Looking to buy your first home? Make sure you have the knowledge and information you need to make the process as stress-free as possible with our top tips…

Updated on 25th November 2022

Plan ahead and know how to prepare your finances and paperwork, and you will increase your chances of getting on the property ladder. These expert tips will help…

Start saving

Try to save for a deposit of between 10-20% of the property price. The greater your deposit, the more likely you are to get access to the most competitive interest rates. It is possible to get a mortgage with a deposit of 5%, but the greater the deposit, the more likely you are to get a competitive interest rate.  

Know where you stand financially

Before you start speaking to a broker or lender, it’s important to have a clear idea of your income and outgoings each month. A lender will need to know what your earnings are, and you’ll need to have three months’ worth of bank statements and salary slips. If you are self-employed, a lender will normally ask to see bank statements and an SA302 form which shows your income for each tax year.

They may also ask for your accounts and further information from your accountant. Typically, banks and building societies will offer between three and four-and-a-half times your total annual income or total joint annual income if you’re buying with someone else. Certain professions may entitle you to borrow more – if you are a newly qualified doctor or dentist, some lenders may offer up to five-and-half times your annual income, while others may allow you to borrow up to six times your annual income if you are an accountant, barrister, engineer, optometrist, pharmacist, solicitor or vet.

Try to clear your debts

Try to pay off or clear any loans or credit card balances. This not only demonstrates that you are reliable when it comes to paying back loans but also shows that you are able to manage your money well and take responsibility for the amounts you have borrowed. At the very least, make sure credit card and loan payments are paid on time each month and you don’t miss any payments.

Improve your credit rating

A prospective lender will look at your credit history and see if you have been able to manage loans and other types of credit in the past. Always repay loans on time so that you have a good reputation as a reliable borrower. Again, this shows that you can manage your money and builds up a healthy credit history. You can check your credit report with Checkmyfile.

Get onto the electoral register

Not being on it can affect your credit rating, and being on the electoral roll can also help you to verify your identity, which is important when applying for a mortgage. You might be able to get a mortgage without being on the electoral roll, but it is more challenging, and some lenders will turn you down if you’re not on it. To register, you must be a British citizen or an Irish or EU citizen living in the UK. It only takes about five minutes to register, and you will need your national insurance number. You can register on the government’s website.

Talk to a broker

A broker has access to a wide range of competitive mortgage products and will be able to find the best mortgage offer to suit your needs. They will also be up to date with what is going on in the market, which means they can save you a lot of time trawling around if you were to do the mortgage search for yourself. They will deal with your lender directly and save you a lot of time. They may also have access to deals not always available direct to consumers, which could save you money.

Factor in other costs of buying a property

It’s not just the cost of the deposit you need to think about when you start saving to buy a house; there are other costs you need to factor into your budget. These include the cost of a survey on the property you have in mind (fees vary), a home buyer’s report, solicitors’ fees (around £900-1500), and possibly a mortgage arrangement fee (again, the fee varies). Not all lenders will charge an arrangement fee, but some will, and it’s important to find out early on if this is the case so that you are prepared. When you do move into your new home, there will also be the cost of buildings and contents insurance to consider.

Understand Stamp Duty

You may be wondering whether or not you need to pay Stamp Duty Land Tax, known simply as Stamp Duty. A person who is not a first-time buyer would need to pay stamp duty in England and Northern Ireland when paying more than £250,000 for a residential property. They wouldn’t pay stamp duty on the first £250,000 of the property but would pay two per cent on the portion between £250,000 and five per cent on between 250,001 to £925,000.  

However, first-time buyers won’t pay any Stamp Duty on a property worth up to £425,000. So if you buy a property that costs £500,000, you will only pay stamp duty on £75,000 (at 5%). If, however, the property is worth more than £625,000, you won’t qualify for Stamp Duty relief and will pay the standard rates of Stamp Duty, essentially following the rules for people who have bought a home before. It’s important to note that if you are buying a property with someone else, you will both need to be first-time buyers.

Be confident you can afford your monthly repayments

While your main focus now might be on being able to get a mortgage, check that the monthly payments will genuinely be affordable for you. A good broker should always act in your best interests, but it’s down to you to ensure you can afford the payments each month.

Check to see if you qualify for government help

If you are seeking to buy a new build house, you may be able to get a Help to Buy equity loan from the government. With an equity loan, you will only need a five per cent deposit. You must be purchasing a home from a registered Help to Buy Builder. Read more about the government’s Help to Buy Equity Loan Scheme.

Consider what type of mortgage would best suit you

There are different types of mortgages, and a good broker will recommend one to suit your personal situation. These include:

Fixed-rate mortgages – the interest rate stays the same for a fixed period of time, such as two, three, five years or even ten years, regardless of whether interest rates change. This can offer peace of mind when it comes to managing your money. You’ll know exactly what you will pay each month and can budget accordingly.

However, if interest rates go down, you will still pay the same amount each month. Fixed-rate mortgages are usually at a higher rate than variable mortgages.

Variable rate or tracker rate mortgages – these are less secure, as the interest rate can change in line with rates going up or down so you will end up paying more money if rates go up. There are different types of variable rate mortgages so it’s a good idea to discuss your options with a reputable broker and if you go down the route of a variable rate mortgage, be confident that you have a contingency plan in place for interest rates going up.

Be realistic and wait if you have to

If you’re not sure about your current work situation and fear that it may change soon, or if you aren’t sure you can afford the monthly repayments, hold back a bit longer and keep saving. Don’t rush into getting a mortgage and put yourself under unnecessary pressure.

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