Home buying on the horizon?

Not everyone is ready to buy their first home right now, or even in the next three, six, or even 12 months; but the journey has to start somewhere and the sooner you start thinking about it, the more prepared you’ll be and the smoother it’ll be.

Below we’ve outlined the key considerations you should be thinking about right now, to help you know where to start.

Savings and budget

There is a high chance you’ll need a mortgage to purchase your first home. Generally, lenders (banks and building societies) are willing to lend approximately 4.5x someone’s sole or joint salary, so the first thing you need to do is figure out how much you’ll be able to borrow so you can set a budget for your house purchase. There are loads of affordability calculators online, but we recommend Money Supermarket’s.

Once you’ve done that, you’ll then be able to figure out how much you need to save in order to get your house buying deposit together. Consider your monthly outgoing on things like rent, bills and food, and set a realistic monthly goal for you to achieve. You’ll then be able to forecast how long it will be until you can apply for your mortgage.

Here’s an example...

Amy earns £37,000 a year and is looking to buy her first home with partner, Dan, who earns £33,000 a year. Together they have a joint salary of £70,000. Based on the typical lenders’ lending policy of 4.5x the applicant’s salary, Amy and Dan could borrow up to £315,000 for their property purchase.

They come across a new build property valued at £315,000, and it’s available to purchase through the Deposit Unlock (click here to learn more) scheme, meaning they only need a 5% deposit to buy. They already have £5,000 saved, so need to save a further £10,750.  If they wanted to buy their home in 12 months’ time, they’d need to save £896 per month, that’s just under £448 each a month.

Consider downloading a saving app like Plum to help stay on top of your target!

You can of course aim to save for a larger deposit (10-15%) to boost your affordability and put yourself in the market for higher value properties.

Get on top of your credit score

We’re going to handover to the pros for this one…

James Jones, Head of Consumer Affairs at Experian says: “If you’re planning to apply for a mortgage, it’s important to check your credit report early on in the process. Your report details your borrowing track record and, importantly, your current financial obligations, so it plays a crucial role in helping lenders understanding both your financial reliability and your current ability to take on a further commitment.

We recommend that aspiring homeowners start engaging with their credit reports at least 12 months before the mortgage application. That way, if there are any problems then there’s plenty of time to address them before the mortgage lender puts the information under the microscope. Checking your report and score can also reveal other ways to improve the picture your credit history paints of your circumstances, helping give your application the best possible chance of success.”

To find out more about credit scores, why they’re important and how to look after yours, check out our blog.

Figure out what’s important to you

Your scrupulous saving is underway and your credit score is being well looked after. Now it’s time to start thinking about what kind of property you want.

To help guide your search, sit down and outline all the things that are most important to you about your home purchase. This will help streamline your search and ensure you don’t waste time when you’re getting ready to start putting offers in. Here are some things to consider:

• What amenities do you want to be close to?
• Is it important that you’re close to your place of work? Or do you mostly work from home and can afford to move a little further out from the city to have more space?
• Maybe you’re thinking about changing jobs in the near future – what impact will that have on your location needs?
• Where do you need good transport links to?
• Maybe you want something that’s a great long-term investment? Do some research into areas that have potential for strong growth.

Register an interest

The next step is a simple one. If you’re looking into new builds you can register your interest in current and upcoming developments. The reason this is a good idea is that you’ll  be the first to know about any updates regarding launches, availability and pricing, meaning you won’t miss out. You can register easily online via developers’ websites.

Keep an eye on the market

The housing market is constantly changing and 2023 is a perfect example of how things can change in a short space of time. Mortgage rates and house prices fluctuate up and down over time, so the more you keep an eye on how these two things are behaving the better informed you’ll be when making decisions around homebuying.

For instance, if you start to notice a slide in house prices, this could be a good opportunity to bring your home purchase forward a few months, if you can. Similarly, if you notice mortgage rates reducing, you might want to think about bringing your purchase forward, as a reduction in mortgage rate often results in an increase in house prices. Staying across the property pages of publications like The Telegraph, The Times and the Financial Times is a good way to do this, or consider reading your local/regional news more often.

Prepare to adapt

As mentioned, the housing market is an everchanging place so don’t be surprised if you have to change your tact a bit! Following the above steps will ensure you can stay on course as best as possible, but be prepared to be flexible and patient. Buying a home, especially your first one, is a big life moment – it wouldn’t make sense if it was easy! Stay composed and keep the end goal front of mind, it’s all worth it!