartial, professional mortgage advice from a separate firm like us.

Make an offer

When you’ve found the perfect place, it’s time to negotiate. The asking price is only a guide, so it’s ok to make an offer for less. Where to start is the tricky bit. You need to strike the right balance between getting a good deal and not insulting the seller.

Tips for making an offer

  • Connect with the seller

Finding your dream home is no easy task. So, when you find a property that ticks all the boxes, you need to make sure you keep hold of it. Making a connection with the seller or agent is crucial. It makes it all the more likely the seller will choose you. A clear head is essential, as is doing your homework. Be clear on how quickly you can move and make sure the seller knows you are serious. The seller needs to see that you are taking the whole process seriously.

  • Become an expert

Before you place an offer, make sure you have done your homework. This can include researching the property market and looking for information on the local area widely available online. Never make an offer unless you are 100% certain. This means researching how much other properties have recently sold for in the area.

  • Use being a first time buyer to your advantage

A first time buyer may be seen by some as risky, but you can also work things to your advantage. As a first time buyer you have no property to sell and no chain. As long as you have been accepted for a mortgage, then you are actually a very attractive prospect to the astute seller or agent. With no chain and no pending house-sale, you are ready to move forward quickly. Stress this, and you will outbid those who have put in offers but need to wait for their pending house sale or other finances to be in order.

  • After you’ve offered

Once your offer has been accepted, ask for the property to be removed from the market straight away. This will minimize any chance of your offer being trumped by a late bidder.

Arrange a survey

It’s a good idea to have a survey carried out to check the building is structurally sound and that it’s worth the money you’re paying for it.

Your mortgage company will do their own valuation but a detailed survey will tell you if there are any major problems – possibly saving you a lot of money in the long run or enabling you to negotiate on the price you pay.

This is particularly important for older properties or those that need some work to bring them up to date.

It’s possible to instruct a more detailed survey through the mortgage lender.  As they are already visiting the property for their mortgage valuation it usually works out cheaper this way.

Find a Solicitor

A solicitor will handle all the legal paperwork for you and draw up the contracts (this is called ‘conveyancing’).   They’ll also deal with the Land Registry and sort out the Stamp Duty charges.

If you need help finding a solicitor, we have a panel of legal firms that we have worked with, all of whom offer competitive conveyancing fees, just let us know and we can put you in touch.

Look forward to moving day

Once everything is arranged, all you have to do is wait for the big day. Your solicitor will exchange contracts and when all the legal processes have been completed, you’ll be able to pick up the keys and move in.

Save as big a deposit as you can

It’s not easy, but the bigger the deposit you have, the better as it will give you access to a wider choice of lenders and more favourable mortgage deals.

Think carefully about your expenditure and how you can reduce what you spend regularly:

  • Could you review your mobile phone deal and reduce your tariff?
  • Are you using the gym membership you pay for each month?
  • Have you thought about making a packed lunch instead of buying a sandwich while you’re out?
  • Do you need a daily coffee each morning from a shop or could you make one at home?
  • Are you paying for a car you don’t use much? Or could you swap to a cheaper mode of transport altogether?
  • Are your holidays more important than getting on the property ladder?  Consider prioritising saving money over spending on travel while you prepare to buy your first home – it might not be for long but could be worth the sacrifice.
  • Think about your entertainment budget – how often do you eat out or get takeaways?  Would it be cheaper to cook more at home?  Do you need all the TV channels you subscribe to?  How often do you go to the cinema?

To help boost your deposit savings and get you closer to owning your own home, there are options available:

Shared equity schemes

Some lenders will offer a smaller, interest-free loan alongside your main mortgage.  It’s linked to the value of the property so how much you pay back will depend on what your home is worth.

Shared ownership schemes

A shared ownership scheme is where you buy a percentage of your home (usually 25% to 75%) and then pay rent on the rest to a landlord.  These schemes are often run by councils or housing developers so they’ll be the ones you pay a monthly rent to on the portion of your home that you don’t own.

You can buy more ‘shares’ in your home over time.  This is called “stair casing”.  The more of your home you own, the less you pay in rent.

Forces Help to Buy

If you are (or have been) a member of our armed forces, you may be able to borrow up to £25,000, interest-free, from the UK Government to buy a home.  Money can be used for the deposit and moving costs like solicitor’s fees.

Pool your resources

Some parents and other family members are helping first time buyers to raise their deposits. Whilst this may not always be possible, there are other ways that family or friends can help.

Many first time buyers are joining forces to buy their first property with siblings, other family members or even friends. This works as everyone only has to save a smaller amount as a deposit but collectively, they can make it count when it comes to the cost of the property they purchase. Some lenders will even allow more than two incomes if there are more two applicants.

You don’t have to live with the family member(s) helping you buy your first home.  Some lenders offer a “Joint Borrower Sole Proprietor” mortgage which allows two or more people to buy a home together but for only one of them to actually own (and live) in the property.  A ‘guarantor’ mortgage may be also be an option, where a connected party (like a parent) agrees to pay your mortgage if you can’t meet the repayment.

In all cases, it is important to seek impartial, professional advice.  Get in touch and we’ll explain each of these specialist products and how they could help get you moving.

We hope this guide has been helpful and you now feel more prepared to buy your first home.  Get in touch with our friendly team to talk more about your specific circumstances and where you’re planning to buy.

Call us on 0117 907 0818 or email contact@mortgage-style.co.cuk