Purchasing Your First Home
Buying your first home is generally considered to be one of life's biggest moments. This is especially the case when house prices are continuously rising, making it harder than ever to save up for a deposit. House prices in the UK are almost continually rising by as much as 1.5%, making the cost of a home in the UK from December 2017 to March of 2018, 2.7% higher than the previous year.
Hence, being a first-time buyer can be an exciting, yet very stressful process. Additionally, for some looking for a second charge mortgage, the reason is in order to help a child with a property purchase. It is therefore also important for the aiding parents to understand what is needed for a first-time property purchase.
To make the home purchasing process easier, there are numerous universally accepted ‘best tips’ for when it comes to being a savvy first-time buyer. By taking a number of factors and practices into account properly and effectively, the process of purchasing your first home can be made much easier than it would be otherwise.
Who is Considered a First Time Buyer?
It is very important from the outset to understand when someone is in fact a true, ‘first time buyer,’ as it may be the case that a property buyer believes they are a first time buyer but they do not satisfy the criteria. Generally, a first time buyer specifically refers to those purchasing their very first property, and who have not bought a residential property (as a freehold or leasehold) previously in either the UK or abroad. This automatically tends to exclude quite a large number of people.
Prepare for the Process Thoroughly
There are many different steps involved when it comes to the property buying process and it is therefore important that you spend a considerable amount of time making sure that your mortgage application is as strong and thorough as it possibly can be. Just as in the case of second charge mortgages' process, it is crucial to understand the process with a first charge mortgage too. These mortgages can sometimes take around six months to a year before making an application about the sort of criteria your potential mortgage lenders will be assessing you on.
Generally speaking, this will include some or even all of the following:
● The deposit size you have
● Your salary (and your partners if you are buying a property together)
● Your credit score in order to determine how ‘creditworthy’ you are
● Current employment status
● The amount you want to borrow for a mortgage
● Monthly outgoings
● General spending habits
It is important to remember that this list is not necessarily exhaustive, and so the lender that you decide to go with may have additional eligibility criteria in order to receive a mortgage.
Research the Mortgage Market
Not all mortgages are the same, and there are numerous different mortgage products available on the market, so it is important as a first-time buyer to thoroughly research the market to find the best deal that suits your personal circumstances. You could do this through looking at price comparison websites rather than looking at the mortgages and their providers individually, which could end up being very time-consuming, and potentially overwhelming.
Another alternative to this is looking at getting advice and guidance from a specialist mortgage broker, who will be better able to help you look for the best possible mortgage deal for you. This could be well worth it, as they have a legal obligation as stated by the Financial Conduct Authority (FCA) to find an appropriate deal for you. Although you may have to pay an upfront fee, you could end up saving thousands of Pounds in the long run.
Assessing and Scrutinising Spending Habits
When it comes to preparing for your mortgage application and purchasing your first property, it means spending a fair amount of time preparing and saving. When it comes to saving, take a look at your spending habits early on, before getting a mortgage (you should aim for a year or more.)
For most people, it is likely that there are areas of spending that will need cutting down, but unless you sit down and look through your bank statements, you may not necessarily be properly aware of how much you spend monthly and on what. Taking time to look through your finances and making a budget can help you to cut down costs on things that may be considered as a luxury when you are trying to save.
Furthermore, when it comes to budgeting you should also make it a top priority of yours to make sure that any outstanding debt has been fully paid off, as debt looming over you can affect your chances of being approved for a mortgage application and the interest rate you end up paying.
Home Buying Schemes
It is often worth taking a look at government backed home buying schemes that are available in the UK, especially as a number of them are specifically aimed at those buying their first home, making the cost of a property less or more manageable. Some of the most popular schemes of this kind in the UK, include:
Shared Ownership Scheme – This scheme works by allowing you the option to buy a share of your property, in which you then pay less rent on the other shares that you do not own yet. Over the course of time, you buy the segments back until you gain ownership (i.e. they have been all paid off.)
Help to Buy Scheme – The Help to Buy Scheme started in 2013 and is aimed at both first-time buyers as well as home-movers. However, there is one stipulation; it is a scheme that is limited to new build homes only. If you are eligible for this scheme, you will be able to gain access to a cheaper deposit requirement, needing around just 5% of the property’s value (as opposed to closer to 20% in most cases) as a deposit. This is considerably less than you would otherwise need.
Consider Other Mortgage Costs
When you are planning to buy your first home, you need to remember that it is not only your deposit that you need to be saving for. You also need to factor in the costs for other factors and considerations such as:
- Surveying costs
- Buildings insurance
- Valuation fees
- Decorating costs
- Arrangement fees
- Stamp duty (though first-time buyers have an exemption on first £300,000 up to £500,000)