Nine steps to purchasing your first home in 2021

Buying the first home could be a daunting process, in the excitement of finding a property you love to the worries of waiting for your mortgage to go through and also the long wait for that legal work to be completed.

Taking the first thing around the property ladder is a journey, but we’re here that will help you navigate the twists and turns and help you purchase your first home in 2021.

1. See how much deposit you’ll need

Saving for any deposit is among the biggest challenges facing first-time buyers, and also the COVID-19 outbreak means you will need in order to save a lot more than before.

In normal times, you’d require a deposit of at least 5% of the property’s cost, but with so few 95% mortgages available, you’re now prone to require a minimum of 10%.

This means that for any home costing lb200,000, you’d need a deposit of lb20,000 instead of lb10,000.

You may use our deposit calculator below to discover just how long it could take you to save enough to purchase your first home.

2. Give your savings a 25% boost

Interest rates on savings are at rock bottom, however the government comes with an initiative in place that will help you increase your deposit and buy your first home faster.

If you're under 40 and therefore are saving to buy a house worth as much as lb450,000, you can open a lifetime Isa.

A lifetime Isa enables you to save up to lb4,000 each year until you're 50. For each lb4 it will save you, the government will add a lb1 bonus for your savings. This means you might get an additional lb1,000 each year.

Bear in mind if you make withdrawals before you're 60 for something apart from purchasing a home, you'll face a problem around the amount you withdraw.

3. Find out how much you can borrow

We’ve looked at how much you will need to save, however the other crucial element is how much you’ll be able to borrow when applying for a mortgage.

The amount you are able to borrow will usually be calculated like a multiple of the annual income. Most mortgage brokers permit you to borrow a maximum of four and a half times your income.

This implies that if you’re buying a home together with your partner and you earn lb40,000 annually between you, you might be in a position to borrow around lb180,000.

Use our mortgage borrowing calculator to obtain an idea of your borrowing power.

4. Look into your mortgage options

As we mentioned earlier, the withdrawal of 95% mortgages is a huge blow for cash-strapped first-time buyers, but the good news is that a few of the biggest lenders have finally relaunched their 90% deals.

If you’ll struggle to save a 10% deposit, you could consider schemes such as Help to Buy or shared ownership (more on these shortly), or you might ask a family member if they will behave as a guarantor for the mortgage.

Guarantor mortgages usually involve a parent or gaurdian or grandparent using their savings or property as collateral, but other alternatives include joint mortgages or joint borrower, sole proprietor deals. It’s worth taking advice from a mortgage broker, who are able to explain the advantages and disadvantages of these various kinds of deals.

5. Research first-time buyer schemes

Help to Buy and shared ownership are two of the most common choices for first-time buyers can not save a house deposit – but both come with some pitfalls.

Help to Buy enables you to purchase a new-build home having a 5% deposit, by taking out a 20% loan from the government and getting a mortgage for that remaining 75%. Assistance to Buy has faced criticism for inflating the costs of recent homes, but it is set to become relaunched with regional price caps from April 2021.

Shared ownership enables you to purchase a share of 25% to 75% in a property (usually a leasehold flat) and pay rent around the remainder. It's really a good way of making the housing ladder in expensive cities such as London, however the combined costs can be very high, and there are concerns over the safety of some blocks.

6. Obtain a mortgage agreement in principle

Getting your mortgage agreement arranged before you begin taking a look at properties is a good idea for 2 reasons: it clarifies your budget, also it can prove that you’re a serious buyer.

An ‘agreement in principle’ usually needs a ‘soft’ credit search and it is essentially an argument from the lender of how much they’ll be prepared to help you to borrow to purchase a house. It’s an essential step but isn’t a guarantee – your mortgage won’t be locked in until you’ve had an offer accepted and formally apply.

Again, it’s worth taking advice from the large financial company, who definitely are able to look at all of the deals on the market and obtain an agreement in principle.

7. Find the right property

Choosing the first rentals are one of the most exciting stages in the house shopping process. Now you’re armed with your agreement in principle, you can spy out the areas where you’ll have the ability to afford a house. If you’re buying in England, you should use our area comparison tool to find out more and compare different towns.

Do your quest in to the local property market and check out our house viewing checklist (or our guide on viewing a show home if you’re looking for a new-build) before heading to viewings to provide yourself the best chance of sorting the wheat from the chaff.

For more detailed advice on this area of the process, take a look at our full guide regarding how to buy a house.

8. Make an offer and make an application for your mortgage

Once you’ve found a property, it’s time to make a deal. Our guide on making a deal on the house provides the lowdown regarding how to obtain a good deal and obtain the nod over other your customers.

After you’ve had your offer accepted, you are able to go back to the mortgage company to formally make an application for your house loan.

9. Take part in the waiting game and get ready to exchange

Now, the boring bit. When your offer has been accepted, you’ll need to employ a conveyancer to sort out the legal issues from the move. You’ll also need to have a house survey completed to ensure there are no significant difficulties with the home.

The conveyancing process can take a number of weeks to go through, specially in the current climate, so manage your expectations over when you’ll be able to get the keys.

Once the operation is nearing conclusion, your conveyancer will work with the seller’s solicitor to set to start dating ? to exchange contracts and finish the acquisition.