Guide for First-Time Home Buyers

Purchasing your first home is a significant milestone. Although it may seem overwhelming at the beginning, once you know what essential steps and considerations to keep in mind, you can simplify the process and ensure you make positive and informed decisions.

Assessing Your Financial Situation

Before venturing into the property market, an important first step is to review your financial status. We would recommend focusing on the following:

Savings: When you plan on purchasing a property, there are two major costs to consider: the down payment and closing costs. Your down payment is a substantial upfront expense that can vary depending on location and other factors. Understanding how much you have available for these costs is central to setting a realistic budget and determining your affordability.
Spending Habits: By making small adjustments to your spending habits, you can free up additional funds to allocate towards your savings. Examine your expenses and current financial commitments to help find areas where you can increase your savings. This might involve reducing discretionary spending on non-essential items such as dining out or unnecessary subscription services.
Credit Score: Your credit score is a significant factor that lenders will consider when assessing your mortgage eligibility and determining the interest rate you qualify for. Therefore, we recommend obtaining your credit report and rectifying any errors to improve your eligibility.

Government Schemes for First-Time Buyers

There are numerous initiatives which focus on helping you access your first property. Let's take a look at two of the most popular options for first-time buyers:

Help to Buy: This initiative can help you purchase a new-build house with a deposit as low as 5%. You are provided with an equity loan of up to 20% of the property's value (up to 40% in London), interest-free for the first five years. By decreasing the deposit, it can help make homeownership more realistic for first time buyers.
Shared Ownership: Shared ownership gives you the option of purchasing a share of the house and paying rent on the remaining portion. You can gradually increase your ownership share over time, with the end goal of complete homeownership.
Starter Homes Scheme: The Starter Homes Scheme aims to provide discounted homes for first-time buyers under the age of 40. To qualify, buyers must meet certain criteria, such as income limits. The scheme offers an opportunity for eligible buyers to purchase a home at a more affordable price, helping them take the first step on the property ladder.

Understanding Mortgage Options

Navigating mortgage options for the first time can be daunting. There are a variety of options available, each with its advantages.

Fixed Rate

This option offers stability with a locked interest rate for a specified period. This means your monthly interest payments remain consistent, making budgeting and affordability easier. Due to its long-term predictability, it is attractive to most first-time buyers.

Tracker

Tracker mortgages fluctuate with interest rates but initially offer competitive rates. As this mortgage comes with the risk of payment increases if interest rates rise, it makes them more suitable for buyers with shorter-term home ownership plans or a high tolerance for risk.

Offset

This option connects your savings to the mortgage, reducing interest by offsetting the balance. Although you won't earn interest on your savings, you won't pay interest on the portion of your mortgage balance, offset by those savings.

Conveyancing & Surveys

After finding your first property and placing an accepted offer, the next step will be enlisting a conveyancer and conducting a survey.

Conveyancing is the legal process of transferring property ownership, and it's essential to instruct a conveyancer to handle this aspect. A conveyancer ensures all necessary paperwork is completed correctly and ensures a smooth transaction.

Arranging a survey is equally important as it provides valuable insight into the condition of the property. Although not a legal requirement, a surveyor will assess various aspects of the property, identifying any potential issues or areas requiring attention.

Prioritising these steps minimises risks and ensures a hassle-free transaction.

Additional Costs When Buying a Property

As a first-time property buyer, being aware of additional costs is crucial to avoid any unexpected financial surprises. These expenses, often overlooked by first-time buyers, can add up and impact your overall financial plan. Here are some common ones to look out for:

Legal Fees
Moving Expenses
Stamp Duty
Survey Costs

Conclusion

The home-buying process requires careful planning, financial preparation, and informed decision-making. By following these steps, you can confidently embark on your homeownership journey. If you own a property and are considering selling it, We Buy Any House offer a convenient service, where they offer a quick sale in as little as 3 days.