The First Step In Buying A Home
Buying a home is exciting but it can be complicated, frustrating and extremely difficult at times. It is easy to feel overwhelmed when looking to buy property, so it is often easier to break down the entire process into smaller steps. When you are looking to take the first step in buying a home, you will find that financial advice is the most important thing for you.
Everyone knows that buying property is a major financial commitment, so it makes sense to obtain as much financial advice and guidance as possible. You should look to speak with an independent financial advisor as this will provide you with the best chance of finding out all of your options. Some financial advisors are linked with certain institutions or lenders and this may mean they recommend what is best for them or the institution they are linked with as opposed to what is best for you.
Save as much money as you can!
One of the most important pieces of financial advice you will receive is that you need to save as much money as you can for a deposit. At this point in time, you should be looking to save up between 5% and 20% of the cost of the property to use as a deposit. As an example, if you are looking to buy property costing £150,000, 5% of this is £7,500 which should be the minimum amount of money you want to save.
Of course, the more money you save above this 5% level, the better it will be for you. This is because the larger the deposit you have, the wider range of mortgages you will have access to and the better chance that you will be offered a more affordable mortgage. A larger deposit means the lender is taking a smaller risk, which means they’ll be confident to offer a lower rate of APR which means that the total amount of money you spend in repaying the loan will be lower.
While the cost of buying property will be the biggest level of expenditure you have to deal with in buying a home, these are far from the only cost you need to consider. Other than the deposit payment, a home buyer needs to ensure they have finance in place for the following up-front costs; survey costs, solicitor fees, removal costs, buildings insurance, initial furniture and decorating costs, stamp duty and mortgage arrange and valuation costs. Given that all of these costs have to be factored in before you make your first monthly mortgage payment, home buyers need to be confident about their finances.
There is also a need to ensure you have funding in place to meet the mortgage payments while paying all of your other bills each month. When you buy a home, you will have costs like utility bills, phone and broadband costs, transport costs, food and drink, clothing, entertainment and many other costs, so you cannot just look at the monthly mortgage payment and think that you are covered if you can pay that amount each month.
When looking for a mortgage, you will find that the lender uses strict checks on all applications and this includes a stress test. This examines your ability to meet mortgage payments if your personal circumstances were to change or if interest rates to rise. If the lender is uncertain about your ability to meet these payments, they will refuse your mortgage application or they will deem you a risk and only provide a mortgage at a higher rate of APR. This of course increases the amount of money that you need to find each month, so this will add to the stress and pressure that a home buyer is under.
Help is available when buying a home
Buying a home is difficult but there are a number of Government backed schemes that provide assistance when buying a home. Schemes like Help To Buy: ISA, Shared Ownership scheme and Help To Buy: Equity Loan have all assisted individuals, couples and families to buy property and you may benefit from this assistance too.
A professional skilled in property finance will be able to offer guidance on these schemes so be sure to speak to an expert.
Taking the time to ensure you are confident about your finances will help you to feel confident about buying property, so take the time to speak with professionals, save money and ensure your finances are as robust as possible.