First time buyers - things to consider

Buying a house for the first time is probably one of the biggest transactions that you could make, so it’s important to get right. As a first time buyer, it can be extremely exciting and is a big achievement. It can also be challenging, but the right conveyancer can guide you through and make sure that you understand the process.

Here are some things to consider when buying a property to make the process as smooth as possible.

Work out what your budget is

One of the first considerations is to work out what you can afford. You can use an online calculator to get a rough estimate, most lenders, such as HSBC and Nationwide, provide an online mortgage calculator. They’ll use details such as your wage, whether you’re buying on your own or with a partner, and your deposit amount. This gives you an idea of how much you can borrow, and therefore what kind of budget you’re working with.

You can also use calculators to work out your monthly mortgage payments based on the amount you borrow, so although you could borrow £200,000, you might not be comfortable with the monthly mortgage payments. Once you have worked out a happy medium between what the house costs and the monthly repayments, you can start looking at what properties you can happily afford.

Consider finding a mortgage broker

Using a mortgage broker to help you can be really beneficial, especially for first time buyers. They’ll help you understand the process and explain terminology, as well as advise on what products are available and which lender may be best suited to your circumstances. Estate agents will often be happy to recommend mortgage brokers to you, but it’s also worth finding independent brokers too so that you can find your own preference.

Having someone dedicated to your case personally means you can choose to use them in the future when remortgaging. Or alternatively if you choose to move house in future, you’ll have already built up a relationship with the individual. Keep in mind that some mortgage brokers charge a fee, whereas others get paid by the lenders, so be sure to ask them directly how their fees work before deciding to appoint them.

How much deposit do you require?

Each lender is different and their requirement for lending will vary, so it’s worth looking around and seeing what’s available. Depending on the financial climate, some lenders will offer mortgages to first time buyers that have a 5% deposit, where other lenders may ask you to have a deposit of 10% or more. Using a mortgage with a 5% deposit as an example, if a house costs £200,000, you’ll need to have a £10,000 deposit to borrow the remaining £190,000.

The size of your deposit will often affect the interest rate of your mortgage. Because the risk for the lender is higher with a 5% deposit, the interest rate the lender offers is likely to be higher for a 5% mortgage than if you had a bigger deposit. It’s best to discuss this with your lender before getting a decision in principle. A mortgage broker can help find the right mortgage product for you, which we go into more detail on later.

Don’t be tempted to use loans or go over your budget to secure a property - always stick to your budget to avoid getting into financial trouble.

Select between a fixed rate, variable rate mortgage or interest only mortgage

When applying for a mortgage, you’ll need to decide what type of mortgage you want. The most common mortgage type is a repayment mortgage (where you repay the loan and the interest) such as fixed rate mortgages and variable rate mortgages. There are also interest only mortgages where you only pay the interest on the mortgage, and not the loan itself.

As a first time buyer, it’s likely that repayment mortgages are the most suitable. A fixed rate mortgage stays the same for a certain number of years, typically between 2 and 5, whereas a variable mortgage can change depending on the current interest rates.

There are benefits to both options. If you have a fixed rate mortgage you know exactly what your outgoings will be each month and if the interest is low at the time of purchase, you can lock in that price. But equally if the interest rates are high when you accept your mortgage offer, you won’t benefit from any decrease in the interest base rate during your fixed term. If you’re more risk-averse, this may be the safer option as your monthly payments are fixed.

A variable mortgage can fluctuate depending on the interest rate, so although you could be paying more some months, you may pay less other months, and it may work out cheaper in the long run. A variable mortgage can be particularly beneficial, especially if the interest rate is unusually high at the time of purchase but expected to drop.

Look for a good starter home

Buying a house can be a great investment. Not only does it provide long-term stability, but unlike renting where your money goes to the landlord, for repayment mortgages (the most common mortgage type), your monthly mortgage payments are an investment. Each month you pay back a portion of the money you’ve borrowed to buy your new home.

