For the first-time home buyer, purchasing property is both exciting and nerve-racking. The events of the past two years have somewhat complicated the home-buying process. Currently, there is more demand than there is supply, making the market extremely competitive. This means that buyers must be thoroughly prepared if they want their offer on a property to be considered.
What the first-time home buyer can use to their advantage is that they do not have a property to sell and are therefore not in a chain. This is attractive to sellers and estate agents because it allows for more flexibility in the moving process. While this will place you in a good position, it is not the extent of what you need to do to get your affairs in order. The home buyer will still need to have their deposit sorted and a mortgage agreement in principle.
Tips for buying your first home
Buying your first home may seem like an intimidating task. Indeed, it is, especially in today’s climate, where houses, flats, and everything in between are sometimes selling within a week. Thus, we have compiled a list of tips you can follow to make the process less daunting.
Confirm that a monthly mortgage payment will not place a financial burden on you.
A mortgage is a monumental financial commitment. You will need to check in with yourself (and your partner, if you have one) and determine whether home-buying is a viable option. If you believe it would place you in a compromising position, reassess your situation and devise a new timeline. Devise a plan for the upcoming months, or even years, that will allow you to get in a more comfortable buying position.
Find out how much you can borrow.
Of course, this number will be approximate. However, it will give you a firmer idea of how much a lender will give you. This can be done relatively easily by using a free online mortgage calculator. Once you have calculated this, you will have a better concept of what homes are in your price range.
Check your credit score.
There is no minimum score for buying property. Of course, the higher the score, the higher your chances are of obtaining a decent mortgage. There are various online resources for checking your score for free. Once you find this out, you will know whether you need to work to improve it before applying.
The deposit is typically the largest portion of the cost to purchase a house. Most lenders require you to have saved at least 10% of the property’s value. If you can afford to go higher than this, do so. Higher deposits will have lower interest fees.
Additionally, many do not always at first consider the additional costs of buying a home, like legal fees. These may include, but are not limited to, the fee for a solicitor, stamp duty, land registry fee, insurance, etc. These can quickly add up, so ensuring you have saved a sufficient amount is imperative.
Lastly, because the market is quite competitive now, you may need to exceed the property’s value. This is an out-of-pocket cost and will not be included in your mortgage. Many buyers are currently going at least 10% over the home report. Keeping this in mind, you can continue building your savings.
Acquire a mortgage in principle.
While a mortgage in principle is not an official contract, it helps prove that you can afford to borrow the amount required to buy the property.
Consider using a mortgage broker.
Mortgages are complicated. Having an adviser removes some of the hassle by helping you better understand interest rates and the differences between mortgages. They make it easier to obtain a mortgage suitable for your needs. Some may even provide you with exclusive deals that can potentially save you hundreds of pounds or more. The fee for this depends on the broker. Some are free to buyers and charge the lenders, others may charge the home buyer around £500.
Use a government scheme.
You don’t need to do this alone and with all of your own funds. There is help for you. Getting onto the property ladder is becoming increasingly difficult, so it will benefit you to take advantage of all the financial aid accessible to you wherever you are. In the UK, for example, you should consider using the mortgage guarantee scheme, the lifetime ISA, or a help-to-buy ISA.
Buying property is a fantastic investment. Property value naturally increases over time, especially if you do any renovations to make the place nicer and more livable. Keep in mind that the less you spend on renovations (e.g., you can decrease your outgoings by taking on DIY projects), the more profit you turn when you decide to sell. Additionally, the longer you own the home, the more likely it is to increase in value.
As you continue to move up on the buying ladder, you may want to consider implementing property investments into your wealth-building strategy. These kinds of investments have potential for long-term gains.
If you have any questions about property investing and how Private Client Consultancy can help devise your wealth-building strategy, contact us today.