How to buy a home – a guide for first-time buyers

17 min Read Published: 08 Sep 2020

How to buy a home - a guide for first-time buyersThe first question you should ask yourself is 'are you ready to buy a house?'. The majority of people in the UK have a desire to buy their own home which can provide security for them and their families in the years ahead. However, buying a home is the biggest financial commitment you are likely to make in your lifetime and you need to make sure you are ready to buy a house before you commit to such a large purchase.

When people talk about buying their first property they tend to focus on the positives and not even look for any negatives, so below I have listed a number of advantages and disadvantages of home ownership.

What are the Pros and Cons of home ownership?

Pros

  • providing you maintain your mortgage payments you will have security
  • can be cheaper than renting
  • you can decorate, improve and extend it which can increase the value
  • you do not have a landlord that can increase your rent, restrict you having pets or evict you at short notice
  • if the property goes up in value over the years then you will benefit from the additional equity
  • you will eventually pay off your mortgage and own the property outright
  • you can raise finance against the value of your property to make improvements, start a business or provide income in later life (known as equity release)

Cons

  • paying a monthly mortgage is a long term commitment which can be a burden if your finances are put under strain
  • if property prices fall (as they have done in the past) then this could result in negative equity where the value of your house is less than your current mortgage debt
  • if you lose your job and fall behind on your mortgage payments you could have your property repossessed
  • you have to pay for your own maintenance and repairs
  • extra costs to be paid such as property insurance taxes
  • cannot move home quickly
  • if you are buying with another person they may decide to move on and leave you having to pay the mortgage on your own or leave you in danger of having your property repossessed

Can you afford to buy a house?

Before you start looking at potential properties to purchase you should work out if you can afford to buy a house. We have partnered with Habito one of the first online mortgage brokers on the market where you can use their mortgage calculator to find out how much you can borrow on a mortgage.

Finding out how much you can borrow is only part of the decision making process as you will also need to make sure that you can afford the additional payments that come with property ownership, such as utility bills, insurance, broadband, and subscription services (Sky, Netflix, and Spotify etc.). Often first-time buyers moving out from their parent's home are shocked at the extra costs of the services provided for 'free' by their parents.

If you are looking to purchase your first property with another person you need to be comfortable that your relationship will last the inevitable strains of buying a house for the first time. If this relationship breaks down then you could be left paying the mortgage payments on just your income.

Saving for a deposit

In the current property market you will need to save a minimum deposit of 10% of the purchase price. The more deposit you can save, the more mortgage deals will be available for you. In order to build up a deposit for your first property you will need to be very disciplined in your spending and saving goals to achieve the deposit you need.

We provide you with some great tips on building up a deposit to purchase your first property in this video - How I'm saving for a house deposit.

You will also need to save enough to pay for the extra expenses involved with purchasing a property and you can find out more in this article - How much are the fees when buying a house?

The house buying process

Preparation

It is a good idea to do some research and thinking before you even start looking at any houses such as:

  • Timing - are you ready to buy a house or should you rent or stay with your parents a bit longer
  • Location - decide where you would like to live or more importantly where you would not want to live so you can limit your house searching to the relevant areas
  • Budgeting - prepare a budget so you can see where your money is being spent and whether there are areas where you could cut back your spending to give you a better chance of obtaining a mortgage when you are ready to apply
  • Think ahead - prepare another budget for when you move into your new home including what your outgoings will be at that time so you can feel confident that you will not be financially overwhelmed when you start buying your new home
  • Consider getting independent mortgage advice - calculate what mortgage you are likely to obtain, considering your current income and outgoings, you can start that process with the online mortgage brokers Habito
  • Final preparation - gather together all the paperwork that you will need when you eventually apply for a mortgage so if you find a property you will be ready to proceed

Find the right property

Searching for a property to buy is much easier these days due to the advent of property portals such as Rightmove or Zoopla where you can put in your requirements and search for properties online. Once you have found some properties that you think are worth considering you should then contact the relevant estate agent to arrange a viewing.

When viewing a property you should look at a number of things to assess whether the property would be right for you. We have written an extensive guide to help you when viewing a property - Get the best deal when viewing a house: 41 things to check

Make an offer

When you finally find a property that you want to purchase you will then need to make an offer, through the estate agent, to buy the property. You need to make a reasonable offer just below the asking price if you expect the owner to accept it. If the property requires a lot of repair work then a lower offer may be accepted if you can detail the repair work and likely cost. In a strong market it may be advisable to offer the full asking price as you may be in competition with other interested parties.

