What You Should Know When Buying Your First Home
Who is classed as a first-time buyer?
While it may be obvious for those who are not homeowners, it’s important to clarify this.
There can be variations between how a mortgage lender defines a first-time buyer, and how the UK government defines a first-time buyer.
You might qualify as a first-time buyer if:
You have never owned a property before - of any kind - in the UK or abroad. This also includes shared ownership schemes.
You own a commercial property (such as a retail unit) with no living space.
You have never owned a property before in the UK or abroad and are looking at buy-to-let properties.
You apply for a joint mortgage and neither of you has previously owned residential property.
You have not owned a property for 3 years (some lenders may see you as a first-time buyer if so).
You might not qualify as a first-time buyer if:
You have ever owned a residential property in the UK or abroad.
The person you are buying with has ever owned a residential property in the UK or abroad (irrespective if you have not).
You have inherited a property.
Someone else is buying the property for you in their name.
These points establish how the UK government might view your mortgage application as a first-time buyer. They will use these criteria against whether or not you might qualify for Stamp Duty Tax cuts.
This will be determined by a broker or your bank or building society
Make a list of your priorities: Think about what is most important to you in a home. Do you want a large garden, a certain number of bedrooms and bathrooms, terraced, semi-detached or a specific location? Having a clear idea of your priorities will help you focus your search and make the process of finding a home more efficient.
Research the neighbourhood: Research the neighbourhood and local market to get a sense of what homes in the area are selling for. This will help you determine if the price of a particular home is reasonable.
Consider the long-term: Think about your long-term plans and how your home will fit into them. Are you planning on starting a family in the next few years? Do you want to be in a location that is convenient for your job? Or if you have small children, which schools you would like them to attend. These are all factors to consider when choosing your first home.
Work with an Estate Agent: An estate agent will help you navigate the process of buying a home and can provide valuable guidance and expertise. Choose an agent who is knowledgeable about the local market and has experience working with first-time homebuyers. They will also deal with the sales progression and co-ordiante between the vendors, vendor's solicitors, buyers and buyer's solicitors. As a rule you do not pay an estate agent to purchase a property unless you are using a buying agent looking for something specific.
Determine your budget: It is important to have a clear understanding of how much you can afford to spend on a home before you start looking. This will help you narrow down your options and focus on homes that are within your price range. There are plenty of on-line tools to assist like mortgage calculators that will give you a clearer understanding of your budget.
Mortgage: Get pre-approved for a mortgage: Getting pre-approved for a mortgage will give you a better idea of how much you can borrow and will also make you a more competitive buyer when you make an offer on a home. Speak to your bank/building society or mortgage broker before you start looking and they will confirm what you qualify for and get you pre-approved.
Most agents will ask you for your mortgage in principle or agreement in principle along with your proof of deposit before they will put your offer forward to the vendors. If you don't have this your offer will not be progressed. Most MIPs and AIPs are only valid for 6 months. If you do not find anything in that time you will need to be assessed again and the rates may have changed.
Deposit: The amount of deposit you'll need to get a mortgage is worked out as a percentage of the value of the property. Typically, you'll need to save between 5-20 per cent. For example, if your home is £300,000, you'll need a minimum of £15,000.
You will need to instruct a solicitor to do the conveyancing work on your behalf. Of course, do your research regarding costs, but if possible find a local solicitor who you can contact easily and even go in to speak to. Your agent should recommend several solicitors as these are ones that they use regularly and have a good corresponding relationship with. This is vital especially towards the end of the transaction when near exchange as from experience house completions have been seriously delayed due to unresponsive solicitors. You will be given a quote which should include VAT, so you know what to expect to pay upon completion. This will include ordering searches (approximately £300 plus VAT). This cost is normally paid on instruction of the solicitor. Thereafter costs will include corresponding with the vendor's solicitor, enquiries and registering the property at Land Registry but this will all be included in the original quote you will be given.
From September 22nd, 2022, first time buyers buying a home up to £425,000 in England and Northern Ireland do not have to pay any stamp duty. If your new home is worth £425,001 to £625,000, you'll pay 5% stamp duty, but only on the value above £425,000.
When purchasing a home a mortgage survey will automatically be completed by your mortgage lender to confirm the value of the property. It is also advisable, particularly in older properties, to obtain a homebuyers survey. The cost of these survey reports vary depending on the size of the property, location and value and also how in-depth is needed. The price can vary between £400 - £1,000.
You may need a man with a van or even a removal company again - you can get various quotes online. Reallymoving.com is a great site not only for removals but for solicitors and surveyors.
Get an idea of what your utility bills will be, including what council tax band the property is in.
Finally be prepared to wait. A first time buyer can normally be at the bottom of a chain and if there are several properties above, things can typically take longer to go through. Make sure when you put your offer in on a property, find out how long the chain is above.
If you have any questions at all or want any advice regarding buying your first property, please do not hesitate to contact us.