Taking time to calculate how much you can afford to borrow as well as researching the most affordable locations could be the key to first-time buyer success in 2019.
That is according to Post Office Money which is offering advice to help people take their first step on the property ladder this year.
Chrysanthy Pispinis of Post Office Money said: “Buying a first home can be as daunting as it is exciting for first-time buyers but there are a number of simple steps people can take to prepare themselves and make the process as smooth as possible”.
Saving for a deposit and other costs
The mortgage lender said finding that all-important deposit will be forefront in first-time buyers’ minds, so setting a savings goal to focus your efforts was a crucial first step in the process. If you are not sure how much you need to borrow there are plenty of online tools to help you, including the Post Office Money deposit planner, which will help you to identify how much you need to save.
As well as saving for a deposit, do not forget there are additional costs involved with buying a home including surveying charges, moving costs and solicitors’ fees. There is also stamp duty to consider in some cases. First-time buyers are exempt from stamp duty on properties up to £300,000 but there are still charges if properties are priced above this threshold – something which is particularly relevant to buyers in London.
The Post Office advises considering these costs up front, and urges potential buyers to put aside some money – little and often- to cover the eventual cost.
What do you need to borrow?
Next up, first-time buyers should consider how much they can afford to borrow. There are a number of affordability calculators available to help with these calculations which will take into consideration your salary, incomings and outgoings. Although these will only provide an approximate figure, they are still helpful in providing some guidance to support your savings goals.
If you are using a financial loan or gift from your parents or another family member or friend to help with your property purchase, it’s also important to be clear about the nature of the agreement, said the Post Office. It explained, of the one in six first-time buyers being supported by parents in their home purchase, 87% had no agreement in place. But having such a contract could help ensure everyone’s expectations are aligned.
Work on your credit score to find the best mortgage
Checking your credit score is a must before considering taking out a mortgage as this will be the deciding factor in whether you are accepted for the loan and what rate you are offered.
You should first of all make sure all the information is accurate and up-to-date. You can enhance your credit score by paying down any outstanding debts and being meticulous about meeting agreed payments such as utility or mobile phone bills.
Ensure you are making more than the minimum payments on credit cards in the six months prior to your mortgage application.
Choosing the right property
According to the Post Office, three fifths of properties sold in the last year were in areas affordable for first-time buyers. Places like Blackpool, Lincoln and Hull proved be the most attractive where this was concerned.
As such, the advice to new entrants to the property market is to cast your net as wide as possible and consider locations where your money will go further.
Understanding the rate at which a property sells in the area you are looking to buy could also help you negotiate on price and also help you plan for additional costs, said the Post Office, which has created a rate of sale map to help buyers.
Being prepared to compromise is also a vital quality in a successful first-time buyer and, as such, adjusting your expectations and having a flexible approach is important.
The Post Office said, on average, new buyers will end up moving 29 minutes or 5.2 miles away from where they originally intended. So, aspiring London buyers may find a borough such as Barking or Dagenham a more realistic prospect.
Ready to buy…
When you are ready to buy make sure you scour the market for the best mortgage for you. Speaking to a broker could help as this will ensure you have access to a broad range of deals.
Some people choose to get a mortgage agreement in principle to help improve their chances of having an offer accepted on a home. The Post Office said this will give you a better idea of how much you will be able to borrow from that lender and will remain valid for 60 to 90 days. However, it also urges caution about applying for too many deals as each application will leave a mark on your credit report
Great article Kate!
I agree that finding a deposit will be the biggest hurdle for first-time buyers, you’ve mentioned the Post Office Deposit Planner which is a useful tool.
Another major point that will help first-time buyers, is the help to buy schemes that are available.
Thank you Mark. Thank you for mentioning Help to Buy. For anyone who is interested, here is a link to a previous article we wrote about the scheme.