How to buy your first house
Buying your first home can seem daunting but we’re here to help with a selection of handy guides on saving your deposit, busting mortgage jargon and explaining the different types of mortgages.
Here is a simplified guide with nine steps to take in order to get you onto the property ladder!
1. Work out if you can afford to buy a house
Before even thinking about buying a house you’ll need to know whether you can afford to pay for the day to day running of it such as your bills, Council Tax, utilities and of course, your mortgage payments. Don’t forget about groceries and your personal bills such as gym memberships and phone bills too.
To find out your disposable income, simply take away all of your current bills and outgoings from your incoming salary or wages and you’re left with an amount of money. If you’re renting, you’ll have an idea of monthly living costs but if you aren’t paying for rent or utilities, speak to someone who is to get an idea of costs.
Once you’re confident that you have enough income to support yourself in a house, it’s time to think about saving your deposit, finding a house and getting a mortgage!
2. Start saving
If you’re confident that you’ll be able to financially run a house then it’s time to look at saving for a deposit. You’ll need a deposit of between 5% and 10% of the value of the property that you’re looking to buy. Don’t forget about the other costs that you’ll also have to pay for such as:
For a helping hand with your deposit, the Lifetime ISA could really boost your total house deposit if you’re aged between 18 and 39 and are a first time buyer*. Each tax year you can save a maximum of £4,000 and you’ll get a 25% Government bonus of up to £1,000.
- Solicitor’s fees
- Mortgage arrangement fees
- Valuation and survey fees
- Stamp duty
- Moving costs
- Furnishings and appliances
Once you have used your Lifetime ISA savings for a first home purchase you can continue to save in the account for your retirement and you can receive the bonus every tax year until your 50th birthday. You can withdraw from a Lifetime ISA at age 60 and your savings will also accrue interest for the entire period of time that you have savings in your account.
You must have your Lifetime ISA for 12 months before you use it without incurring a 20-25% Government charge and you could also incur the same charge if you withdraw for another reason other than a first home or retirement. Any withdrawals made from your Lifetime ISA between now and Monday 5th April 2021 will incur a 20% Government withdrawal charge. After Monday 5th April 2021 you'll be charged 25% which means you could get back less than you paid in.
3. Choose the right mortgage
Getting the right mortgage advice is essential. You can go to your bank or building society who will offer you their own mortgages or you can go to a mortgage broker or adviser who will look at lots of different mortgage lenders and find the one that best suits your needs.
With The Nottingham’s Lifetime ISA you have access to fee-free mortgage advice from Nottingham Mortgage Services (NMS) after you’ve had your account for 12 months.
The advisers will explain the mortgage deals that you could potentially have access to and find the right one for you out of the thousands of mortgages that they will search from over 60 lenders. They will look at the individual features of each mortgage deal on offer to ensure that it’s the right one for you.
Remember, you don’t have to use a mortgage broker if you are comfortable finding your own mortgage deal.
4. Get an Agreement in Principle
Once you’ve had a chat with your mortgage adviser and together you’ve worked out how much you can afford, they’ll be able to give you an ‘Agreement in Principle’ certificate (AIP). This shows estate agents and the people whose house you are interested in that you are serious about buying.
5. Make an offer
When you have found your dream home you can make an initial offer through the estate agent who will put it to the vendor on your behalf.
6. Make a full mortgage application
Once your offer has been accepted, you need to complete your mortgage application. This will involve credit checks on you and a partner if it’s a joint application. Your mortgage lender will also need proof of things such as identity, income and current address. Read more about credit scores in our guide.
Your lender will also need to check that the house you want to buy is worth what you’ve offered for it and doesn’t have any major problems such as subsidence or dry rot. The lender will arrange a survey for you called a Mortgage Valuation Report (MVR). But you could choose to organise an additional survey. There are two options you can go for, a home buyer's report or a detailed building survey. Both of these can also be arranged by your lender and they will incur a cost.
7. Find the right solicitor
You need to be certain that all the legal paperwork is done properly and for this you’ll need a solicitor or licensed conveyancer. Your NMS adviser or your mortgage lender can help you to find the right one if you don’t have any recommendations from family or friends.
8. Exchange contracts
Once you have your mortgage offer in place and your solicitor has confirmed that all the checks have been made, then you can go ahead and ‘exchange’ contracts. This means you sign a contract legally committing you to buying the property, pay the deposit and agree a completion date. It’s worth noting that if you decide to pull out of the purchase at this point, you could lose your deposit.
If you are using a Lifetime ISA to save for your first home you will have to factor in withdrawing from the account for your home purchase before you exchange as you will be using your savings for the deposit. This can take up to 30 days from when the conveyancer notifies the Lifetime ISA provider that the funds are being withdrawn. Read our guide on how to withdraw money from your Lifetime ISA.
Your ‘completion day’ is the day when the money is transferred from your mortgage provider to the seller. Your solicitor will organise this for you and then all you have to do is collect your keys and start the next stage of your life!
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