First time buyer: Where to start?

Tom_B_

Hi all!

I'm looking at buying a property. I'm 24, currently living with my parents and it's time to move out!

I'd rather buy than rent, simply because at least then my money is actually going to something I own.

What is the first step? Look at property prices in my area? Go to a mortgage lender?

I have no idea what sized mortgage I could afford...

I think I'm in an OK position.

-I earn £25,000 a year
-I have £18,000 in the bank
-The only debt I have is £4000 left on my student loan.
-I have no credit cards (Somoene told me this was bad because I'd have no credit rating, is this true?)


Is this a good starting point? Is there anything I can do to improve it and will this be enough to get a mortgate?

Thanks for any advice!

Tom

GMS

The best advice available to you is to visit a 'Whole of Market' broker. You should research the sort of property you are looking for and get an idea on prices. Are you looking to put down all of yor savings as a deposit? If you can manage to have a 15% deposit as a minimum then the interest rates tend to be more favourable.
You may also want to consider repaying your student loan from savings as this way your only outgoing would be the mortgage.
Not having a credit card may mean a lower credit score, but it depends on many other factors as to what your score is.
Have an idea of how much you need to borrow, and how much you are comfortable with as a monthly repayment and sit down with a broker. You could speak to your bank but they will only offer their own products. A broker can look across the market for you.
Good Luck

Tom_B_

Thanks!

£18,000 is my entire budget for moving.

I would probably need £1000-2000 (is this a good estimate?) for white goods/furniture depending if anything came with the property.

My savings would also need to cover any valuations, solicitors fees, etc. Again I'm not sure on the total costs of these but a post on this forum suggests £2600 and £1000 for emergency/misc costs so that would leave me at about £12,000-£13,000 for a deposit (Which is 15% of £86,600 that's not very much )

Would I really be better off losing £4000 from a deposit to clear my student loan? All the advice i've seen says the bigger deposit the better.


I will find a broker.

Thanks

Doshwaster

Tom_B_ wrote: »

Hi all!

I'm looking at buying a property. I'm 24, currently living with my parents and it's time to move out!

I'd rather buy than rent, simply because at least then my money is actually going to something I own.

What is the first step? Look at property prices in my area? Go to a mortgage lender?

I have no idea what sized mortgage I could afford...

I think I'm in an OK position.

-I earn £25,000 a year
-I have £18,000 in the bank
-The only debt I have is £4000 left on my student loan.
-I have no credit cards (Somoene told me this was bad because I'd have no credit rating, is this true?)


Is this a good starting point? Is there anything I can do to improve it and will this be enough to get a mortgate?

Thanks for any advice!

Tom

Based upon borrowing 3 times your salary and having a 15% deposit that would mean you could look at houses around £90,000 (deposit 15k, borrow 75k)- can you get anything in your area for that price? That would be a mortgage of around £450 a month. Some lenders may be prepared to lend you 3.5 to 4 times salary but your mortgage rate would be higher as your %age deposit would be lower.

Best talk to a good independent advisor - not your bank - most will give a first consultation for free. No point in going to an estate agent if you have no idea what you can afford.

Remember you will need about £2000 for legal and financial fees - plus money to equip the house.

GMS

There are lenders who will do a free valuation and legal fees so this could be an option for you as long as the overall deal was right for you. Legal fees are generally around £499 plus disbursements for a purchase, and a valuation is dependent upon the property price but for 100k or less you should factor around £300.

Cost of furniture is pretty much down to you. If you are happy with Ikea rather than John Lewis' then your costs would be much lower. Same for white goods, lower end vs Smeg and the likes.

Your student loan is your call. It will be taken as a commitment which would reduce the amount of loan available to you. You may well still be able to raise enough even accounting for the loan. This is something you need to discuss with a broker. If you provide all figures the broker will know the best way. You are right that a bigger deposit is better but if having a loan reduces your borrowing ability then the higher deposit becomes less relevant.

If you can repay your loan and still come up with a 15% deposit then you would be in a decent position. Have a look around at prices and work backwards.

It is not as difficult as it sounds when all the figures are in front of a broker.

Tom_B_

Based upon borrowing 3 times your salary and having a 15% deposit that would mean you could look at houses around £90,000 (deposit 15k, borrow 75k)- can you get anything in your area for that price? That would be a mortgage of around £450 a month. Some lenders may be prepared to lend you 3.5 to 4 times salary but your mortgage rate would be higher as your %age deposit would be lower.

Hmm that seems very little. I earn just over £1500 per month after tax and after my student loan has come out. At the moment I've been saving around £800 a month after paying £100 on a train season ticket and £100 to my parents in rent (yes they don't charge me much so I can save up to be able to move out ) both charges which wouldn't apply if I moved out (as I plan on moving within cycling distance of work).

£450 seems like a very small chunk of that £1500 of course there's council tax and bills on top of that but even so..

Looking at Rightmove, pretty much everything I can find under £100,000 is shared ownership. Highest share I can find is 80% for £90,000 on a 1 bedroom flat :-\ Seems really expensive. There's a couple of 2 bed places for ~£75,000 but other similar properties in the same area are £65,000 for a 50% share so would assume they're shared ownership but it's not listed as such. I'll give the estate agents a call tomorrow and check though

CloudCuckooLand

1/3 of income is a sensible amount to spend on a roof over your head.

Another 1/3 goes on bills/food/necessities.

Then the other 1/3 is for luxuries, or builds up savings for holidays, future house deposit, pension, etc.

If you start a family 3-5 years from now, you'll be struggling to fund a move to a 2-bed place...

GMS

Remember to factor in the monthly rental if you are looking at shared ownership.

Tom_B_

Well looking at the prices it's pretty much the only thing I'll be able to afford if the numbers here are correct

Would rather have my own place but not sure that's much of an option looking at the prices.

Doshwaster

Tom_B_ wrote: »

Looking at Rightmove, pretty much everything I can find under £100,000 is shared ownership. Highest share I can find is 80% for £90,000 on a 1 bedroom flat :-\ Seems really expensive. There's a couple of 2 bed places for ~£75,000 but other similar properties in the same area are £65,000 for a 50% share so would assume they're shared ownership but it's not listed as such. I'll give the estate agents a call tomorrow and check though

Shared ownership may be worth looking at - but just be warned that qualification rules do vary around the country with local authorities and developments. You may well find that being single with your income you actually earn too much to be considered for one of these schemes.

It was the trap I was caught in for years - earning too much for an "affordable" home but not enough for a non-affordable one.

As for £450 "not being much", I suspect while living at home you have been protected from the full costs of home ownership. There's probably £200 a month on top of that for council tax, gas/electric and insurance. For a first house most people are happy to cope with cheap, donated or 2nd hand furniture for a few years but there is also the cost of any repairs or home improvements to consider. It all adds up!

Finally, don't totally discount the option of renting. Rent prices are relatively low at the moment. In a falling market it may be worth renting for a year or two while you save up for a bigger deposit and have time to search for that perfect house. Rather than buy that £100k house with a 15% deposit you could get it for £90k in 2 years with a 25% deposit.

Buying a house is not a decision to rush into just because you are sick of living with your parents.

becca0417

We earn similar to you and our mortgage is 550 per month. We manage on that and have about 500 disposable income per month after everything.

The one piece of advice I would give you which is really important is to use an online site to check your credit score. We were turned down for 2 mortgage before checking ours, realising there was a slight issue with OH and the broker found a way around it immediately. But you can't deal with things you know nothing about, so definitely worth a look.