How to avoid the common first-time-buyer pitfalls
How to avoid the common first-time-buyer pitfalls
Becoming a homeowner is a major milestone in anyone’s life and is often fraught with a mixture of emotions – excitement, fear, delight and disappointment – all battling it out with the rather rational intrusion of loans and legal deals. It can be an overwhelming, and at times downright confusing period of highs, lows and befuddlement.
Here, we’ve outlined some common pitfalls that many first-time buyers unfortunately fall foul of in the hope we can help you safely navigate your way through the minefield and avoid making the same mistakes.
Not checking your credit score
Don’t fall at the first hurdle! Before even pulling on your house-hunting boots or filling in a mortgage application form, you need to be absolutely certain you are credit-worthy. Unless you’re fortunate enough to have a stash of cash to splash on a home and don’t need a loan, then mortgage pre-approval is essential.
Things such as late payments on credit cards or even phone bills can affect your credit score and could lead to your loan request being rejected. UK lenders use the information supplied by the three main credit reference agencies, Equifax, Experian and CallCredit, to decide whether they wish to grant you a loan. It’s easy – and free – to get hold of your credit report, and information on how to do this is available online. There are ways and means of improving your rating too (again there are plenty of tips online explaining how to do this – and it’s something we’ll be covering in future blogs, so watch this space) and it’s worth making every effort to maximise your score before you make your application.
Choosing a home before you’ve agreed a loan
House-hunting and home buying is an emotional business. Whether you are buying just for yourself, making a joint purchase with a partner, or looking for a forever home for your family, it’s surprisingly easy to fall in love with a pile of bricks and mortar. And this flood of feeling can make people a tad impulsive when it comes to making decisions, including offers they might not really be able to afford.
Stay calm and be sensible – contact your mortgage broker to arrange an ‘agreement in principle’, then you’ll know exactly how much you are able to borrow. This will help you to stay on track when it comes to viewing properties within your price range, and not be tempted to make offers that are simply unaffordable or get drawn into a bidding war. It’s about keeping a firm grip on the logical side of the game and not letting your emotions overtake you.
Skipping a property survey
Whatever you do, don’t skip the survey! Even new-builds need a professional property survey carrying out. It’s a very important part of the process, giving you a chance to spot any potential problems before you commit to your investment. This could include defects not obvious to the average house-hunter, such as structural issues, rot, damp, unsafe roofing, or subsidence among other things. You might decide you can fix the issues, but reduce your offer to compensate for the additional costs you’ll have to bear. Ultimately, the relatively small price you pay for the survey could prevent some significantly large bills in the future. It’s important to be aware that the valuation your potential lender commissions will not cover such issues, and they are unlikely to share the findings with you. All they are looking for is to check that the value of the property equates to at least what you are considering paying for it, to protect their stake.
Spending too much on a deposit
Many people spend years saving up for a deposit on their first home, often aiming for a 10 per cent figure. As prices have risen in the past couple of decades, this means the deposit itself can seem an unreachable target, especially for those buying on their own.
A five per cent deposit is the minimum you can put down on a property, and while it might restrict your choice of lenders or mortgage deals a little, you could still be financially better off in the long run taking this approach, as it might leave you more free cash to cover the other costs associated with buying and furnishing your home.
If you’re sure you can afford to put down more though, it’s prudent to do so, and will reduce your monthly payments and interest over the long term. And if you really have plenty of cash kicking around, a 25 per cent deposit would enable you to pick and choose from some of the best deals on the market.
Ignoring additional costs
As mentioned earlier, it’s all too easy to get carried away by the emotions involved in purchasing your first home, but it really does make sense to sit down and calculate the full list of expenditure you’re going to incur – not just your mortgage payments – before you commit to a deal.
Securing a mortgage is a major milestone in your journey, but don’t forget there are other outgoings to consider. There’s Stamp Duty; legal fees; removal fees; your house insurance (buildings and contents); council tax; utility bills; potential parking permit fees if you’ll be parking on the road; internet subscriptions; any repairs or redecoration; new furniture… it’s quite a long list when you really drill down into it!
So, it’s worth putting a bit of time into totting these up so that you understand exactly what your monthly or quarterly costs will be, then you can work out whether or not the home and the mortgage is genuinely affordable for your budget. It’s also worth thinking about mortgage protection insurance, to give you peace of mind just in case something happens to prevent you being able to pay your mortgage in the future such as a job loss or a period of illness.
The good news is there are more mortgage opportunities now for first-time buyers than there have been for some time. If you manage to avoid all these common first-time-buyer mistakes, chances are you will soon be living in a happy home with sensible, manageable finances.
If you’d like a friendly helping hand picking your way through the challenges for first-time buying, chat to us at www.hoocht.com.