6 Things Every First Time Buyer Needs to Know

first time buyers advice

We think the property ladder is an exciting place to be but do you know the main pitfalls that can rapidly turn house-buying into a game of snakes and ladders?

In this guide, we give first-time buyers six pieces of advice to help them navigate their first rung on the ladder.

Get an Independent Check on Your Finances

It goes without saying that becoming a homeowner can be an expensive process but, in the long term, can be significantly cheaper than renting. However, in order to get your foot on the property ladder, you will need to have some cash to get you started as well as a good credit rating to get a good mortgage.

As well as saving for that all important deposit, you need to factor in the associated costs of buying a home including solicitors fees, survey charges and removal fees. This is in addition to the cost of Stamp Duty and Land Tax (SDLT) which, for first-time buyers, is waived on the first £300,000 for homes worth up to £500,000.

check your finances first time buyer

It goes without saying that you should fully understand the finances before committing to a property purchase. Image via Pexels.

Once you are installed in your new home, you will need to have factored in those all-important running costs that can differ from renting or living with family. As well as paying for contents insurance to cover your possessions, you will also be paying for buildings insurance as well as putting aside some money for those all-important (and ongoing) little maintenance jobs. It is usually a condition of your mortgage that you rectify any defects as soon as they are noticed in order to avoid more serious problems at a later stage.

If this is your first home then factoring in all the monthly costs such as utilities, council tax and other household bills is essential.

It is a common mistake that many first time buyers make by simply looking at the mortgage repayments as a way of assessing the affordability of owning a home. Always look at the full picture.

So, our first piece of advice is to get some advice from an Independent Financial Advisor (IFA) who can help sort out your finances and help you decide on what you can afford to buy and, more importantly, to run. A good IFA can help you decide on a suitable mortgage product that reflects your income, credit rating and level of debt.

If you need any recommendations of a good IFA then contact Property Assistant on 0118 912 3270 and we can offer the services of several reputable companies in the Thames Valley area.

Seek Help Where You Can

If that first meeting with an IFA reveals that your finances are less than ideal then don’t give up on your dreams of becoming a homeowner. The government has backed several schemes aimed at giving first-time buyers a helping hand to access the housing market.

There are three main affordable ways to buy including:

  • Help to Buy
  • Right to Buy
  • Shared Ownership
  • Shared Equity
  • Starter Home

help to buy first time buyers

As well as government backed schemes, you might already be closer to the property ladder than you think. A poor credit rating is easy to earn but difficult to escape the consequences of and poor money management stays on your record for many years. If you are struggling to find a mortgage lender willing to make you an offer, then you might want to consider a guarantor mortgage. A parent or relative might be willing to stand as a guarantor on your mortgage enabling you to secure a property in your own name. Such a decision should not be taken lightly and must be given full consideration by both parties. If you are unable to meet the repayments of your loan then your guarantor must be able to afford to do so for you. You should always ensure that you can afford to meet your financial responsibilities and this kind of solution is not for everyone.

Likewise, with a deposit, if you have a good credit rating and can easily repay a mortgage but struggling to build a deposit then you might find that asking relatives for help could offer you the solution you are looking for. With rising house costs, many children are living at home for longer and equity release on the family home might be an option to help parents become free of their dependents sooner. No offence but your parents might appreciate your asking for help rather than have you live with them indefinitely!

Finances First, House Hunting Second

Always, always get your finances in order before starting to shop for a property. Starting the other way around often means making an emotional decision rather than a practical and sound financial one. Once you have met with an IFA, sorted out your deposit (or home-buying scheme) and been preapproved for a mortgage only then should you start looking for a house. Not knowing your budget in advance is a big mistake and can lead to a lot of wasted time and effort as well as heartbreak. Certainly do not put in an offer on a property without having your finances tied up first, doing so is unfair to the seller and can cause a lot of aggravation later, even if you do get the mortgage and finances agreed.

Seek, and Take, Advice

In the thrill of purchasing your first home, it can be tempting to ignore the offer of assistance from the professionals. From people like estate agents, mortgage advisers, solicitors, surveyors and even family and friends who have done it all before. However, these people are often very experienced and have been through the process of buying a home many times. And, as an added bonus, most of the advice they will offer you is free.

first time buyers

Buying a house is an exciting prospect but can also be expensive and stressful. Let others help where they can. Image via Flickr.

Get recommendations from friends and family about which estate agents to use to help you find the perfect home. A good independent agent will go out of their way to make sure they find you something you need not just offer you what they have to sell.

It is always worth asking for a second opinion on a potential property purchase from all aspects, not just financially. Properties have the capacity to capture our hearts as we imagine how life will be behind our own four walls. Unfortunately this can mean making a decision without always engaging our heads. Take a friend or family member along to a second viewing to get their opinion and listen to what they have to say. You might not want to acknowledge that the house of your dreams is a money-pit but your parents might just make you see sense…maybe.

Don’t Count Your Chickens

Though most first time buyers will be aware of how property chains can collapse, most do not think it will happen to them. However, recent research shows that almost 4 out of ten house sales fall through before completion. It’s a figure that has been steadily rising with the lowest rate being 20.5% in 2013.

It’s a harsh reality of the property market and one that can be incredibly frustrating for buyers, sellers and the related professionals working on their transactions. The government estimates that almost £270 million is wasted each year in failed housing transactions.

property chain falling through

Housing chains are fragile and the contract process can collapse at any time. Be cautious. Image via Public Domain Pictures.

In most instances, there is very little that can be done to avoid the collapse of a chain. Situations such as gazumping where a seller accepts a higher offer mid-contract are becoming far more common and much still needs to be done to legislate against this.

However, there are ways to help reduce the chances of this happening including having your own finances in order before making an offer, being prompt when responding to queries from your seller and their agent as well as returning documents accurately and swiftly to your solicitors.

There is also a new process of buying and selling a home to avoid the uncertainty of a traditional housing transaction. The service aims to streamline the contract process and reduce the incidence rate of failed contracts. You can find out more about this service by contacting the office on 0118 912 3270 or reading our guide on ‘How to Slash the Risk of House Sales Falling Through‘.

Robbing Peter to Pay Paul

A lot of first-time buyers like to stretch their budget to the max and buy the biggest house they can afford. In doing so they are often left with no savings or cash reserves for the period prior to the contract completing. In some cases, this can mean borrowing to make ends meet until moving. For others who are excited about their new home it can mean opening credit accounts to fund purchases like sofas, beds and carpets. Unfortunately, this can adversely affect your credit rating and push you to the wrong side of solvency in the mortgage lenders eyes. The result can, unfortunately, be the withdrawal of your mortgage offer even after the exchange of contracts has happened.

Either delay your credit spending spree of ensure that you have enough in reserve to afford the extras to go with your new address. It is also worth having some extra cash for any remedial work or redecorating that needs doing once you move in.

credit rating first time buyers

Don’t spoil your credit score by taking out new accounts once you have been approved for a mortgage. Image via Picpedia.

At Property Assistant, we know all of the pitfalls and problems that come with any house purchase and not just those with first-time buyers. Fortunately, because we’ve seen it all, we’re well prepared and extremely patient at making sure you make it through the property jungle. From helping you find the right home to suit your budget to ensuring that the process is as straightforward as possible, we take pride in welcoming new buyers to the marketplace.

For more help and information on the costs associated with buying a home read our comprehensive guide here plus you can also download our full guide to Home Buying by registering for our newsletter, here.

Featured image via Public Domain Pictures.