Stepping onto the property ladder with your first home is exciting, but it involves a lot of planning and careful consideration to ensure the best decision. You’ll have to consider your finances, government schemes, the mortgage process, and the area you’re interested in.
If you’re ready to take the next step of property ownership, read our guide to help you decide what to look for to get a great deal.
Assessing Your Financial Readiness
Evaluating your financial situation is crucial before embarking on the home-buying journey. You’re about to take on the most significant debt you’ll likely ever have to pay.
First, you’ll have to prove that you have a stable income. When making a mortgage application as self-employed, for example, you’ll usually be asked to share your tax calculation or certified business accounts from HRMC. These include all of your income and outgoings when you’ve been trading.
Lenders prefer a credit score of about 620 and above to qualify for a standard mortgage. However, some may consider your application if you have a lower score and a large deposit or stable income.
You’ll also have to determine how much you can afford for a deposit, as most first-time buyers are asked to pay 20% upfront. Recent data indicates that the average deposit for first-time buyers is around £61,090, rising to £125,000 in London.
The costs of buying your first home go beyond a deposit. Stamp duty and solicitor fees can quickly add to your total expenditure.
Exploring Government Schemes and Incentives
The UK government offers various schemes to assist first-time buyers for which you could be eligible. The First Homes scheme, for example, applies to homes in England.
If you’re a first-time buyer over the age of 18, able to get a mortgage for at least half the price of the home and earn under £80,000 a year before tax, or £90,000 if it’s London property, you may be able to buy for 30% to 50% less than its market value.
If you’re buying with a partner, your joint income cannot be over £80,000 a year (£90,000 in London), and your partner must also be a first-time buyer. Before starting the process, you must understand how to apply for and manage properties under this scheme and others like Shared Ownership and the Right to Buy.
Choosing Between New Build and Existing Properties
Deciding whether to purchase a new-build house or an existing property is a significant consideration that will impact your finances and living experience years after moving in. Balance the pros and cons of each to determine the best fit for your budget and desires.
If you’re looking for energy efficiency, new build homes are more likely to have advanced double glazing, effective insulation, and a modern heating system that achieves an A or B EPC rating. This leads to reduced bills and decreased energy consumption.
Additionally, new builds feature modern fixtures, decor, and construction materials, minimizing the need for frequent maintenance. However, they are typically more expensive than similarly sized older properties and often have smaller floor areas.
In contrast, older properties usually offer larger rooms, gardens, and additional parking space, making them suitable for families. Their property prices are generally lower than new builds, depending on location, which gives you the opportunity to increase their value through renovations, extensions, and other improvements.
Understanding the Mortgage Process
Securing a favourable mortgage is a crucial step in buying your first home, so take your time to understand the different types of mortgages available, the application process, and how lenders assess your affordability. You’ll have to choose between repayment, fixed-rate, interest-only, and variable-rate mortgages.
Ministers have recently pushed for relaxed mortgage rules to aid first-time buyers, potentially making it easier to secure a mortgage with less of a deposit. Look out for updated regulations and new schemes to help buy your first property on the government website.
Considering Location and Property Type
The type of home and area you choose will significantly impact your lifestyle and future resale value. When researching different areas, consider local amenities such as supermarkets, petrol stations, post offices, transport links and future development plans.
Understanding the distinctions between a freehold and a leasehold property can also influence your decision-making process. Freehold owners own their land and buildings, while leasehold owners only own the building for a set period. Buying a leasehold property could result in high service charges.
