Buying your first home is generally thought of to be biggest financial decision of your life and there is no doubt it will be time consuming, frustrating and feel like very hard work at times – But with the right information it can be a very rewarding process. In this article I intend to make your journey a lot smoother and give you five tips that will help you go into the property market with some confidence.
How much can you afford to spend?
This is often the biggest consideration when it comes to buying your first home. Too many people spend more than they can realistically afford to try and get a bigger home and get lumbered with large mortgage payments. How much you can afford depends on what you can borrow, but first and foremost it needs to depend on what you can afford.
When loaning money you will traditionally be able borrow up to three and a half times what the main earners salary is before tax as well as one times the second earner income. However with some lenders you can alternatively borrow two and a half times their joint incomes if this is larger.
But don’t get carried away by what you see, remember it all has to be paid back as well as well as interest so don’t forget these interest rates can go up, and more often than not will at some point during the duration of the 25-35 years you are paying it back.
I cannot stress enough that the key thing to remember here is that when buying your property don’t spend everything you can afford, you also need something to fall back on if unfortunately something goes wrong.
Find the right place
This may sound simple but there are so many people who rush into buying their first home and outgrow it within a year. Too many people just want a place of their own they buy something that isn’t real practical. After viewing the home you like, go back for a second look and take somebody whom you trust with you.
On this visit make sure you are theoretical; forget about how nicely the bedrooms are decorated, or how lovely the furniture looks is in the living room. You need to think practical here, think about things like “what state is the bathroom in” or “Do I need to update is the kitchen”.
One useful tip is to make notes, or even better a list of the pros and cons across the home and weigh up if any possible costs will be feasible. Remember things such as a new kitchen will eat thousands of pounds out of your budgets, so be sure to knock substantial money off the value of a property if there is a lot of modernisation needed.
When making an offer
Once you are sure the home is right for you it is time to put your first offer on the table. Now, the opening offer is vital – you need to work out what the maximum is you are willing to pay for the property before you start, so you know that if your first offer gets rejected you still have somewhere to go with the second offer. If the home is valued at £125,000 and you are happy to go that high, you need to be offering £115,000 to test the waters, knowing that if its rejected you can go in with a slightly increased offer under you and the vendor are happy. With the market so hard at the minute first time buyers with a good financial plan have a considerable bargaining advantage when it comes to bidding as they have no chain involved.
If you have your bids rejected then negotiate by adding a thousand pound onto each offer, until you reach a price suitable for all parties. Houses in different areas of the country have a variety of values, so what might be an appropriate increase in a London suburb might be halved when you are talking about rural Yorkshire.
The key to house pricing and offers is don’t let your emotions kick in, if you’re negotiating is going the way you plan and you can’t drive a deal that’s good for you, walk away; it’s easy to forget that there will always be other houses.
Finding a mortgage
You need to be careful when finding a mortgage, be careful with estate agents that offer financial services or even offer to set up a mortgage for you, the probability of them finding you a good deal is very low – most of the time they have deals with specific brokers to make them commission and therefore not have your best interest at heart.
In the modern era most mortgage lenders will allow you to agree your deal over the phone or even on the internet. This allows you to agree an offer with the seller and get moving onto the next stages. Your average lender will charge around £500 for setting up your mortgage for you but this will vary depending on the deal, with higher fees you will be charged better rates and vice versa for lower. Don’t forget about additional fees for solicitors, stamp duty, and any house inspections that might be needed before you can finalise the deal.