You never forget buying your first home. It’s an exciting time. And it needn’t be nerve-wracking. Here are some basics which, if you get them right, can relieve some of the stress.
1. Understanding Your Finances:
Budgeting:
Determine how much you can afford by considering your income, savings, and expenses. Use a mortgage calculator to estimate monthly payments based on various loan amounts and interest rates.
Credit Score:
Check your credit score as it influences mortgage rates. Aim for a score that’s at least “Good”. If there are blips in your credit record, try to rectify them. Free websites like Credit Karma can give you tips as to how to improve your score. A good mortgage broker will also be able to give you advice.
Saving for a Down Payment:
Most lenders require a down payment of 3% to 20%. Start saving early and consider government programs for assistance.
Government schemes:
In the UK, there are several government schemes available to assist first-time buyers:
1. Help to Buy: Equity Loan: This scheme allows first-time buyers to borrow up to 20% (40% in London) of the property's value from the government, which is interest-free for the first five years, making it easier to afford a home with a smaller deposit.
2. Shared Ownership: Under this scheme, you can buy a share of a property (between 25% and 75%) and pay rent on the remaining share. This makes homeownership more affordable, especially in high-cost areas.
3. Lifetime ISA (LISA): First-time buyers can save up to £4,000 each year in a LISA, and the government adds a 25% bonus on your savings. This bonus can be used towards your first home purchase or retirement.
4. First Homes Scheme: This initiative offers new homes to first-time buyers at a discount of at least 30% compared to the market price, helping to make housing more affordable.
5. Stamp Duty Relief: First-time buyers in England and Northern Ireland are exempt from paying stamp duty on properties up to £425,000 and receive relief on properties up to £625,000.
These schemes can significantly ease the financial burden for first-time buyers and make the dream of homeownership more achievable.
Additional Costs:
Remember to account for closing costs, home inspection fees, and moving expenses.
2. Pre-Approval Process:
Get pre-approved for a mortgage to understand the amount you can borrow. This strengthens your position when making an offer. Where Can I Find A Home is not authorised to give mortgage advice but we do have introducer associates who are regulated mortgage brokers and they will be pleased to help.
3. What to Look for When Buying a Home:
Location:
Research neighbourhoods for safety, schools, and amenities. Visit at different times to get a feel for the area.
Property Condition:
Look for signs of wear and tear, and consider hiring a professional for a home inspection. In Scotland the Home Report will give you a good indication of a property’s condition but if that’s not available consider arranging a surveyor. Remember a mortgage valuation is only designed to give lenders an idea of suitability for security. It’s not a report on its condition.
Future Value:
Consider the potential for property value appreciation. Is the area “up and coming”. Research development plans in the area. Sometimes you can get a bigger property in an area that isn’t quite so desirable.
Size and Layout:
Think about how much space you need now and in the future. If you can afford it, buy a house that has a bit of room to expand.
Be prepared to compromise:
You may be lucky and get your perfect home. But you may have to compromise on size, location or condition. Getting onto that first rung of the property ladder is so important so perfection may not be possible this time round.
4. Making an Offer:
Once you find the right home, work with your mortgage broker to make a competitive offer based on market conditions and comparable sales. Having an Agreement in Principle puts you in a much stronger position to have your offer accepted and having a solicitor or conveyancer in place will save time when you see the ideal property.
5. Closing the Deal:
After your offer is accepted, you’ll enter the closing process, which includes finalizing your mortgage and completing the necessary paperwork.
Conclusion:
Buying your first home can be overwhelming, but understanding your finances and knowing what to look for will make the process smoother. It will be the biggest purchase of your life so far. Take your time, do your research, and seek professional advice when needed. Remember, you’re only a first time buyer once in your life so most of all, try to enjoy the experience.
Note: This article is for general information purposes and should not be considered advice. Where Can I Find A Home is not regulated by the Financial Conduct Authority to give advice on mortgages or financial products.