First Time Buyer Guide

First look at your income, what you get paid after any tax, National insurance and student loan, against your outgoings like bills, regular spending and other debts to work out how much money you'd have left each month.You'll also need to consider other extra costs when buying a home like mortgage product fees, legal fees, property surveys, stamp duty and home moving companies. Ask yourself if you have enough to cover a monthly mortgage payment. Make sure you are as thorough and realistic as your mortgage broker/lender will be. 

There are many banks that offer borrowing calculators such as the Barclays Affordability Calculator 

The size of your deposit affects how much of a mortgage loan you’ll need. For most first time buyer mortgages, you need a deposit of at least 5% of the price of the property you want to buy. The bigger the deposit, the better access you’ll have to lower rates, and lower monthly payments.

If your deposit has been given to you as a gift your mortgage provider will ask where your deposit is coming from and for any gifted deposits over £10,000 you’ll likely need to complete further forms as part of your application. 

Firstly, what is a mortgage? It’s a loan that you take out to buy your home. It’s secured against the value of your home until you pay it off. You’ll be charged interest on your monthly repayments. The higher the interest rate of your mortgage, the more interest you’ll be paying each month. The quicker you pay off your mortgage, the less interest you’ll end up paying overall. It’s important that you keep up with your payments. If you don’t, your lender could repossess your home, to sell it and get their money back.

A mortgage in principle, sometimes known as an agreement in principle, is a document from a lender which can give you an indication of the maximum amount it would let you borrow based on your income, spending and debts.

Getting a mortgage may feel like a daunting task but there are a number of actions that you can take to increase your chances of getting one. 

1. Check your credit score

There isn’t a minimum credit score required for buying a house. However, the higher your credit score is, the better your chances are of being offered a better mortgage deal.

It’s a good idea to check your score with one of the main credit agencies such as Experian about a year before you plan to buy. Understanding your credit rating can help you work out if you need to improve it before applying for a mortgage.

2. Use a mortgage broker

Using the services of a professional can help you to wade through the jungle of available mortgage products. Leaning on their expertise can help them pick the best option for you. This could be especially useful for the self-employed or those with variable earnings. We strongly recommend the expert opinions of our friends at Zest.

3. Schemes to help you get on the property ladder. 

After what feels like decades of rising property prices, first-time buyers have a mountain to climb to get on the property ladder. There are a number of government home buying schemes available to help you get on the property ladder including Shared Ownership and First Homes.

4. Save a big deposit

A substantial deposit can give you access to some of the best mortgage deals and the cheapest mortgage rates. It is possible to find a mortgage with a deposit of just 5% but these deals tend to have the highest interest rates and have stricter criteria for eligibility.

A mortgage deposit is a sum that you pay upfront, to help pay for the home you’re buying. You then borrow the rest and make monthly mortgage repayments with added interest.

The bigger your deposit, the less you’ll have to borrow using a mortgage. You usually need a deposit that is between 5 and 20% of the full property value. You may be able to access schemes which allow you to use a smaller deposit.

Home-buying does not come cheap. Saving for the deposit is the biggest hurdle for first-time buyers but there is more to consider. Before you start viewing properties, it’s a good idea to know what fees you will be expected to pay along the way so you don’t get any nasty surprises.

1. Conveyancing fees 
You will normally need a solicitor or conveyancer to help you buy the property.

Expect to pay between £500 and £1,500.

2. Land Registry fee
They keep a record of all registered properties in England and Wales. Your solicitor might include this fee as part of your conveyancing package but it’s worth checking.

3. Stamp duty 
Stamp duty is what homeowners have to pay when they buy a home above a certain price or threshold. You pay extra depending on how expensive the property you want to buy is. However, if you're a first time buyer in England and Northern Ireland, you will not have to pay Stamp Duty on the first £425,000 of a property's purchase price. For a property purchase above £425,000 and up to £625,000, Stamp Duty of 5% will apply.

This gives you an idea of the condition of the property. It’s a good idea to get a thorough one done so that you are aware of any issues before you buy. It can also be a useful bargaining tool.

Sometimes known as an arrangement fee, this is the cost the lender will charge you for setting up the loan.

This is charged by the mortgage lender to check the property is worth roughly what you are planning to pay for it. 

Whilst we highly recommend the expertise of a mortgage broker, nearly all mortgage brokers will earn commission from the lender, but some will charge you a fee on top.

Your solicitor can arrange indemnity insurance, which is a one-off payment for a policy that lasts forever. It can cover a problem with the property that could result in council or legal action in future. For example, if your home had a loft conversion but the seller did not have the correct building regulation certificates.

Most mortgage lenders require you to get building insurance.

You might be asked to pay the reservation agreement. The aim is to lock people into the buying process to prevent gazumping. This is when someone makes a higher offer after yours has been accepted. Both the buyer and seller would put down £1,000 and if either side pulls out, they will forfeit their payment. Some reasons for withdrawing may be allowed, such as a bereavement, losing your job or an inability to obtain a mortgage.

Once you feel confident that you can afford to buy, you should consider what kind of property you want and the area where you want to live in. Remember to be realistic though, there’s no point in dreaming up a 5 bedroom detached house if you aren’t able to afford it. 

Reach our to the professional, either pop in or give one of Oakheart branches a call. We can help you develop your list of priorities such as how many bedrooms and bathrooms do you want? Or if you want to be near local shops, parks or schools. Bear in mind that you might have to compromise on some of the things on your wish list.

Don’t be afraid to ask lots of questions. At Oakheart we love to hear questions as it prevents any misinformation and assumptions and keeps everyone on the same page. Here are some common questions its good for you to know: 

Also, consider the re-selling potential. It may be your dream home but will others be potentially put off by some of the features? 

Once you have viewed a few houses and have found one that you really like, you can consider making an offer. Remember to first speak to your agent and get their advice on what price to start with, be realistic but can be worth first offering under offer price if you are the only person interested. Remember if you are a first time buyer and either renting or living with family/friends use this as a bargaining tool as you won’t be holding anyone up. If your offer is accepted then congratulations! Make sure you celebrate the win but bear in mind you have some way to go before you can call it your home. 

There is still lots of information here but if you require any further help or advice you can reach out to the Oakheart team who would be delighted to help you in your search for your new home.