Once on the property ladder, if the property market is strong and prices increase, you can use the return on your investment to purchase another, potentially larger home in the future. Be aware though that like most investments, the price of property can go down as well as up.

Your first home doesn’t have to be your forever home, so it doesn’t have to be perfect as you can always move home in future. That being said it’s worth making a list of your priorities, such as whether location is more important to you than the size of the property. It’s good to be clear on what compromises you would be willing to make that won’t impact your lifestyle, but allow you to get on the housing ladder and begin building equity in the property.

Remember as well that factors like how a property is decorated is down to personal taste and can be changed, so don’t disregard properties if the décor isn’t to your liking! As it’s your first home, it may be better to find a middle ground on price, location and other aspects.

View a variety of different properties

Make sure you view a range of properties within your budget, so that you can get a feel of what is important to you. It can be hard to judge a property by photos alone, so if you’re on the fence, it’s probably worth viewing. By viewing different properties, you’ll start to find out what’s high on your list of priorities.

You might find some distinctive features you come to love when going to see it in person. Don’t miss out on opportunities because of the angles and quality of the photos. In many cases, getting a ‘feel’ of the property can be the main deciding factor.

Take your time choosing your property lawyer

When looking for your property lawyer, it’s important to find the right lawyer for you. If you’re unsure how to choose a conveyancer, take a look at our guide. Make sure that you get a clear quote with a breakdown of costs and what you can expect to pay.

Ask questions that are important to you, perhaps such as who is your dedicated point of contact throughout your transaction? Does the company dedicate a property lawyer that deals with your case or will there be multiple caseworkers with no clear point of contact?

You should also look at the review pages of conveyancing firms to see what real customers have said, this can be a good indication of what you can expect your experience to be like.

We provide you with an itemised fixed fee quote, so you can see all your costs from the outset. We also offer an online platform, MyEden, that allows you to communicate with your property lawyer directly and see all of your progress in one place. You’ll have access to your property lawyer by email, mobile phone and be able to instant message them if you have any questions.

Find out what documents you need

You’ll be requested to provide certain documents to secure a mortgage and knowing what these and having them to hand can really help to speed up the process. If you have a mortgage broker, you can ask them for more information, but the first things you’ll be asked to provide are normally your payslips for the last 3 months (you may have to provide more financial evidence if self-employed), utility bills and proof of identity.

Work out your living situation

Moving house takes a certain amount of time, so it’s important to make sure you have your current living situation sorted until you know your moving date.

For example, if you currently rent, it’s advisable to give notice to your landlord when you exchange contracts and not before, as that’s the point where the seller is legally bound to sell to you. You could also plan to stay with friends and family while you wait for your new home to be ready.

The purchase process doesn’t have a fixed time frame, so make sure that you’ll have a place to stay, and ideally, back-up accommodation in mind too just in case.

Consider the bills

Remember that it’s not only your mortgage you’ll be paying for, and you’ll need to work out what bills you’ll be responsible for too. You can request details from your seller through your property lawyer to see what they have been paying for energy and gas.

You can also work out what council tax band you are in by entering the postcode into the Government website, and browsing Wi-Fi and TV subscription plans. For leasehold properties, be aware of ground rent and/or management charges. These are both charges the freehold owner of the land can charge to maintain the building and its grounds.

Remember that as a first time buyer, there may be some bills that you haven’t had to be responsible for before. Make sure you factor these into your budget when you’re planning what monthly mortgage repayments you can afford.

Get insurance

Once you’re a homeowner and therefore responsible for the property, you should get buildings and content insurance. Most mortgage lenders will want confirmation that you have buildings insurance before releasing funds.

Buildings insurance will protect your house against things such as property damage caused by flooding or fires. You can visit a comparison site to find an insurance package that best suits your needs.

Don’t rush your decisions

Buying a house is a big commitment, but there are plenty of advantages to being a homeowner. Never rush into decisions, and make sure you get all the advice you can. For more advice from Eden, take a look at our help and advice section for blogs covering financing a house and more. You can also get an instant fixed-fee quote from Eden, with a full breakdown of what you are expected to pay.