Buying a home for the first time
Buying your first home is an exciting and daunting time. Here, we guide you through everything you need to know about buying a home for the first time. We demystify terminology, breakdown the steps and cover everything from saving your deposit to collecting your keys.
Getting ready to buy your first home
Saving up a deposit
Buying a home for the first time starts with saving (and saving and saving!) a deposit. It’s by far the longest and most arduous step for first time buyers, particularly those without the financial support of family and friends.
Thoroughly researching available financial support schemes, budgeting, and setting realistic saving goals will all help to make this task less daunting. Opening a competitive savings account with higher interest rates will ensure you get ‘more bang for your buck’ with your saving efforts. Patience (a lot of it) and flexibility will help too.
Understanding mortgages
Your saving will largely be in aid of obtaining a mortgage – a loan that you use to buy property. Most mortgages require deposits of between 5-20% of the property value. So, for example, you’ll need to save at least £14,500 to buy a property worth £290,000 (the average UK house price in 2023). Obviously, this figure will go up or down depending on house prices at any given time.
Even minimum deposits can be very large amounts of money to contemplate. First time buyers also have to accept that sometimes only bigger deposits will open the doors to better mortgage deals with lower interest rates and monthly repayments. Using a mortgage calculator can help you to explore what mortgage options are available based on the property price and budget you are working toward.
Using a mortgage broker – or spending time researching types of mortgages, mortgage lenders and the mortgage application process – will help to ensure you access the best deals available on the market.
Planning for other costs
Your deposit isn’t the only cost you need to consider when buying a home for the first time. Some other costs to consider will include conveyancing fees, transfer fees, stamp duty and removal fees among other things. Thoroughly researching all the costs involved will help you to budget effectively and not get hit with any surprise expenses.
Boosting your credit rating
Your credit score, or credit rating, is a number that tells lenders your creditworthiness – that is, how reliable you are when it comes to borrowing and repaying money. It’s based on your credit history which details everything about how you use credit: how many credit accounts you have, the number of times you make credit enquiries, your credit limits and payment history. The higher your score, the lower the risk you present and the more likely it is you’ll have your mortgage application approved.
Demonstrating that you are a reliable borrower is pivotal to buying a home for the first time. You can do this by using credit reliably, regularly and in small doses in the months and years leading up to buying a home.
Tidying up your current account
Mortgage lenders will want to examine your bank statements to assess affordability – whether you can afford the monthly repayments at the point of application and across the duration of the loan. To do this they will look at your income and expenses and evaluate your spending habits. If you are planning on buying a home for the first time you can tidy up your current account in a number of ways. These include cancelling unnecessary direct debits, reducing your spending, staying on top of credit agreements, avoiding using an overdraft and looking at ways of increasing your income.
Researching financial support schemes
Getting onto the property ladder can be challenging - particularly at a time when living and housing prices are on the rise and wages are not – and so researching and accessing financial support schemes can make all the difference when it comes to buying a home for the first time. Schemes vary in the type of support they offer, ranging from discounts on property prices to percentage bonuses that ‘top up’ savings. Some of the current schemes available are:
- First homes scheme
- Mortgage guarantee scheme
- Lifetime ISA
- Shared ownership
- Right to buy
- Deals from developers
Creating your first home wish list
Perhaps one of the more exciting aspects of buying a home for the first time is creating a wish list. That is, deciding on the non-negotiables when it comes to features, location, and amenities. Do you need to be near a school or a high street? Do you need a certain number of bedrooms or a garden? An office space or garage? Are you looking for a new build or an older home? What is the price point for your budget?
Building a picture of your home needs will help you navigate the home buying process, from viewing homes to working with your estate agent, with more ease.
Navigating the home buying process
Understanding market conditions
Understanding the current housing market can help prospective buyers get more value for money. For example, you may be able to buy property for less during a recession, but lending criteria is likely to be tighter at this time too. If you are buying a home for the first time you should research local prices, sales and interest rates, or get advice from an estate agent with local market expertise. This will help to identify the best time to buy.
Securing a mortgage in principle
Once you have saved your deposit, the next step is to secure a mortgage in principle. This is an agreement with your bank or building society which indicates how much lenders are prepared to let you borrow. You can request an agreement in principle by speaking to your bank and they are usually valid for between 30-90 days. Securing a mortgage in principle will help the home buying process go smoothly as well as show estate agents and sellers alike that you are ready to buy.
Viewing homes
Being able to see a space with your own eyes is another exciting step to buying a home for the first time. A viewing gives prospective buyers the opportunity to ask questions, check out the neighbourhood and inspect the interior and exterior spaces. Keep in mind those non-negotiables and your budget when viewing properties. Check out our top tips for more viewing advice.
Making an offer
Once you have found a home you really like, it is time to make an offer. This is usually done over the phone and your knowledge of the local market will help you to pitch your offer. Some back and forth and negotiation may be required here; just remember to stick to your budget and build a positive relationship with the seller.
Buying your first home
Securing your mortgage offer
Once your offer has been accepted, it’s time to formally complete your mortgage application. You’ll need to share several documents with your lender so having these prepared will help to speed up the process:
When buying a home for the first time, you’ll need proof of your:
- Identity: passport or driving license
- Income: P60, payslips, tax returns
- Address: utility bills, bank statements
- Deposit
- Credit History
As well as your employment details and bank statements for the last three to six months showing your income and expenses.
Instructing an independent surveyor and solicitor
At this stage, you will need to instruct your solicitor. That is, ask your solicitor to start work! It is your solicitor’s job to represent and advise you. Among other things, they will liaise with the seller’s solicitor, complete local authority and land registry searches, handle the exchange of deposits and draw up the contracts.
While it’s not mandatory, you may also want to arrange a property survey. These can help you to identify any issues with the property that weren’t visible in your viewings. You may use this to renegotiate the sale price and if not, to prepare for upcoming costs.
Exchanging contracts
The period between making an offer and exchanging contracts can vary in length, from weeks to months, and is usually the longest stage. But once both the seller and the buyer sign identical contracts and the solicitors exchange these, the transaction becomes legally binding and a completion date can be set.
Collecting your keys
Completion day is the day all monies are transferred, you can collect your keys and you officially own your first home. You would usually collect your keys from haart after the solicitors have confirmed completion and so the moving day begins!
How haart can help
Even after reading this handy guide, buying a home for the first time can still feel daunting. So why not pop in to one of our branches (we have over 100 nationwide) and talk through the steps?