If you are looking to get on the property ladder, there are a number of things you have to consider and it is fair to say that most of these aspects relate to money. However, before you start worrying too much about money, it is important that you think about yourself, what you want to achieve and where you see yourself in the future. No one knows what is going to happen in the future but if you don’t see yourself staying in the same place and enjoying a home for at least five years, you shouldn’t even contemplate buying a home.
Buying a home is the biggest responsibility you will have in your life and buying your first home is likely to be the biggest decision and risk you will ever take. There is an expected progression for people to find themselves on the property ladder but if you aren’t ready or you don’t feel as though it is for you, don’t be pressurised into buying a home. Buying and owning a home can be difficult enough for people who are fully committed to home ownership, it can be nigh on impossible for people who don’t care too much for the process.
However, if you weigh up the buying process and you are fully committed to the process and this is what you want to do in life, congratulations, you are now at the stage where you can start to think about the financial aspects of buying a home.
The first step to buying a home is saving the deposit and you want to have as much money as you can for this stage. The total level of deposit you will need will depend on the price of the home you want to buy and the level of deposit you will be expected to provide but for most home buyers, a sum of 5% to 20% of the cost of the property is the expected deposit. If you are looking to buy a home that costs £150,000; you will be expected to have at least £7,500 (which is 5%) as a deposit. If you want to buy a home that costs £300,000; 5% works out as £15,000 and this is the sum you will be expected to have put aside in savings. Of course, if you can only get a 90% or an 85% mortgage; you will need to save more money, so saving money should be your first focus and your saving activities should begin long before you start looking at properties.
Bear in mind that the more money you can save, or moving beyond 5% of the property cost should give you access to more affordable mortgages from lenders.
One important step for first time buyers is to pre-qualify for a mortgage. This means meeting with a mortgage lender and having them review your finances. The company will provide you with a figure that they would be willing to offer you as a mortgage. This isn’t a guarantee and the mortgage lender will examine your finances in greater detail before committing to an offer, but this is a very important step for anyone looking to get on the property ladder. It introduces you to the process of the lender reviewing your finances, it will give you a rough guide on what sort of mortgage you will receive, which indicates what sort of property prices you should be looking at, and this pre-qualification process indicates that you are taking the mortgage process and house buying process seriously.
There are obviously issues for first time buyers to contend with but there are a couple of factors that you can use in your favour. First of all, first time buyers are not involved in a property chain, so some sellers may view your offer more favourably. Also, if you have this pre-qualification at hand, it lets people know that you are fully committed to the mortgage process. This can see you being the preferred buyer over people who haven’t taken this step.
In addition to the mortgage, you need to know the costs involved with buying a home. There are upfront costs such as solicitor costs, survey and report costs and there may even be stamp duty to pay. When you want to move into the home, you will likely have some removal costs too, so you need to have access to additional funds at the point of buying your home.
You also need to make sure that you can make the monthly payments, and this doesn’t just mean your mortgage payment. Clearly you need to be able to afford the mortgage but you will have council tax, home insurance, potential factor fees to consider and then you have TV licence fees, utility bills, broadband and phone bills and the cost of getting to and from work. This is all before you have factored in money for food, drink, clothing and entertainment. You need to make sure that you find a mortgage that fits in with all of the other bills that you need to pay as a homeowner, and this means you need to be confident on your finances. Again, no one knows exactly what is going to happen in the future but you need to try and pull together as much of a plan as you can to give yourself the best chance of meeting the requirements of your mortgage and life in general.
Once you know the budget you can expect to obtain, you will have a guideline as to the properties you can look at. It is likely that you will have a certain style of property in mind, but it can be helpful to know what you definitely need in a home and what you would like. The aspects that you need are the things that you need to focus on and depending on your mortgage budget and where you are willing to stay, you may need to compromise on certain matters.
Getting on to the property ladder can be a difficult task but it isn’t impossible, and you should find that with proper planning and consideration, you have a great chance of enjoying a home for many years to come.
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