Looking into buying your first home is extremely exciting and, while challenging at times, the feeling you get when you finally get the keys is hard to beat.
However, as with so many things in life, preparation is key – so before you even start arranging those house viewings and scouring the internet for properties, make sure you take a look at our top tips.
Tip one – get your deposit together/start saving
A vital part of buying a home is putting down a deposit and whilst you will need to get a mortgage in place, you will also need to put down some money of your own to secure the sale.
Generally speaking, you are looking at a 10% deposit (so £20,000 on a property value of £200,000) at least, but 5% deposits are making a comeback in the mortgage market. This would halve the amount of deposit you need – so in our previous example, you would need just £10,000 on the same £200,000 house.
You may have built up some savings already or a relative may be giving you a (generous!) gift, or you may even be starting from scratch. Whatever the situation, it makes sense to put money aside on a regular basis from your income to build the deposit up or to put aside for other costs, such as removals, solicitors and so on.
Think of your savings as another bill and pay it each month without fail - as you would any other. Your future self will thank you for it.
Tip two – find out how much you can borrow
Once you have worked out how much you can put down as a deposit, make an appointment to see us at Pebble Money to find out how much you can borrow as a mortgage.
This will provide valuable insight into the price range of properties you can look at and also how much roughly it will cost you per month.
This is a vital stage and one which prepares you well for your property search, while avoiding possibly unrealistic expectations and wasted time.
Tip three – make a budget plan (and stick to it!)
So, you’ve found out how much the mortgage may cost and you’re putting money into your savings each month (well done!), now is time to look at the other costs that come with owning your own home.
You may have a head start if you are renting your own place, as some of the costs could be similar – such as telephone, broadband, gas, electricity, and water. However, there are also other costs to consider, such as Home Insurance, Life and Critical Illness Cover and Income Protection.
You also need to factor in whether the property is larger, further from work and so on and increase those costs accordingly.
You may be living with your parents currently; in which case all of these bills and outgoings will need to be estimated. You can ask your parents for help with this and/or your friendly mortgage broker.
Put down the costs on paper, be realistic and identify areas to cut back on if applicable – hopefully, there should be a big enough gap to insert your monthly mortgage payment and some wriggle room for any unexpected costs that crop up.
Tip four – look after your credit score
The following cannot be emphasised too much – your credit score is a vital part of your profile when it comes to asking for a mortgage. A lender looks at your ability to pay the loan each month (income and outgoings) but also your track record in paying credit cards and loans in the past.
Get a copy of your credit file from Experian or Equifax and identify any issues early, it doesn’t necessarily mean you won’t get a mortgage, but it may restrict your choices.
Above all, make sure you pay all your credit cards and loans in time every month from here on in, as a recent missed payment is one of the worst things a lender can pick up at this point.
While we are at it, also pay close attention to your bank statements and outgoings – try cutting back on unnecessary spending and those pesky gambling sites, as some lenders may take a dim view of this.
Regardless, these are good habits to get into with a new mortgage on the horizon.
Tip five – collect your golden ticket!
Known in the industry as either an ‘Agreement in Principle’ or a ‘Decision in Principle’, this piece of paper really is a golden ticket when you are looking for properties. The document tells whoever wants to know what you can borrow and - most importantly of all - that you are a serious buyer.
We will submit your personal details, income details and roughly how much you are looking to borrow to the mortgage lender, who then looks at this, along with performing a credit score (see tip four!) to assess whether they are willing to lend to you and, if so, how much.
Just the thing you need to let everyone know you mean business!
We hope this helps in your quest for your first home and gives you a good starting point, but please do get in touch if you need any help, have any questions or want to start the ball rolling.
Your home may be repossessed if you do not keep up repayments on your mortgage.
To find out more or to book an appointment, contact us today.