Owning your first property – Tips for a first-time buyer
7th August 2017
Becoming a property owner might seem every bit as daunting as it is exciting, but it can be a great investment opportunity. Interest rates and government support have never been better for buying property, however there’s a huge amount of considerations to make before you settle down.
Getting onto the property ladder is an important stage of every person’s life, and owning an asset puts you in a strong place financially. Below are some of our tips on becoming a first-time buyer, getting your first mortgage and finding the right property.
Obtaining a mortgage
Get a ‘Mortgage in Principle’
A mortgage in principal is an agreement by a lender before you make an offer on a house. This often places you in a better position with the seller as they know you will be able to afford to go through with the move. Changing your mortgage in principal to an actual mortgage offer is easily done via your mortgage lender once you have agreed a sale.
Check your credit
As one of the biggest factors taken into consideration by banks, having the required credit score is essential to gain that much needed mortgage.
Credit scores are calculated from a wealth of information including your payment history, amount of money you owe, the length of your credit history, any new credit accounts you own, and the types of credit you have used. These all come together to form a number between 0 – 999 to describe your credit score.
Checking your score is simple but can take a bit of patience and time. Sites such as Experian offer free credit checks, whilst services such as FICO charge customers for ongoing credit score tracking. It’s important to shop around and find the right service for you.
When it comes to buying a house, banks would be looking for a credit score of at least 660. Whilst this isn’t set in stone, this figure would suggest you are a low enough risk for the bank to hand out a mortgage.
Whilst mortgages can be attained for lower credit scores than 660, these are ‘sub-prime’ and efforts would be better spent improving your credit score rather than settling for an unfavourable mortgage.
Finding a Property
Consider what’s necessary
Deciding on which features you can’t live without and which are nice to have is important when viewing properties. You should also consider the area you’re buying in, as well as what facilities or activities are essential for you to have near.
Factors such as number of bedrooms are imperative to have a clear idea of, as well as parking restrictions and outdoor space.
It’s important to balance any extra features you’d love to have with a realistic view of what you can afford. That swimming pool you’ve been dreaming of may have to wait!
Keep your options open
Find a shortlist of potential properties and use this to compare house prices in the local area. For example, if a property seems below average price for the area, there is probably a good reason why and finding out that reason before you buy can help save you thousands.
Falling in love with a house definitely involves visiting the property and its surrounding area. Do this on different days and different times for a well-rounded view of the property. This gives you a chance to ask any questions you’ve gathered about the property and also to really explore and experience the atmosphere.
Buying the Property
Most property will require a deposit of around 5-20%. The higher the deposit you have, the more mortgages will be available to you and the less you’ll have to pay back a month. It’s worth scrimping and saving for longer to achieve the best property deal and mortgage.
As well as saving for your deposit, costs will arise such as tax, stamp duty and insurance, as well as paying for basic furniture or decorating.
As you’ll be repaying your mortgage monthly, you’ll need to make sure you have the income to be able to afford this. Falling short on repayments can result in large amounts of interest, so it’s important to stay on top of your finances.
It’s also worth researching your eligibility for a number of housing schemes from the government. These include ‘Affordable Housing, ‘Help-To-Buy’ and ‘Shared ownership’.
Buying a property will be the most expensive purchase of your life, but don’t let this put you off – it’s absolutely worth the wait for the independence owning a property will bring you. Knowledge is power and knowing any hidden costs as well as being aware of schemes that could help you will help to avoid any nasty shocks or surprises.
Above all, finding a property should be an enjoyable (if long) experience. Getting help from a property management firm can ease the weight off your shoulders and give advice on difficult queries.
To find out more about how James Peacock can help, get in touch with one of our property experts or give us a call on 01925 243 366