Home buyers guide

Buying a home can often be a long and complicated process, especially for first time buyers. If you plan correctly for everything you need to do then it can be much less difficult.

Buying a home can be broken down into a few key steps:

• Define your budget and save for a deposit

• Search for a home

• Get a mortgage in principle

• Put down an offer for a home

• Get a mortgage

• Exchange contracts and transfer funds

• Move into your new home

Step 1 - Your budget and deposit

This is not necessarily the most inspiring place to start, but it's important to be realistic or you could find yourself financially overstretched.

Save for a deposit

Plan for how much you will be able to afford on buying a home and calculate what 20% of that will be – this should be the amount you will need raise for a deposit. In 2022-23, the average deposit was £53,414, according to first-time buyer statistics.

Work out how much you can afford to put away into your own savings account just for buying a home. Using that figure, calculate how long it would take you to reach your savings goal and find a high interest savings account to get a little extra back.

Some mortgage providers offer 95% mortgages, meaning you might only need a 5% deposit, but it's worth saving up for at least 20% of the home's purchase value as you will have access to better deals and cheaper interest rates.

Could Help to Buy or Shared Ownership help you?

The Help to Buy scheme is now closed to applicants in England, but applicants in Wales may be able to take advatnage of this until March 2023 - please look for update on the Help to Buy Wales website.

The scheme offers first time buyers a deposit boosting 'equity loan' of up to 20% of the value of a new build home. To be eligible for the scheme a borrower will need at least a 5% deposit of their own cash.

There will be no repayments for five years after taking out the loan, but after that time it need to be repaid in full or interest charges will apply.

It's worth noting that as an equity loan the amount that will need to be repaid is pegged to the value of your home, so if your home went up in value from £100,000 to £110,000 over five years, you'd need to repay £22,000 (20% of £110,000) instead of the initial loan of £20,000.

The government backed Shared Ownership scheme allows people to own a 'share' in a property whilst paying rent on the share that they don't own to a housing association.

For example, you can buy a 50% share in the home, meaning you would only need half the deposit amount. The remaining 50% share will be owned by the local authority who you pay rent to.

Can you meet affordability checks?

You will usually only be able to borrow around four times your household income, though different lenders will apply different multipliers to your income, so this isn't a rule.

It's also worth bearing in mind lenders will consider you existing debts, spending habits and other financial commitments when deciding how much to lend to you.

Home buying costs

There are several costs that need to be factored when buying a home. In your step by step plan, consider all of the costs and budget for each one.

• Deposit - You will likely need around 20% of the home value to get a mortgage.

• Mortgage - You will have monthly mortgage payments for around 25 years.

• Stamp Duty - If your home is valued over £125,000 then you will owe a tax of somewhere between 1% and 7% depending on the value. Use our stamp duty calculator to find out how much you'll need to pay.

• Mortgage admin fees - You will need to pay a set up and booking fee, as well as a fee to close your mortgage when you've finished paying it.

• Legal fees - You will need to pay for a surveyor to check the building structure, and for a conveyancer to transfer the money before the purchase can go through.

The extra costs on average add up to around £5,000 (potentially many thousands more depending on the value of the home), so make sure you have that in addition to your deposit.

Step 2 - Find a home

Once you've got an idea of your budget you can look for a place to buy. You can do this the old fashioned way with local newspapers and estate agents, or online with property listing sites like Zoopla.

When searching, you should bear in mind the obvious things such as affordability, schools, local amenities and , but also do research on the neighbourhood. Check pending  planning permission applications with the local council, also make sure to check you're not in a flood zone or near a flight path as these things may affect your property value should you ever resell to move.

Step 3 - The agreement in principle

A mortgage agreement in principle (also known as a decision in principle) is a statement from a lender that they are theoretically happy to give you a mortgage. It's not necessarily a guarantee and neither you, nor the lender, are tied into the agreement.

An agreement in principle is mostly used by first time buyers to strengthen their case when putting in an offer to buy a home.

Step 4 - Offers

This is a difficult process and can all too often become more complex than it needs to be. But as a first time buyer you're in a relatively strong position with fewer dependencies as you won't be in a 'chain' of other buyers and sellers.

It goes without saying that before you make any form of offer you should ask and research a few key questions about the property and area.

Make sure the house is removed from the market if your offer is accepted. But, unfortunately an accepted offer is not a legally binding guarantee, the seller can still withdraw until you formally exchange contracts.

Also, if your offer is accepted make sure it is conditional to relevant surveys being completed, you can hire your own qualified surveyor, use your mortgage lender's or the estate agent's. Depending on what the surveyor finds you may be able to negotiate a discount, or it may be prudent to walk away from the sale.

Step 5 - Getting a mortgage

Once you've got an offer sorted you will need to formally apply for a mortgage for the amount required to purchase the house.

Not all mortgages are created equal and choosing the right mortgage for your needs can make a big difference, so you should think about the type of mortgage you'd like to apply for:

• Fixed rate - A fixed rate mortgage will keep your rate at a fixed level for a number of years, giving you a set monthly repayment whatever happens with the markets, this is a popular option for first time buyers.

• Variable rate - A variable rate mortgage will offer a discount on the lender's standard variable rate (SVR) for a few years, the lender's SVR may go up or down depending on conditions in the wider economy and markets.

• Tracker - A tracker mortgage will follow the base rate of interest set by the Bank of England by a set mark up. For example if the base rate was 0.5% and your mark up was 2% your rate will be 2.5%, if the base rate falls to 0.25% your rate would drop to 2.25%.

You can read more about mortgage types in the Uswitch guide on all the different types of mortgage.

Step 6 - Exchanging contracts and transfer funds

If you've not already got one, you will need a solicitor by this stage (in general it's useful to have a solicitor ready from early on in the house buying process), as both the examination of the contract and the transferring funds, or 'conveyancing', will need to be handled by a qualified legal professional.

This process can take as little as a week if everything goes smoothly, but can take much longer should any problems arise.

Step 7 -  Setting up your new home

Once you move in you will need to arrange your broadband, energy, water and council tax payments. You could likely switch to a cheaper energy deal and a better broadband deal if you check with Uswitch.

It could also be worthwhile to take out home insurance as well as life insurance to ensure you and your home is protected and your loved ones are covered should the worst happen.

Read more …

• Home Buying & Moving Costs |The Facts of Buying a Home

• Rent to Buy | What is it and how can it help you?

• First Time Home Buyer Mortgage