4 things first-time buyers should ask before they view
Most first-time buyers say they don’t feel equipped to buy their first home. According to a study by Lloyds Bank six months ago, only 13% of prospective buyers questioned said they fully understood the homebuying process.
And only one-third of those who took part said they really understood the steps. Just 4% said they felt confident about the stages of the process. And only two in ten said they were certain about the steps about securing a mortgage.
A different survey last month by the Mortgage Advice Bureau backed these claims. It found that four in ten prospective buyers are hesitating about buying a home. They say a lack of knowledge and financial conditions are delaying their decisions,
Our helpful steps for first-time buyers
Buying a home is the biggest purchase you will ever make. And as 64% of first-time buyers say they have anxiety about the challenges in securing their first home, The Mortgage Dog wants to help.
We understand there is a lot of legal jargon and steps to go through. If you’re a first-time buyer there are things you might not have thought about. Over the coming weeks, we’ll focus on the steps you need to know.
First, it’s the things you need to think about before you even start looking for a home! Before we start, we want to let you know that you shouldn’t feel that your questions are silly. You don’t know what you don’t know!
We’ve decades of experience across our team, and we’re ready to help. So, if we miss anything, contact our team and we’ll be happy to help.
4 things first-time buyers should ask before they view
If you’re thinking about buying or planning to buy your first home, what do know about the steps you need to follow?
You might be scrolling the pages of estate agent or Rightmove and dreaming. But that is the easy part. Long before you put an offer on your first home, you need to have worked through many steps. Not budgeting properly could leave you disappointed. The following questions will help cover the first phase of home buying.
What is your deposit?
You probably know that you need to think about a deposit. Most lenders will ask you to put down a deposit. It’s a sum of money that you pay upfront that’s part of the purchase price.
Typical deposits range from 5% to 20%. But some lenders offer home loans where you can pay more or less than that. The deposit is security that confirms to your lender that you can pay your mortgage. It also reduces the lender’s risk.
If your deposit is 10% then you’ll need 90% of the purchase price as a mortgage. So, if you see a home for £150,000, and you need a 10% deposit that’s £15,000. To buy the property, you’ll need a mortgage to cover the rest (£135,000).
You’re likely to get a better interest rate if your deposit is higher. How you acquire the funds for a deposit depends on your situation. For example, you may have that sum in savings; or you may be able to loan the deposit amount from a family member.
How much can I borrow?
How much you borrow depends largely on a few factors. The main considerations include:
How much deposit you have. If you have a larger deposit, it could mean you can borrow more.
Your salary. If you have a well-paid job, it can mean lenders will happily lend more. But even if you have a lower salary, some of our specialist lenders can help. Here’s a link to our guide about downloading your HRMC income documents.
Regular outgoings. If you have more in payments going out than coming in, that could affect your mortgage offer.
Your credit score. If you’ve a history of bad credit, it can affect the number of lenders that are happy to loan to you. Find out more about credit scores here.
Property type. Some properties – such as high-rises or timber-framed houses – may limit which lenders are happy to offer a loan.
As you can see, there are a lot of factors. If you want a rough idea about how much you can borrow in your situation, check out our 'How Much Can I Borrow Calculator'.
The costs you need to cover
Your deposit isn’t the only financial factor you need to prepare for when buying your first – or any – home.
You also need to budget for solicitors’ costs. For example, a conveyancer is a lawyer who specialises in property purchases. You can’t really buy a property without solicitors as there are complex factors to consider. We’ve looked at conveyancing in another blog.
Stamp duty is also something you may need to consider. It’s a tax on buying a property in England and Northern Ireland.
If you’re a first-time buyer, you only pay stamp duty land tax (SDLT) on properties worth more than £300,000. That drops to £125,000 if you’ve bought a residential property before. We’ve a Stamp Duty Calculator that can help you.
Interest rates change over the years. So, if you buy a property today, your mortgage interest rate could be higher or lower next time. For example, if it’s higher, you’ll be paying more when your current deal comes to an end. If you’re already stretched financially, you might struggle to pay higher interest rates in future.
Don’t forget that your lender is likely to expect you to take out property insurance. Though the costs are usually fair, forgetting to budget could leave you stretched.
Agreement in principle
When you ask a lender for a mortgage, they will provide you an ‘agreement in principle’. This is usually a statement or certificate from your lender that states they are willing to give you a loan in principle.
It’s something that shows the people selling the property that you’re probably in a position to buy it. Without that, they’re unlikely to accept your offer. That’s because you could be wasting their time if you can’t access the funds. Also, the property will remain on sale until you can show your AIP (sometimes called decision in principle). And that could mean you lose out if someone with an AIP puts in an offer.
Remember, the AIP isn’t an offer – that comes later once other checks are made. But it gives the selling agent or housebuilder some confidence that you really can afford to buy.
We’ve looked at AIPs in depth in an earlier blog.
What else should I know?
The four points above cover the early steps when buying your first property. We’ll look at others in future blogs. But if you want a friendly chat about buying your first property, our experienced team can help.
And our final point to think about is this: When buying a home, it could be repossessed if you don’t keep up your mortgage repayments.
