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10 tips to help first-time buyers onto property ladder

Professional advice website Unbiased.co.uk has published 10 top tips from leading experts on getting onto the property ladder:

1 Karen Barrett, chief executive of Unbiased.co.uk

"Over the last two years, consumers have watched on as the property market slowed down, lenders tightened their lending criteria and the amount needed for a house deposit soared. As a result, many first-time buyers have been left worrying as to whether they’ll ever have their feet firmly on the property ladder. Seeking advice from a qualified and whole of market mortgage adviser will provide you with the information and help you need."
2 Melanie Bien, Savills Private Finance

"Get an ‘agreement in principle’ from a lender before you start property hunting. This will give you an idea as to how much you can borrow – and in this market – this is really important as lenders are requiring bigger deposits than before – up to 25% of the property value for the best rates. The other advantage is that vendors will take you more seriously. Property chains are breaking far too frequently when a buyer has to pull out of a transaction because they can’t get the necessary finance and many vendors have lost time and money when their sale has fallen through. So expect an estate agent to ask whether you have already arranged a mortgage before your offer will be accepted.

"A decision in principle usually involves a credit check by the lender to establish whether you are a good credit risk. Once you make a formal application, more detailed checks are run and information collated. Use an independent mortgage broker to get your decision in principle before you start looking for a property and they will help you find the right deal for your circumstances."

3 Andrew Swallow, Swallow Financial Planning LLP

"As it is now commonplace for first-time buyers to be unmarried, if you are buying a property with a partner, after you have decided what percentages of the new property you will each own, it is very important to make sure you have a valid and up to date will in place. In England, if you die without a will and you are single (ie not married or in a civil partnership) without children then your money goes to your parents. If your parents are deceased it goes to your siblings, then your grandparents, and so on through your family. This might be what you want; however, if you are a young couple you may want your partner to have your share of a property if you die. If this is the case, you should both write a will and make this explicit! A qualified solicitor and independent financial adviser can help you with this."

4 James Carter, Independent James

"When buying a house for the first time, make sure your house is also a ‘home’. Taking all the financial aspects into consideration is vital, but as a first-time buyer you should also ensure the property you are buying is a suitable home for you to live in, ie), somewhere you can happily live for a number of years. There is never the guarantee of an increase in property prices and you should not view your home as simply an investment. Of course, you can improve a property and potentially increase its value, but if the recession has taught us anything it’s that those least affected by the crisis are those who are happy in their homes and able to live there for a number of years without concern."

5 Ray Boulger, John Charcol

"When embarking on the house buying process for the first time, plan well ahead because lenders are very fussy. Most lenders will credit score you, and this process assumes you are guilty of not being able to handle credit unless you can prove otherwise. It is therefore important to understand what affects your credit score and how you can improve it. For example, make sure you are on the electoral roll – even if you don’t plan to vote. Never go overdrawn unless you have agreed an overdraft facility and if you have a facility, never exceed it. Make sure no cheques or direct debits bounce. (Most lenders want to see between one and three months bank statements for first-time buyers.)  If you are renting don’t miss any payments. If you don’t have any credit cards get a couple, spend something on them every month and set up a direct debit to repay the balance in full every month. The longer you have had your current account with the same bank, lived at the same address and been with the same employer the more points you will get. Always put your landline telephone number on a mortgage application form in preference to a mobile number."

6 Mark Osland, Formula Limited

"The property market slump has resulted in lenders tightening their criteria, and as a result there is real pressure on borrowers to have larger deposits when applying for a mortgage. However, even if you have a sufficient deposit to get a mortgage, you will find that the interest rate would probably be lower if it were bigger. If you are considering any sort of house purchase, it is beneficial to work out how much you need to spend and hence borrow. Set up a direct debit into a savings account for the notional mortgage amount. This not only tests your affordability, but after a few months you will have a tidy sum towards your deposit and expenses."

7 Jane King, Ash-Ridge Private Finance

"Check out Government backed affordable homes schemes such as Shared Ownership. It will allow first-time buyers to step on the ladder with a much smaller deposit than they would need on the open market. The option is there to buy the property outright eventually and the rent you pay on the ‘non-owned’ portion will usually be less than your mortgage. These schemes used to be restricted to certain workers; however, many are now open to all with an income of less than £60,000. Check your local Housing Association website to see what’s available and always seek advice from an independent mortgage adviser who specialises in this area."

8 Danny Cox, Hargreaves Lansdown

"When you have an offer accepted on a home, consider getting a Homebuyer’s Report rather than a survey. A basic survey is a requirement of the mortgage lender and will confirm the property is broadly worth what you have offered. However, this survey will not tell you much about the condition or any major faults with your property. On the other hand a Homebuyer’s Report is more comprehensive and should highlight any areas of concern. Extra money spent on a more comprehensive survey is money well spent – since the cost putting a structural defect right could cost thousands of pounds. Your mortgage lender will have approved firms you should use to conduct the survey for you. Allow for between £300 and £1000 plus VAT."

9 Dan Clayden, Clayden Associates

"The most important thing for any first-time buyer entering the property ladder is to set a budget and stick to it. If you have your heart set on a particular property, it is all too easy to regard the additional costs as only another £5000 or just another £10,000…but where do you stop? Before you go over budget, make sure that you take account of all the financial implications of house buying. For example, conveyancing and legal fees, Stamp Duty Land Tax (which is payable on residential property purchases over £125,000), buildings and contents insurance, the cost of any mortgage protection (to cover the outstanding loan on death or critical illness) or mortgage payment protection insurance (which covers the monthly mortgage payments in the event of accident, sickness or unemployment) as well as council tax and utility bills. These costs should all be factored in to your budget as part of your mortgage costs."

10 David Clay, Hudson Green & Associates

"It is an unfortunate fact that life does not always go as planned for everyone. Changes to our economic conditions, employment situations, and health are not always as good we’d hope and circumstances can take us by surprise. If a life event can be insured against, such as loss of income through long-term illness, or the diagnosis of a critical illness or a redundancy, then this should be considered as part of your budget plans for when you own a home. Taking out insurance against life events doesn’t mean they will happen; it just means that you are protected if they do. 

"Seeking independent advice on this matter will give you clarity in two ways. First, it will provide you with an opportunity to assess your own concerns about life events and decide what is important to you. It might be that your concerns focus on critical illness, as a result of family history, or perhaps it is redundancy as a result of the economic conditions. Second, it will give you an opportunity to understand the monthly or annual costs of each of these types of protection plans. Having this information means that you will not have any nasty surprises when you begin the house-buying process."

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