Purchasing your first home is an exciting journey but can sometimes feel overwhelming. By breaking the process into manageable steps and understanding key considerations, you can confidently navigate your way to homeownership.

Step 1: Assess Your Financial Situation

The first step in buying a home is understanding your financial health and ensuring you’re in a strong position to apply for a mortgage.

  • Credit History: Mortgage lenders will closely review your credit report to assess your reliability as a borrower. A strong credit score not only improves your chances of approval but can also secure lower interest rates by enabling you to access high street lenders, potentially saving you thousands over the life of your mortgage. Check your credit report early and address any inaccuracies or issues, such as unpaid bills or excessive debt, before applying.
  • Affordability: Lenders will calculate how much you can borrow by considering your income, regular expenses, and debt-to-income ratio. This ensures you can comfortably afford the monthly mortgage payments without overextending yourself financially. It’s wise to review your own budget to determine how much you can realistically afford before speaking to lenders.

Step 2: Save for a Deposit

A deposit is your initial contribution toward the property’s value and is a key requirement for securing a mortgage.

  • Minimum Deposit: Most lenders require at least 5% of the property’s purchase price. For example, if you’re buying a home for £200,000, you’ll need at least £10,000 as a deposit.
  • Advantages of a Larger Deposit: Saving more than the minimum—such as 10% or 20%—can offer significant benefits. Larger deposits typically result in lower interest rates, smaller monthly payments, and access to a wider range of mortgage deals.
  • Savings Schemes: If saving feels challenging, explore government schemes like the Lifetime ISA. For every £4 you save, the government adds £1 (up to a maximum of £1,000 per year), which can quickly boost your deposit savings.
two mugs on table

Step 3: Understand Mortgage Options

Mortgages are not one-size-fits-all, so it’s important to choose the one that best suits your needs and circumstances.

  • Fixed-Rate Mortgages: These offer stable monthly payments over a set term (usually 2, 3, or 5 years). They provide certainty, making budgeting easier, especially for first-time buyers who prefer predictability.
  • Variable-Rate Mortgages: These include tracker mortgages (which follow the Bank of England base rate) and discount mortgages (offered at a reduced rate compared to the lender’s standard variable rate). While these may initially offer lower rates, they carry the risk of fluctuating payments.
  • Mortgage Term Length: The term typically ranges from 25 to 40 years. While longer terms result in lower monthly payments, they increase the total interest paid over the life of the loan. Shorter terms reduce overall interest but require higher monthly payments. Consider your financial stability and long-term goals when deciding.

Step 4: Use a Mortgage Broker

Finding the right mortgage deal can be complex, but a mortgage broker can help simplify the process.

  • Expert Guidance: Brokers have access to a wide range of lenders and products, including exclusive deals that aren’t available directly to consumers. They can match you with a mortgage that fits your financial profile and goals.
  • Mortgage Agreement in Principle (AIP): A broker can help you obtain an AIP, which is an estimate of how much you can borrow. An AIP not only gives you clarity on your budget but also reassures sellers and estate agents that you’re a serious buyer.
  • Comparing Costs: When reviewing mortgage options, look beyond the interest rate. Account for additional costs such as arrangement fees, valuation fees, and potential early repayment charges, which can significantly impact the overall cost of your mortgage.

Step 5: Budget for Additional Costs

Buying a home involves more than just the deposit and mortgage payments. Be prepared for a range of additional costs:

  • Stamp Duty Land Tax (SDLT): First-time buyers purchasing a property up to £425,000 are exempt from SDLT under current rules. For properties above this threshold, a reduced rate applies. However, these thresholds will revert to £300,000 from April 2025, so timing your purchase could make a significant difference.
  • Legal Fees: Solicitors or conveyancers handle the legal aspects of your purchase, including searches, contracts, and registering the property. Fees typically range from £1,000 to £2,000.
  • Survey Costs: A professional survey assesses the condition of the property and identifies any potential issues. Costs vary depending on the level of detail, ranging from £300 for a basic report to £1,000 or more for a full structural survey.
  • Moving Expenses: Don’t forget to budget for removal services, packing materials, and any initial costs for setting up your new home, such as furniture or repairs.
  • Ongoing Costs: Once you own the property, you’ll need to cover costs like buildings insurance, maintenance, and any service charges if you’re buying a leasehold property.
  • Protection Cover : It is important to make a financial allowance so that your mortgage debt is covered if the worst were to happen to you. Speak to a mortgage broker to discuss your life insurance, critical illness cover and income protection needs.

Step 6: Avoid Common Pitfalls

Many first-time buyers make mistakes that can delay or derail their purchase. Avoid these pitfalls:

  • Overborrowing: Just because you’re approved for a larger mortgage doesn’t mean you should take it. Stay within your budget and leave room for unexpected expenses, such as rising interest rates or home repairs.
  • Financial Changes: During the mortgage application process, avoid making major financial changes, such as taking on new loans or switching jobs. These could raise red flags with lenders and jeopardize your approval.

Step 7: Conduct a Professional Survey

A professional survey is a crucial step to ensure your investment is sound.

  • Mortgage Valuation: This basic check confirms the property’s value for lending purposes but doesn’t identify structural issues.
  • Detailed Surveys: A HomeBuyer Report or Level 2 Survey or a full structural level 3 survey provides a more thorough assessment, uncovering potential problems like damp, subsidence, or faulty wiring. Addressing these issues before purchase can save you from costly surprises later.

By following these steps and seeking advice from an experienced mortgage broker, you can approach your first home purchase with confidence. For tailored guidance and support, contact the MAPIO team today—we’re here to help you every step of the way.

Your property can be repossessed if you do not keep up your payments. The information contained within was correct at the time of publication but is subject to change.  10th January 2025