Helpful Guide for first-time home buyers in 2023

Helpful Guide for first-time home buyers in 2023

Millions of people who wish to own a home have aspirations of climbing the property ladder for the first time. The problem is that purchasing a home is a difficult undertaking, made even more difficult by the current economic situation, which includes a recession and rising borrowing costs. As a result, first-time purchasers are increasingly older; the most recent English Housing Survey indicates that the average age in England is currently 34. Yet things are about to change, maybe for the better for purchasers, as a result of lowering home prices and a calmer real estate market according to property experts including estate agents in Tooting.

Here are the 10 essential actions you must take in order to buy your first home in 2023.

Determine how much of a deposit you’ll require.

Budgets are getting tighter due to the cost of living crisis, making it more difficult to save up for that important down payment, but falling home prices mean it may be simpler to raise the necessary amount. Typically, you should strive to put down at least 5% of the purchase price, which implies you’ll need a 95% mortgage. For instance, if you are looking for properties for sale in Tooting and you wanted to purchase a home for £200,000, you would borrow the remaining £200,000 and put down £10,000 of your own money. With mortgage rates skyrocketing until the end of 2022, there are significant benefits to paying as little interest as possible. If you can, put down a larger deposit to be granted a mortgage with a lower interest rate.

Including the additional expenses

Do not forget to include in your budget the extra costs associated with purchasing a home, such as closing charges, surveys, and moving expenses. Make sure to account for them in your budget because they can add up. Furthermore, first-time purchasers who buy a home for more than £425,000 will have to pay stamp duty.

Increase your deposit savings by 25%

Any opportunity to increase your savings should be taken advantage of; with lifetime Isas, first-time buyers can receive a 25% government bonus on their funds. If you’re under 40, you’re allowed to save up to £4,000 of your own money and earn up to £1,000. Before purchasing your first home, you must have had the lifetime Isa for at least a year, and the house must cost no more than £450,000. But, be aware that the 25% bonus and 6.25% of your own money will be forfeited if you withdraw your funds for any purpose other than purchasing a property (or when you retire after turning 60).

Discover your borrowing capacity.

Once you have a deposit and a spending plan in place, it’s time to determine how much you may borrow. A maximum of around four and a half times your annual wage is typically used to determine the size of a mortgage loan. Both of your wages will be considered if you’re purchasing a property with a partner. Hence, if the two of you make £40,000 year, you might be able to borrow about £180,000. Potential lenders will consider your anticipated deposit size, credit score, and monthly expenses in addition to your income.

Enquire about first-time buyer programmes and alternative financing choices

There are choices available to assist purchasers in climbing the ladder. First-time homebuyers in England are eligible for a 30% discount through the government’s First Houses programme. First Houses may only be sold for a maximum of £250,000, or £420,000 in Greater London. You must obtain a mortgage for at least 50% of the property’s purchase price in order to be eligible for the discount. Even though the Help to Buy equity loan programme has ceased, if you were a prospective first-time buyer who created a Help to Buy Isa before the program’s November 2019 deadline for new savers, you would still be qualified for a government bonus up until 2030. If you save £12,000, you can be eligible for a tax-free bonus of up to £3,000. Other possibilities to consider include joint mortgages, shared ownership, sole proprietorship agreements, and guarantor mortgages, in which a family member pledges their money or other assets as collateral for your loan.

Get a principled mortgage agreement.

Although it can be tempting to start looking at residences right away, there are advantages to arranging a mortgage arrangement first. An “agreement in principle” (AIP) specifies your housing budget and demonstrates your seriousness as a buyer. The AIP, which typically calls for a “soft” credit enquiry, is essentially a declaration from the lender outlining the maximum amount they are ready to offer you.

Find your first house

It’s time to start looking for properties now that you have an AIP in place. You can have access to properties before they are listed online if you register with estate agencies. For the fullest understanding of a property’s potential, make sure to visit it in person. Investigate the local real estate market and the neighbourhood you’re considering. You can make sure you know what to look for by using our detailed house viewing checklist.

Create a proposal

You’ll be able to submit an offer once you’ve located a property you want to purchase. 2023 is expected to see a decline in home values, with estimates ranging from 2% to 15%. First-time buyers, who have battled to keep up with price hikes for years, will benefit from the market shift. Don’t think a lower offer won’t be accepted because most sellers had to settle for less than their asking price at the end of last year.

Play the waiting game, then prepare to trade.

If your offer is accepted, a conveyancer is needed to handle the legal parts of the move and order a house survey to make sure the property has no major problems. Especially if the seller is linked to other properties, the procedure may take many months. Your conveyancer will liaise with the seller’s solicitor to schedule a date for the exchange of contracts and finalisation of the sale once all the pieces of the puzzle are in place.

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