Purchasing your first home is an exciting milestone, but it can also be a complex and overwhelming process. All home buyers need to choose the right location, secure financing, and weigh the pros and cons of each option. When you’re buying a house for the first time, the following details and the 11-step checklist will bring you up to speed with the process.
WHAT INCENTIVES ARE THERE WHEN PURCHASING YOUR FIRST HOME?
Help to Buy UK: Buyers contribute a 5% deposit; the government provides an equity loan for up to 20% of the property value (40% within London). The mortgage typically pays the rest of the transaction price. Available only for new builds under a certain amount (e.g. less than £600,000 in England, £300,000 in Wales). The loan is interest-free for the first five years. This scheme has now finished although there will likely be a replacement announced at the end of 2024.
This is due to the UK election, where housing policy is going to be a key battleground for parties to debate over as the supply of housebuilding is below current requirements. Furthermore, an alternative to the help-to-buy scheme would be an easy way to support first-time buyers who are being squeezed with rent increases and support housing developers with a government-funded buyer pool for new-build properties.
Stamp duty relief in the UK: This policy was set out by the government in 2017 to further aid first-time buyers in the market. First-time buyers pay no stamp duty on purchases up to £300,000 and a rate of 5% on portions between £300,001 and £500,000. Stamp duty is another policy that could have a radical change in the UK elections in November 2024. Watch this space.
WHO IS A FIRST-TIME HOME BUYER?
Being branded as a first-time buyer is a nice tag to have, as lender rates and stamp duty are cheaper as long as you qualify. The following is the way you can tell if you qualify:
- If you’ve never owned a property before.
- If you’ve owned a commercial property but never owned a residential property. A first-time buyer status only applies to residential properties, so if you own an office or shop that’s fine. Although if you own a mixed-use property with elements of residential you won’t qualify.
- If you jointly purchase the home and none of you have previously owned residential property. Combining both first-time homebuyer rights.
Situations that don’t qualify for the perks of being a first-time home buyer are:
- If you’ve previously owned a property and sold it.
- If you inherited a property or were added to the deeds. First-time buyer status is based on ownership, not whether you bought it.
- If you own a buy-to-let property.
- If you have part-owned a residential property in the past.
- If you own a residential property overseas.
- If your spouse owns a residential property. According to property law, spouses are considered single buyers. This means that if your spouse has previously owned a property, even if you are applying to buy a property solely in your own name, you would not be classified as a first-time buyer if you haven’t owned a property before.
PURCHASING YOUR FIRST HOME CHECKLIST
To help you navigate through this journey, we have prepared the ultimate checklist for first-time home buyers. By following these essential steps, you can approach your home-buying experience with confidence and make informed decisions.
1. Determine your budget.
Before you start house hunting, evaluate your finances and set a realistic budget. Consider your income, expenses, and savings to determine how much you can comfortably afford for a down payment. It will also help budget for your monthly mortgage payments, and other homeownership expenses such as repairs. Make sure these numbers are as reliable as possible, so there’s not a shock once you’ve taken responsibility. The following blog, The Best Way To Achieve Financial Freedom provides budgeting templates and financial goal setting to aid in this process.
2. Get pre-approved for a mortgage.
Obtain a mortgage pre-approval from a couple of reputable lenders. This will give you a clear understanding of how much you can borrow, allowing you to focus your home search on properties within your price range. Additionally, a pre-approval letter strengthens your offer when you find your dream home. Please don’t hesitate to reach out for mortgage broker recommendations at [email protected].
3. Research neighbourhoods.
Explore various neighbourhoods that align with your preferences and lifestyle. Consider factors such as proximity to schools, commute times, amenities, safety, and future development plans. Visit the neighbourhoods at different times of the day to get a sense of the atmosphere, traffic, and evening activities.
4. List your priorities.
Make a list of your must-haves and deal-breakers. Determine the number of bedrooms and bathrooms you need. Also desired square footage, layout preferences, and any specific features or amenities that are important to you are helpful. Furthermore, whether you’re willing to live in a project, or you want a ready-to-go property. This will help you narrow down your options and avoid getting overwhelmed during your search.
5. Find a trusted real estate agent.
Engage with reliable real estate agents who specialise in your target market. By creating this network, you will be made aware of properties coming to the market and be able to see them before they are publicly available. Providing you with an opportunity to secure it before the competition is aware of the property.
Furthermore, an experienced agent can guide you through the home buying process, provide valuable insights, and negotiate on your behalf to ensure that your interests are protected. This is more common for large investment properties, sourcing a larger home, or buying property in the UK while living abroad.
6. Start house hunting.
Begin touring properties that meet your criteria. Take notes, pictures, and videos during your visits to help you remember the details later. Be patient and open-minded, as finding the perfect home may take time.
7. Perform thorough inspections.
Once you find a potential home, schedule a professional inspection to evaluate its condition. If there’s work to be done, ask a contractor to come around and inspect with you. Inspections can uncover hidden issues that may affect the property’s value or require costly repairs. Use this information to make an informed decision or negotiate repairs with the seller.
8. Price negotiations
Make sure you do your research to understand what the market value is for this property. Rightmove has some very helpful tools for establishing house prices. It is essential to ensure you don’t overpay for the property, and having an appreciation of the market value will help with your negotiations. One point of note: if you’re not paying the estate agent to work for you, they’ll be working for the seller, so don’t take everything they say as fact.
9. Review the contracts.
Carefully review the purchase contract with your legal advisor and the mortgage document with your broker. Understand all terms and conditions, including contingencies, deadlines, and any special provisions present in the contract. Ensure that you are comfortable with the terms before signing the contract.
10. Secure homeowner’s insurance.
Before closing on the property, obtain homeowner’s insurance to protect your investment. Research different insurance providers, compare coverage options, and choose a policy that suits your needs.
11. Prepare for closing.
As the closing date approaches, diligently complete all necessary paperwork and gather the required documents. Furthermore, ensure that you review the final statements and understand the financial aspects of the transaction. Conduct a final walkthrough of the property to ensure it is in the agreed-upon condition and prepare to move in.
PURCHASING YOUR FIRST HOME CONCLUSION
Buying your first home is a significant milestone, and having a comprehensive checklist can help streamline the process. By following these essential steps, you can navigate through the home buying journey with confidence and make informed decisions. Remember, patience and thoroughness are key. With the right preparation and guidance, you’ll soon be holding the keys to your dream home. Happy house hunting!