Apply for a mortgage

Once your offer has been accepted then you will need to get your mortgage application processed. Contact your mortgage broker, or the lender if you arranging the mortgage direct, to complete the mortgage application and pay the survey fee together with any upfront costs involved with arranging the mortgage.

Once the mortgage application has been completed and submitted the lender will arrange a survey and carry out the background checks required. When everything has been approved the lender will then issue a mortgage offer.

Survey

Typically the mortgage lender will instruct a mortgage valuation survey which is the very basic type of survey. This survey is for the benefit of the bank or building society to provide them with a report that states that the property is worth the price you are paying. If you are buying an old property or one that will need some work carried out then a full structural survey may give you peace of mind and a full understanding of any issues with the property you are purchasing.

Legal process

When completing your mortgage application you will need to appoint a solicitor who will carry out the legal work involved in a house purchase. Your solicitor will carry out a number of searches on the property to check if there is anything you need to be aware of such as any proposed new road schemes or other large developments. A full structural survey is more expensive and would cost in the region of £1,000 compared with the £300 to £400 cost of a mortgage valuation survey.

Exchange of contracts and completion

Once the mortgage offer has been made and the legal work completed then the exchange of contracts can be made and a completion date agreed. The completion date is typically 4 weeks after the exchange of contracts to allow all parties to make the necessary arrangements to move.

The moving process

Once you have exchanged contracts there are a number of tasks you will need to carry out prior to the moving date.

If you are currently renting then check your tenancy agreement

Make sure you know the notice period required to end your tenancy and make a note of your rental payment date and try to arrange the completion date to minimise your rental payments. Don't give notice on your tenancy agreement prior to arranging a completion date as you may end up homeless if things don't go according to plan.

Arrange a removal company or van hire

It is worth shopping around before the exchange of contracts for a potential removal company so that you can budget for this cost and check their availability.

Declutter

Now is a good time to do some serious decluttering as it's a good opportunity to get rid of things you no longer need and start afresh in your new home.

Arrange utilities

Start researching the deals available on all your utilities to keep the costs to a minimum. If you have shared the cost of utilities or had the cost included in your rent where you now live you will need to budget for these extra monthly expenses.

Communicate your change of address

Here is a list of the potential people you should contact to inform them of your change of address;

  • employer
  • bank/credit card providers
  • utility companies
  • DVLA if you have a driving license
  • motor insurance provider
  • local council - only do this after you have moved
  • TV licensing
  • subscription services
  • doctor
  • royal mail to redirect your post

Start planning for the moving date

Confirm ahead of the moving date so that the removal company is prepared for the move. Make arrangements for what is happening with any pets or children to ensure they are looked after as the process of moving can be chaotic. If you are using the services of a childminder or kennel/cattery don't confirm the booking until you have exchanged contracts.

What help is available for first-time buyers?

Lifetime ISA

A Lifetime ISA ( LISA) is a long term Independent Savings Account (ISA) introduced in 2016. Similar to an ordinary ISA, a LISA offers tax-free growth on your investment but with the added bonus of a 25% boost provided by the government. A Lifetime ISA can be used by a first-time buyer towards purchasing a property once the account has been held for 12 months. Any property purchased must be valued at £450,000 or less and must be the first property owned, wholly or in part, by the applicant.

Help to Buy Equity Loan (2021-2023)

First-time buyers who meet the affordability and lending criteria can borrow from the government up to 20% (40% in London) of the purchase price of a new build home. You have to pay a deposit of 5% and arrange a mortgage with a lender to make up the full asking price. You will not be charged interest on the 20% loan for the first 5 years of owning your home. Applications for the Help to Buy 2021-2023 scheme can be made from Autumn 2020.

Click to learn more about the Help to Buy equity loan scheme - Help to Buy Equity Loan

Shared Ownership

Shared ownership allows buyers to purchase a portion of a home while paying rent on the other portion. It is designed for those that would struggle to obtain a mortgage that would purchase a home outright. Most Shared Ownership schemes allow you to purchase between 25% and 75% of the property and buyers have the opportunity to purchase additional shares in the property at any time (known as staircasing). We explain more in our First-time buyer guide.

 

Further reading

We have also written further articles on buying a property which will be well worth reading:

First-time buyer guide – Everything you need to know about buying your first home

How to apply for a mortgage

7 ways to increase your chances of getting a mortgage

 

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