First-time buyer’s guide: How to buy your first home

Read Freedom Finance's first-time buyer's guide. Discover how to buy your first home

Not a clue where to start with buying your first home? Don’t worry. Although the idea of getting on the property ladder can be pretty daunting, the process isn’t as complicated as it first seems.

To help give you a clear idea of how to buy your first home, we’ve run through each step in the homebuying process. Plus, what you need to think about along the way.

If you’re…looking to buy your first home in 1 to 5 years

First time home buyers can be all smiles if you follow the right steps.

Great. The fact that you’re thinking about buying your first home well in advance is a good sign. Here are the main things you need to be thinking about 1 to 5 years before buying your first home.

Start working on your credit score

A healthy credit score is key to getting a good rate on your mortgage. A lower APR will mean lower monthly repayments. This won’t only make your repayments more manageable, but you’ll also save money in interest overall.

Got a thin credit file (AKA you haven’t really borrowed money in the past)? Then a credit builder card is a good place to start. If used regularly for small amounts and repaid in full each month, you can build up a solid history of making repayments on time.

There are also a few quick wins you can do to give your credit score a boost. Take a quick look at our easy ways to improve your credit score.

Start saving your deposit

Probably the hardest part of buying your own home is saving up a big enough deposit. You’ll usually need to save up at least 5%-10% of the value of the property you want to buy. This would give you a 95% to 90% mortgage. For instance, say that you’re hoping to buy a £200,000 home. In that scenario, you’ll need to save £10,000 for a 5% deposit or £20,000 for a 10% deposit.

Although we want to get on the property ladder ASAP, it can be worth waiting longer for a bigger deposit. This is because if you put down a bigger deposit, you can be eligible for much better rates. Also, it can reduce your monthly repayments.

If you’re not sure where to start, here are a few savings tips that can help you along the way.

  • Set up a dedicated savings account for your deposit;
  • Create a monthly budget – and stick to it;
  • Set up a monthly standing order to your savings account;
  • For those looking to buy a home of £450,000 or less and are ages 18-39, set up a Lifetime ISA. You can save up to £4,000 annually. Plus, the government will give you a 25% top up, up to £1,000 a year.

Still not sure? Take a look at our FAQ: How big a deposit do I need?

If you’re…looking to buy your first home within the next year

You need to make some key decisions  to determine how much you’ll be able to borrow with a mortgage.

If you’re thinking of buying within the year, you’ll need to have a deposit almost ready to go. Alternatively, you want to have one saved by the time you’re planning to buy.

There are also some key decisions you’ll need to make as they’ll affect how much you’ll be able to borrow with a mortgage.

Decide whether you’re buying with someone or alone

This is a key decision as it will affect how much you can borrow and the property you’ll be able to buy.

If you’re buying with someone else (i.e. a partner, friend or family member), you’ll be able to pool your deposits and incomes. Not only does this mean you can put down a bigger deposit, but a greater combined income will mean you’ll be eligible to borrow more money.

Just note that once you buy a property with someone, you’ll be financially linked to them. Do your research to make sure you understand how this could impact you.

If you’re buying on your own, you’ll have to be sure that you can cover the deposit and the mortgage repayments by yourself.

Calculate your budget

Now you know the size of your deposit and income, you can use a mortgage calculator to work out roughly how much you’ll be eligible to borrow. This will give you a property budget that you can use to begin house hunting.

Before you get ahead of yourself though, make sure you have enough money to cover the other costs associated with moving. These include:

  • Stamp duty
  • Mortgage fees
  • Surveyor’s fee
  • Valuation fee
  • Solicitor fees
  • Buildings insurance
  • Moving costs, such a hiring a van or removal company

How much you’ll need to save up to cover the additional moving costs will depend on the value of the property you want to buy.                                   

Currently, first-time buyers in England and Northern Ireland can receive stamp duty relief on properties worth up to £300,000. For homes worth up to £500,000, you won’t pay stamp duty on the first £300,000. After that, they charge 5% on the remaining amount, up to £200,000.

If your property is worth over £500,000, you won’t qualify for first-time buyer stamp duty relief.

Generally, it’s a good idea to have around £5,000 available to cover additional moving costs, although it could be more or less depending on the type of property you’re buying. But if you are still unsure, it’s always best to chat to a mortgage advisor who will help you figure out your budget.

Choose where you want to buy

Deciding on where you want to live can be one of the easiest or hardest parts of the whole process. Already set on your location? Then you can just move straight on to the next step.

If you’re relocating or moving to a new area however, it can be a little trickier. So if you can, spend some time in a few areas to get a feel for what they’re like. You may even decide to rent in your top choice for a while before you commit.

You may also want to think about if there are any up-and-coming areas to consider. While they might not be the most desirable now, if there are plans to improve the amenities or transport links in the area, the value of your property might shoot up in a few years.

Finally, if you have or are hoping to have children, good schools and local facilities are factors worth thinking about.

If you haven’t already made a decision, we compiled a list of the happiest places to live in Great Britain that might help you make your mind up.

If you’re… ready to buy your first home now

Freedom Finance can help you as you navigate how to buy your first home

Brilliant, you’re ready to buy! By now, you’ll need to have your deposit saved, funds for additional moving costs, a maximum property budget and a plan of what you want to buy and where.

Now, we’re going to run through the steps involved in actually making a home your own.

