Follow the steps in this guide to buying your first home in the UK to make getting on the property ladder quicker and easier. From saving for a deposit to making an offer, learn everything you need to know about making your homeowner dream a reality.
We just want to mention that in terms of time scales, saving for a deposit (step 2) is by far the longest stage for most people. So the earlier you can start saving, the better, even if you don’t know exactly how much you’ll need.
Remember, you don’t have to figure everything out alone. Find out how speaking to a financial coach helped this Claro user to buy their first home. Or, book a session with one of our financial coaches today to discuss your home buying goal in more detail.
Step 1: Find out how much mortgage you can borrow
Ready to start buying your first home in the UK? Let’s begin with step 1.
The total price of your home will be made up of three things: your mortgage, your deposit, and your upfront costs (legal fees and stamp duty, for example).
Price of property = mortgage + deposit + upfront costs
So the first thing to do is find out how much money you can borrow from a mortgage provider.
The amount a mortgage provider will lend to you depends on your:
- Affordability (your outgoings, particularly any other debt repayments)
- Credit score
Most mortgage lenders will offer you between 4 and 5 times your salary. For example, if your annual income is £40,000, you might be able to afford a mortgage of up to £200,000. If you’re buying with someone else, you can combine salaries and borrow more.
You can use mortgage calculators to find out how much you’re likely to be able to borrow, for example this one from Money Helper.
When you’re thinking about how much mortgage to borrow, consider whether you’d be able to cope with the repayments if your income dropped or if interest rates rise – you don’t want to overstretch yourself!
Step 2: Save for your deposit
Now you know how much you can afford to borrow, you can work out how much deposit you need.
Most mortgage providers will require a deposit of 10-20% of the property price. So if you were looking to buy a home for £350,000, you’d need at least £35,000 to put down upfront.
Of course, this depends on the provider, and if you’re using a government scheme like the 95% mortgage scheme, you might only need a 5% deposit. It’s a good idea to check out the affordable home ownership schemes on offer to see if you could save money.
Need a helping hand saving for your deposit? Read our 5 ways to save for your deposit to help you get there sooner. Remember, the bigger deposit you can put down, the better the interest you’re likely to be offered on your mortgage.
When you’re calculating how much you need to save, don’t forget about the upfront costs of buying a home. From valuation fees to removal costs and decorating, you might be surprised how many extra things you’ll have to cough up for. Work out how much you’ll need to pay for stamp duty with this calculator.
Watch our webinar on how to budget for your first home.
Step 3: Get a mortgage ‘in principle’
It’s never too early to start looking for a mortgage. You can find one from an Independent Financial Adviser (IFA), a mortgage broker, or a lender such as a high street bank.
Once you’ve found the right mortgage for you, you can apply for a mortgage ‘in principle’. This is an indication (not a promise) that you could be lent a certain amount, and what interest rate you’ll likely pay. This is a key thing to remember if you’re ready to start buying your first home in the UK.
Importantly, an agreement in principle shows sellers that you’re likely to be able to afford to buy their property.
As part of the process, the lender will look at your income and address history, so it’s vital that you give up to date information.
The lender will also run a credit check on you to make sure you can afford to borrow (and repay) the amount you’ve requested. It depends on the lender whether they make a “soft” or “hard” credit check on your report. But remember that too many hard searches can damage your credit score.
It’s a good idea to check your free credit score before you apply for a mortgage in principle. That way, if it’s not up to scratch, you have time to improve it and boost your chances of being offered a competitive mortgage.
Step 4: Find your dream home
Time for the fun part of buying your first home in the UK: start your property search!
Don’t forget to register with estate agents in your area (or the location of your future home, if it’s different). That way they can keep you up to date with new properties before they get snapped up.
Think about what’s really important to you in your new home. Maybe you’re happy to compromise on that extra bathroom but you won’t budge on the back garden. Whatever it is, be clear on what you are and are not willing to negotiate on.
Step 5: Make an offer
Found a place you want to call your own? Great, now it’s time to make an offer.
All you need to do is let the estate agent selling the property know that you’d like to put an offer in.
If they accept your offer, the estate agent will send you a written contract titled “subject to survey and contract”. But remember that this isn’t a done deal yet – both you and the seller can still pull out.
If the agent declines your offer, go back with a higher offer if you can afford to. Just be wary of overstretching yourself. Other houses will come on the market, this isn’t the only one for you!
Step 6: Arrange a solicitor and a surveyor
The next step is to find a solicitor or conveyancer to handle the legal work around buying the property. We’ve all heard horror stories of slow solicitor processes, so if you’re not sure how to choose the right solicitor for your house purchase, follow these top tips.
The solicitor who deals with the legal transfer of the property (known as conveyancing) will be responsible for:
- Acting as the ‘middle man’ for you, the mortgage lender and the seller
- Reviewing any contracts involved in the purchase
- Dealing with the Land Registry (when you buy land or property, you have to register it with the government)
- Sorting out stamp duty
- Transferring the money from you to the seller
Solicitors usually cost around £500-£1,500 + 20% VAT.
A surveyor will value the property and look for any problems that might affect the cost of your home.
Once you’ve formally applied for a mortgage, the lender will send a surveyor to do a valuation to check if the property is worth what you’re about to pay for it. Why’s this necessary? Because it minimises the risk to the mortgage provider in case they have to repossess the property, protecting them from any significant financial loss.
The other reason for carrying out a valuation is to highlight any problems with the house, such as damp or termites.
A valuation isn’t a proper survey, it’s more to check how much the property is really worth. If you want a comprehensive report, you’ll need to pay for an independent survey with a RICS surveyor. They will cost around £300-£600. Just enter your postcode to find a surveyor local to you.
Step 7: Finalise the mortgage and offer
Once you’ve had your survey completed, you may want to go back and renegotiate the offer on your property. For example, if the surveyor found that there are £3,000 worth of repairs needed, you may want to factor that into your offer.
You’ll also want to get your mortgage finalised at this point. Having an agreement in principle will help to speed things along at this stage. You’ll often be charged an arrangement fee to set up the mortgage, which can cost in the range of £0-£2000. Once everything goes through, you’ll get a ‘binding’ mortgage offer.
You can still compare with other mortgage offers at this stage, so take a look around and make sure this is the right mortgage for you!
Many people find this a stressful stage of the process. Some things can go wrong, for example, the seller could withdraw the property from the market, or accept a higher offer from someone else. Try to keep in close contact with the seller through your estate agent or solicitor.
Remember, you can still pull out at this stage!
You’re not locked in until you’ve exchanged contracts (the next step). So remember that until you and the seller have signed contracts, you can change your mind.
Step 8: Exchange contracts
This is when your solicitor and the sellers’ solicitor exchange signed contracts, and you pay your deposit.
Before you exchange contracts, you’ll need your official mortgage offer, your agreed completion date and buildings insurance in place from the day of exchange (or from completion if you’re buying a new build.)
Your solicitor will send you a contract to sign, so go through it with them and make sure everything is as you agreed, such as what the seller has agreed to leave in the home.
Once you’ve exchanged contracts, you can celebrate! Everything is now legally binding. The hard work is mainly done, and the chances of things falling through are very slim.
The final step in the guide to buying your first home in the UK…
Step 9: Complete and move in!
Completion day is when the ownership of the property is transferred from the seller to the buyer. It means the seller has to vacate the property and you can get your keys and move in.
Hard work done, keys in hand… It’s time to enjoy your new pad! This is when the fun starts, whether that’s decorating, throwing a housewarming party…or simply taking a well-earned rest.
Hopefully this guide to buying your first home in the UK has helped. Oh, and don’t forget to redirect your mail to your new address!