Where to start: first time buyer tips and advice — get the basics right before you buy

Before you begin your property search you need to find out what you can afford and how to borrow it. Here's how.
Lizzie Rivera25 March 2020

Before you fall in love with your dream home, you need to make sure you can access the money to buy it. Here's how to do that in five simple steps.

1. OBTAINING AN AGREEMENT IN PRINCIPLE
Most estate agents will require proof that you can afford to buy a property before they will agree to show you around the houses on the market.

This is commonly called an agreement in principle and you can obtain one from any mortgage lender.

It's simply a case of providing them with your financial details so they can work out how much they will be willing to lend you.

Generally speaking, you'll need to put down a 10 per cent deposit and you'll be eligible for a mortgage to the value of up to 4.5 times your combined salaries.

2. CALCULATING YOUR DEPOSIT
You’ll need to have at least 10 per cent of the purchase price to buy a home. If any of this is being given — i.e. from the Bank of Mum and Dad — those gifting the money will need to confirm it in writing.

In broad terms, the more money you can save for your deposit the greater the range of mortgage options and lower interest rates you will find available to you.

3. OBTAINING A MORTGAGE
The amount you can borrow will depend on your income, outgoings and credit score, so it’s a good idea to be careful with your spending at least three months before applying for a mortgage.

Mortgages of 4.5 times the combined salaries of buyers are typically given. So,r a couple buying a property worth £300,000 will need to earn £60,000 between them, plus have at least a £30,000 deposit to afford it.

4. TYPES OF MORTGAGE
There's a vast range of mortgages available and some lenders offer deals for first-time buyers i.e. cash-back or contribution to legal fees. One of the main decisions you will have to make is whether to opt for a fixed-rate or variable-rate mortgage.

Fixed-rate mortgages
Interest rate stays the same for a set fixed period agreed by you and the lender, usually two, three, five or 10 years. The rate of interest you pay is usually slightly higher than variable rates, but the fact the amount doesn't change is useful if you're trying to budget.

Variable-rate mortgages
The interest rate on a variable rate mortgage is linked to the lender’s standard variable rate or the Bank of England base rate, so your monthly payments can go up or down.

5. OTHER COSTS TO CONSIDER
It's a good idea to have at least an extra £3,000 saved for costs that may not have been budgeted for: valuation, surveyors, solicitors, stamp duty, searches, land registry fees, building and contents insurance, moving costs, furnishings, wear and tear costs and so on.

It is worth remembering that first-time buyers purchasing a home for £300,000 or less will pay no stamp duty, while on purchases over this but under £500,000 they'll pay five per cent on the additional amount over the £300,000 figure.

Now you’ve sorted your finances, you’re ready to start your property search.