Decide whether you want a mortgage agreement in principle

Getting a mortgage agreement in principle (AIP) (sometimes known as a decision in principle) will allow you to prove to sellers and estate agents that a lender will (in principle) be willing to lend you the amount you want to buy your home.

To get an AIP, get in contact with your chosen mortgage broker (or lender). A mortgage broker will arrange an AIP on your behalf, and you can also brief them on how much you’re hoping to borrow and where you’re up to in your home buying journey.

Although getting an AIP isn’t an essential step, it could make you a more attractive buyer. It could also prevent you getting well into the buying process only to realise your home budget was a bit out – something all of us would much rather avoid.

However, if you are going to get a decision in principle before you make a formal mortgage application, try to make sure your broker uses a lender that only runs a soft credit check (aka it won’t affect your credit score). A hard credit check will be recorded on your credit file, which could impact the mortgage rates you are offered when you go to apply.

Find out more about how to apply for a mortgage in our FAQs.

Get property hunting

Now, the exciting bit! Finding your perfect home isn’t always an easy process, so having a clear idea of what you want can help you narrow down the options. That said, there may be things you need to compromise on to get the elements you really want, so making a short list of deal breakers can help you stay focused.

Registering with local estate agents is also a good place to start. They will let you know if any properties come up in your area that meet your requirements so you can book a visit.

When property hunting, always try to visit a property in person. This will give you a far better feel for the space and size of the place. Visiting at different times of the day will also help. That way, you can see if things like noise or parking availability differs in the daytime vs the evenings.

Make an offer on a property

Once you’ve found the property you want, it’s time to make an offer. It’s fairly common to offer a bit less than the asking price, however it all depends on how competitive the property market is in your area. You may find you need to offer the asking price or more to snap up your dream home.

Contact your estate agent to ask them to put in an offer on your behalf. As a first-time buyer, you have added benefits such as not being in a chain which can make you a more attractive buyer. Also make it clear that your offer is subject to a survey and being taken off the market.

Speak to a mortgage broker

Once you’ve made an offer on a property, speak to a mortgage broker to get the ball rolling on your mortgage application.

A mortgage broker will be able to search a number of lenders on your behalf to find the right mortgage option for you. You can go straight to a mortgage lender, but you may find it beneficial to shop around for your mortgage options.

A qualified adviser will then run you through your mortgage options and offer you advice on which mortgage might be best for you and your circumstances.

Once you decide on your mortgage, wait to see if your offer is accepted by the sellers before submitting your application.

Apply for a mortgage to buy your first home

If your offer is accepted on your new home, you can make a formal mortgage application. If you are using a mortgage broker, they will arrange all this on your behalf.

To apply for a mortgage, you’ll need supply:

  • Proof of ID (i.e. a photo passport or driving licence, plus a recent utility bill)
  • Proof of income (i.e. your last three payslips. Note that this will be different if you’re self-employed or have other sources of income)
  • Proof of expenses (i.e. a bank statement from the last three months)

The mortgage lender will then arrange a valuation of the property you are hoping to buy. This is so they can make sure the property is worth what you are going to pay for it. They’ll also run through all the documents and paperwork you’ve submitted, as well as your credit report, before they can approve your mortgage.

Look for a property solicitor or conveyancer

After your offer has been accepted, you’ll need to find a property solicitor or conveyancer to carry out the legal side of things.

In England and Wales this includes arranging searches, dealing with the Land Registry, drawing up contracts and paying any stamp duty.

If you’re buying in Scotland, this works slightly differently. You’ll need to contact a conveyancer earlier in the process, i.e. after you’ve seen the home you’re hoping to buy, not after the offer has been accepted.

Get a property survey

A property survey assesses the condition of the property you want to buy and will identify any structural problems.

A property survey isn’t a legal requirement. However, it is highly recommended. If there are any issues, you may be able to negotiate a price reduction with the seller to factor in fixing any problems.

Arrange insurance

Most mortgage lenders will require you to have buildings insurance set up for the day you move in. This because if something was to happen to the property once you are the owner, the property needs to be covered so any damage can be repaired or, in the worst-case scenario, you and the lender can get your money back.

If you have dependants (i.e. a partner or children) who would rely on your income to cover the cost of the mortgage should anything happen to you, you may also want to think about life insurance and income protection. This would ensure your family doesn’t lose their home should these circumstances arise.

Exchange contracts

The exchanging of contracts is when the buyer and seller’s legal teams swap signed contracts and the deposit is paid. Before you can exchange contracts, you will have need to have:

  • A written mortgage offer;
  • An agreed completion date;
  • Buildings insurance for the day of completion.

Once you’ve exchanged contracts, the property buying process is legally binding.

Get the keys and move in

A couple of weeks after the contracts are exchanged, you can complete the home buying process. You can arrange a completion date with your seller that works for both parties.

Once you’ve completed, congratulations – you are officially a homeowner! The money will be transferred, and you can pick up the keys from the estate agent.

From this point it’s up to you to decorate and furnish your home and, ultimately, make it your own.

If you’re at the stage where you’re ready to look at your mortgage options, our team at Freedom Mortgages can easily check your mortgage options with over 90 UK lenders. They have access to deals that you can’t get directly from a lender and will sort your entire mortgage on your behalf – saving you around 16 hours of legwork.

To find out your options with Freedom Mortgages, get in touch today by requesting a call back.

Want to know more about all things mortgages? Take a look at our other FAQs and guides: