First-Time Buyers Guide: A Beginner's Handbook

Your earnings matter a lot, as it’s a crucial variable that determines how much you can borrow – or, to say, whether you stand a chance of buying. But that’s not the only thing that matters.

Your outgoings, or how much you spend every month, and what you spend money on, matter (almost) just as much. Mortgage lenders are typically worried about taking risks on borrowers, especially first-time homebuyers, so they feel (rightfully) compelled to carry out all sorts of judgements on your spending pattern.

This is just to gauge how safe a bet they can make that you’ll stick with your repayments each month in a responsible manner.

They do this by looking at your credit score and spending habits based on bank statements, debts, or any regular expensive commitments, such as a child, dog, or biweekly Elfbars.

During your application, you’ll probably be asked to provide at least three months of bank statements and fill out a form detailing your spending habits – all of which can affect how much you can borrow. So ensure that you don’t exceed your overdraft limit or have any bounced payments within this period.

Be honest whilst filling out this application. Not only it’s fraudulent to lie, but this due diligence should also make you think hard about whether you can afford to buy a new home. A bank can only know so much about whether you can make your repayments. You, however, are the only person (or you and the persons you are applying with) that knows whether you can and should, be stretching yourself in the long haul.

Remember that beyond life changes, and outside events can also significantly affect our finances – pandemics, wars, less-than-ideal politicians, you name it. So before making a long-term financial commitment like a mortgage, it's wise to have some sort of cushion for unexpected events and/or rises in bills or interest rates.

Most lenders will run a ‘hard’ credit check before offering you an agreement in principle. This, as opposed to a ‘soft’ check, will appear on your credit file. While one or two applications shouldn’t pose too much of a problem, having several applications in a short span of time can hurt your chances of borrowing and may raise a red flag to lenders.

And remember, getting an AIP is not a guarantee of anything. As you fill out an actual application, your mortgage lender will look into your earnings, spending, and credit history in more detail – they may very well refuse to lend you at this point.

We can’t stress this enough, visit properties in person. Opting for video viewings is normal– you may be too busy or moving into a whole new city that you can’t visit yet due to other commitments. But if you can, check properties thoroughly, in person, before putting your name on the dotted line.

By checking the home in person, you will be in a much better position to gauge whether you’d like to dedicate your 25 mortgage-paying years to it. Even if you are considering moving again in the future, buying a house is a serious commitment – you wouldn’t want to spend too much time, energy, and funds on a place you’ll eventually get rid of either.

When a seller accepts an offer, it’s usually a ‘gentlemen’s agreement’. Meaning that it’s not set in stone, and they may simply tank the deal if a buyer with a higher bid swoops in. This is yet another harsh reality of homebuying and is called being ‘gazumped’.

To lower your chances of being gazumped, do the following:

1. Do not lower your offer just before exchanging contracts unless you have a solid reason to do so; it’s just bad practice and may anger the seller.

2. Insist that real estate agents take the property listing down from their websites – they probably won’t do this unless you insist they do so. Be consistent, and follow up.

• If you're not competing with other buyers, it may be worth considering making a slightly lower offer, perhaps around 5% below the asking price. If the initial offer is rejected, you can always come back with a second offer.

• If you're renting and able to move quickly, inform the estate agent about this as it can be a useful negotiating point.

• You can also mention that you're willing to be patient while the owner searches for a new house to buy. This flexibility could be an appealing advantage for the seller.

• If there's significant interest from other potential buyers, it might be wise to make your first offer your best offer. This approach can encourage the owner to take the property off the market swiftly, potentially avoiding a prolonged negotiation process.

• If the bidding process reaches the stage of "best and final offers," it typically indicates that at least one other buyer has made an offer. Consider your absolute maximum offer, but avoid paying more than you believe the property is worth.

Remember, these are general suggestions, and it's important to adapt your approach based on the specific circumstances and dynamics of the property transaction.

Making the most out of your mortgage is a pure balancing act:

You can lower your monthly mortgage payments by opting for a longer term, which would accrue higher interest over time.

Similarly, a mortgage with a cheaper interest rate may only sometimes be the cheapest deal over the long haul. Mortgages with lower interest rates usually have higher arrangement fees, and vice versa. You need to determine whether you are better off with a lower arrangement fee and a slightly higher interest rate – banks are notorious for creating attractive offers with low-interest rates but ultra-high arrangement fees.

Although getting legal help after your offer is accepted is common, finding a solicitor before you put in the offer will likely make you look more organised and committed. It can also save time when an offer is accepted, so you can proceed to exchange contracts quicker.

1. The cost of conveyancing fees can vary, typically ranging from approximately £1,000 to £1,500. The specific amount depends on factors like the property's cost and location.

2. The overall cost will also depend on the complexity of the property transaction. For instance, if the property is a leasehold, additional legal work may be required, such as reviewing the lease agreement.

3. Solicitors may charge a fixed fee, or they may base their fee on a percentage of the property's value. It's essential to clarify the fee structure and confirm whether it is fixed. Some firms might charge additional fees if any unexpected issues arise during the process. It's advisable to obtain multiple quotes before selecting a conveyancer.

4. Fees for property searches can also vary. For example, the Land Registry charges fees on a sliding scale based on the property's value. You can utilise the Land Registry fees calculator to estimate the potential cost.

Remember to review and compare different conveyancing quotes to ensure you have a clear understanding of the fees and services offered by different solicitors or conveyancers.

When you're already investing a substantial amount of money in purchasing a house or apartment, you might question the need for a survey, considering it an unnecessary expense.

However, it's essential to be aware of any potential issues before finalising the property purchase. This allows you to make an informed decision regarding the appropriate price and, if required, plan for any future repair expenses.

In the event that significant problems are discovered through the survey, you can utilise this information as a negotiating tool with the seller. For instance, if the survey reveals that repairs costing £10,000 will be necessary, you could negotiate a £10,000 reduction in the property price or request that the seller completes the repairs before the exchange of contracts.