First-time buyers guide to getting a mortgage and buying a house
BUYING a house is a complicated process and getting the funds together for a deposit is only the beginning.
Disheartening stats revealed earlier this week that four in 10 Brits wouldn't be able to buy one of the cheapest homes in their area, even with a 10 per cent deposit.
But if you're lucky enough to beat the stats then you'll need to know what the next steps to take are.
From securing a mortgage "in principle" to knowing which survey to pay for, we've got you covered with our guide to buying a house.
Work out how much you can afford
There are a whole host of costs to consider when it comes to buying your first home.
There's the deposit, which tends to be at least 5 per cent of the property's value, mortgage fees (anything up to £2,000), stamp duty on homes that cost more than £125,000, solicitors fees and surveys.
What are the extra costs of buying a property?
BUYING a property is more than just saving a deposit. Here are some of the hidden fees you can expect when buying your first home:
Mortgage broker - Around £500 although online brokers such as Habito and Trussle shift the cost onto the provider so it's free to use for the buyers.
Arrangement fee - The amount lenders charge for borrowing from them - this costs around £1,000 to £2,000.
Booking fee - Sometimes you'll need to pay a booking fee on top of the arrangement fee that is around £100 to £250.
Valuation survey fee - Ranging from £150 to £1,500.
Transfer fee - The charge from moving your mortgage money from the solicitor's account to the seller's solicitor's account. Around £25 to £50.
Mortgage account fee - The lender charges for setting up, maintaining and closing down your mortgage account. It usually costs between £100 and £300. You can choose to add this to the mortgage but then you'll end up paying interest on it so pay upfront if you can.
Solicitor's bill - Usually between £500 and £1,500 plus 20 per cent VAT.
Register the sale with the Land Registry - Your solicitor usually does this and the cost depends on the price of the property.
Stamp duty - If you're buying a property above the £125,000 threshold then you'll need to budget for 2 per cent of the portion that's between the £125,001 and £250,000 threshold, 5 per cent between £250,001 to £925,000 and 10 per cent on properties worth between £925,0001 and £1,500,000.
Removal vans - These can cost between £300 and £600.
Typically, lenders will offer you a mortgage of up to four and a half times your yearly salary.
So if you're earning the average UK salary of £26,000, this means you will likely be able to borrow a maximum of £120,000.
These are the types of homes you will be able to afford on that budget across the UK - although none of them are in the South East.
You may be able to extend your budget using the government backed Help to Buy schemes.
There's Help to Buy Isas which are tax-free savings accounts designed for people saving to buy their first home.
For every £200 you put in the account, the government will add an extra £50 towards buying your first home, up to £12,000.
The maximum you'll be able to earn is £3,000 tipping your savings up to £15,000.
The government will also lend you up to 20 per cent of the value of the property - or 40 per cent in London - as long as you can stump up the cash for a 5 per cent deposit.
This is the Help to Buy equity loan which can be used towards buying a new-build property.
It's interest-free for the first five years but remember it's another loan on top of your mortgage and will need to be paid back.
How to get a mortgage and what are the fees
Often when you apply for a mortgage you'll need three months worth of bank statements and a good credit score in order to pass the affordability checks.
Shop around for the right deal by checking offers for first-time buyers on or on the .
Most people get advice from a mortgage broker. This is essentially a qualified middleman who has a duty of care to recommend a suitable mortgage for you but their services often come with a fee of around £500.
Agreeing a mortgage "in principle" allows you to get an idea of how much the bank is likely to lend to you and how much interest you'll pay.
They usually last between 30 and 90 days and put you in a position to make an offer when you find the property you like.
When do I put my deposit down?
When buying a house there are technically two down payments - the exchange deposit and the mortgage deposit.
The mortgage deposit is the amount that you've promised to put down, for example 15 per cent of the value of the property.
When your offer has been accepted then you'll need to exchange contracts. This is when you'll need to handover a hefty "exchange deposit" that you'll forfeit if you back out of the purchase.
This is usually 10 per cent of the value of the property but it can be negotiated down.
For some first-time buyers the exchange deposit is their entire mortgage deposit for example, if you're putting down 10 per cent.
But if you've promised your lender a bigger deposit then you'll need to handover the rest of the money when you complete.
For example, if you're putting down a 15 per cent deposit, they may ask you for 10 per cent to exchange contracts, so you'll need to put the remaining 5 per cent down when you complete.
This is when you also transfer the rest of the mortgage loan, fees and any Help to Buy boosters.
This is when you'll get the keys to your new property.
Latest figures from Hometrack suggest that first-time buyers need an income of at least £53,000 for a home in Britain's 20 biggest cities.
The sum is up by £8,000 — 18 per cent — in three years due to sharp house price growth.
It may feel like an impossible task but according to UK Finance the number of first-time buyers is actually at a 10-year-high.
Have you managed to buy your first home and fancy sharing tips on how you did it? Why not take part in our My First Home series?
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