Top ten tips for first-time buyers


Looking to purchase your first home? Follow this guide to make sure you don't get caught out

Thousands of First Time Buyers received an unexpected windfall last week when the Chancellor axed Stamp Duty. Many are now in the position of potentially getting onto the property ladder quicker, and so to help, Habito sets out its top ten tips for buying your first home:

1.     Top up your deposit, save on your mortgage

Tempting as it may be to use the money you had earmarked for Stamp Duty elsewhere, many would make best use of it by topping up their deposit. Your deposit is the biggest factor impacting on your mortgage rate so a larger deposit opens up the number of mortgage products to choose from, including those with lower interest rates. This could lead to thousands of pounds worth of savings that far exceed the extra initial outlay, over the long term.

2.     Step away from the comparison sites 

Whilst it’s tempting to use these for a fast overview, comparison sites can’t take into account your personal buying circumstances and often overlook a number of fees. 

To get an accurate view of what you can afford, use a mortgage calculator that adds in all the costs you’ll pay. These are free and shouldn’t come with credit checks. Avoid comparison websites or ‘best buy’ tables that show you different products and interest rates.  There’s no way of telling if you’ll actually be eligible for them by putting in just a few details.

3.     Ensure you are credit-check worthy

Having a good credit rating is crucial when it comes to mortgage applications. It enables you to get the best possible interest rate on your loan – one of the main goals when it comes to securing a mortgage. In the UK, there are several credit reference agencies (CRAs) such as ClearScoreExperian, and CallCredit, and each will hold a file on you called a credit report. The report has a footprint of your credit history (credit cards, loan agreements, mobile phone contracts, etc). Check as many as possible before applying for a mortgage, address any mistakes and cancel any unused credit cards that show up. 

4.     Don’t automatically use the estate agent for brokering…

Did you know the UK’s largest mortgage broker is also one of the country’s largest estate agents? The problem is not the service, but that estate agents are raking in the cash from these in-house deals and the customer isn’t benefitting. 

Discussing finances with an in-house broker effectively lets the estate agent know the maximum you can afford to pay for a property. This is not an ideal bargaining position. Habito doesn’t sell houses, we only broker mortgages, never at any cost. Similarly, you should avoid using an estate agent’s recommended conveyancer as it will likely be a commission-based recommendation and end up costing you more. Instead, negotiate a fixed fee with your solicitor or a licensed conveyancer for the work.

5.     Look out for free online services

It is worth talking to a broker, to see how you can translate last week’s Stamp Duty saving into a better mortgage. Many charge fees, so look beyond your neighbourhood broker and instead use real-time, online services such as Habito that are free and available 24/7 from any device. Most importantly Habito is designed to give buyers the very best of both works – we use technology to search thousands of mortgages across the market to find the right one for you, and our human broker team are on hand for further advice and further personalise your advice.

6.     Have all your documents ready in advance for a speedy mortgage application

Being prepared can make the application process much, much faster. And not having them ready is unfortunately one of the most common reasons why an application gets held up. For more information on which documents you’ll need for your mortgage application, check out our dedicated blog post

Documents include high-resolution scans of:

a.     Proof of salary (payslips, or SA302 forms if self-employed)

b.    Proof of address (council tax/utility bill)

c.     ID (passport or driver’s licence) and bank statements

A full list of documents can be found here.

7.     Secure a real Agreement in Principle (AIP)

When you’re ready to put an offer on a house, get a lender-backed Agreement in Principle.

Several websites will promise to give you an AIP in minutes (also known as a Mortgage in Principle or Decision in Principle). Be warned they are just an output of a mortgage calculator.

The real application is based on all of your personal circumstances and financial information. It also runs a credit check to see if you’re eligible for the home loan. 

But be aware, don’t get several of them, as it can have a damaging effect on your credit score.

8.     Save for the cost of moving

As completion day on your new home approaches, sundry costs such as council tax, home insurance and removal fees can quickly mount up. So make sure that you plan for these well in advance and get the best price you can. Make a budget and include everything from removal fees and mail redirection to buildings insurance and council tax. And remember, you don’t have to stay with the same utility companies as the previous owner, so shop around and get the best deal on everything from energy to broadband. 

9.      If you are still struggling to get your first foot onto the ladder….

Don’t despair, there are a range of government schemes to help you get on your way to homeownership. Many mortgages aimed at first-time buyers now offer deals for those with small deposits of just five per cent such as Help to Buy, for others a Shared Ownership offers you the chance to buy a share of your home (from as little as 25% of the home’s value) and pay rent on the remaining share. For a full rundown of all the schemes currently available, click here

10.  Remember to remortgage

Remortgaging is just like switching your energy, mobile or broadband provider, only with much bigger returns. If you’ve had a mortgage for more than two years your introductory offer could have expired, leaving you on an SVR (standard variable rate). What does that mean? When your fixed term ends (usually two years or five years), your initial rate is over and you’re then switched on to your lender’s standard rate – which is usually significantly higher. You could possibly save thousands – yes, thousands – of pounds a year just by switching to a new lender. When it’s time to remortgage, Habito alerts customers and helps them switch quickly and easily so they can be sure they’ll never pay more than they have to. 

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