How to get on the property ladder

Historically Rightmove buyer searches increase significantly from Boxing Day. But the question is should you or should you not buy a property in 2023? The truth is there is no definitive good or bad time to move house and if you do your research, it is more likely that you can avoid making a financial misstep.

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Searching for a house

First time buyers currently are facing higher borrowing costs, but equally house prices are falling, and property portals show a range of discounted properties and sellers are more willing to negotiate than before. On top of this tenants are facing higher rents this is because of pressure on landlords who now have considerably increased costs and mortgage payments. This will make first time buyers think whether paying their own mortgage is still a better option than paying someone else’s.

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Buying your first home

Buying your first home is one of life’s biggest (and most expensive) decisions. Especially when borrowing costs are higher you want to be fully prepared for the mortgage journey and increase your chances to get accepted and to get the best possible mortgage rate.
Here are some of the key things prospective first-time buyers need to know.

1. Have your deposit ready

The amount of deposit that you will need to save to buy your first home will depend on the purchase price of the property that you wish to buy. The minimum deposit is 5%, but not all lenders have this option available and you should aim to accumulate a larger deposit if you can. Not only does this improve the likelihood of getting a mortgage, but this also means your monthly mortgage repayments will be smaller because the bigger the deposit, the smaller the balance that’s left to pay off.
Loan to value ratio, or LTV, is the ratio of what you borrow as a mortgage against how much you pay as a deposit.

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Saving for a deposit

Here’s how loan to value ratio works:

You pay a deposit of £20,000 for a property worth £200,000.

You get a mortgage of £180,000 to pay for the rest.
Your deposit covers 10% of the house price.
So, your LTV is 90%.

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Have your deposit ready

As a general rule, the higher the LTV, the more expensive your borrowing costs will be. The cheapest mortgages tend to be on LTV’s of 60% or lower. This is because lenders consider people requiring high LTV’s as being higher risk. Lenders offer different rates depending on the LTV brackets you are in. The lowest LTV bracket usually is 60% and will go up in 5 – 10% increments all the way up to 90 or 95% depending on the lender.

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Gifted deposit

The deposit can come from your own savings, or it can be gifted by family. Generally, mortgage lenders are happy to accept gifted deposits from family members. They will usually require you to provide a Gift Letter and proof of funds if the gift is over £20,000 or when the funds are coming from outside the UK.

When it comes to buying a house or flat, there are more costs to save for than you might imagine – and budgeting properly will help you avoid nasty surprises further down the line. You will have to cover costs such as conveyancing fees, property survey, mortgage arrangement fees, removals costs and in some cases Stamp Duty Land Tax.

2. Check your credit report

Preparation is key to a successful mortgage application. One key area is to pass the credit score.
A good credit score could increase your chances of being accepted for a mortgage, as well as getting a lower interest rate. There are ways to improve your credit score. Make sure you are on the electoral register, pay your bills and debts on time and avoid multiple mortgage applications.

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Good credit score is important

Missed or defaulted payments, County Court Judgements (CCJs), payday loans, and betting patterns on your bank statements can all lower your chances of getting a mortgage. It is still possible to get approved for a mortgage if you have adverse credit, but the choice of lenders will be limited, and the cost of borrowing will be much higher with a subprime lender.

3. Check if you can afford the property you want

Before starting your property search, it is important to get an idea of how much you can borrow on a mortgage.

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Check if you can afford the property you want

These days however, the calculation is not necessarily a simple one. Mortgage lenders overlay the traditional ‘income multiple’ approach, with a wide variety of other factors when assessing your application such as source and type of income, outgoings such as loan payments, childcare costs etc. You will have to meet lender’s criteria too and not all lender’s will lend you the money based on your circumstances.
Everyone is different and each financial situation is unique, and mortgage brokers have extensive experience in finding the right lender and mortgage for people with specific life and financial circumstances. A mortgage broker will be able to provide you with a Decision in Principle or Agreement in Principle before you start viewing properties. Having this document will mean that you will be able to show estate agents that you are a serious buyer who is also credit worthy and it will put you into a better position when you make an offer on a property.

4. Have a clear idea of where and what to buy

It’s important to be realistic when searching for your first home. Before you begin your search for a new home, you’ll want to have a clear outline of what you will and won’t compromise on.

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Have a clear idea of where and what to buy

Knowing what you can afford is the most important factor in house hunting. There is no point viewing properties which are outside of your price range. This is why having an Agreement in Principle is so important before you start viewing properties.

List your priorities for your new home, consider location, condition of the property, size, distance from work and schools as well as future needs.
Use the right property search portals such as Rightmove and Zoopla and register with local estate agents.
Once you found a property you like, it’s time to ask the important questions, to make sure it is really your dream home.
Don’t be afraid to ask the estate agents questions; a new home is a huge investment and it’s important that you make the right choice for you. It is important for you to know why the current owners have decided to sell, how long the house has been on the market, what items will be included with the purchase, how energy efficient is the property, what are the local amenities, public transport like in the area and whether you will be in a property chain. Check the crime rate in the area and find out how much is the council tax bill and average utility bills.

5. Hire a conveyancer

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Hire a conveyancer

You’ll need a conveyancing solicitor to carry out all the legal work needed to buy a home. The first question you’ll be asked when you put in an offer on a property is the name and contact details of your solicitor or licensed conveyancer. A conveyancer will handle the deposits, arrange contracts, and transfer the deed of the property from the seller to you. Choosing the right conveyancer is vital. Things to consider when choosing one: fees, reputation and communication. You can ask family and friends for recommendations, or your mortgage broker will know who the reputable firms are from experience and so they can also recommend you one.

Zita Latham, Mortgage Broker at multi-award winning mortgage firm The Mortgage Mum Team

If you liked the article, you may also be interested in this:

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Zita Latham

Mortgage Broker at The Mortgage Mum

Zita has worked in financial services for over 10 years predominantly as a mortgage advisor in London and the South East at both Barclays Bank and Nationwide Building Society. She currently works at the multi – award winning brokerage The Mortgage Mum as a mortgage broker. Zita’s aim is to educate, support and take care of clients, affording them the time and space they need to better understand their finances and explore their relationship with money. She is available to answer any reader’s specific questions and available for mortgage consultations by appointment.

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