January 11, 2023
Renting might have been perfect for you historically for many reasons, but now you have decided it is time to get a place of your own and take that first step on the property ladder. The question is, though, how do you make that leap from renter to homeowner? Read on and we will take you through the things you will need to consider.
The first thing that will need to happen is for you and your household to be financially viable. Yes, this does sound a little harsh, but unless you can afford to buy a property outright there is every chance you will need a mortgage and a lender simply will not lend if the finances don’t stack up. How do you become financially viable?
- Be in stable full time employment or have at least 3 years of decent accounts if you are self-employed. Lenders will want to see stable income and proof of that income
- Pay down debts. It is easy to run up credit cards or get loans in the course of every day living, but these will count against you when it comes to calculating how much you can afford. The lower the debt you have, the less of a risk you are to the lender and the more you can borrow
- Start saving. When it comes to the mortgage you will need a deposit. No deposit then no mortgage, it’s that simple. Make a monthly budget of the essential bills like council tax, gas, water, electricity, TV licence and food and then a list of the nice to haves like gym membership, subscriptions and phone package. Look where you can make savings and cut back on your spending. Put that money, at the beginning of every month into a dedicated savings account. Be creative here, can you move in with family of friends while you save?
- Check your credit score. This is a very important score and late payments, over stretching credit, not being on the electoral roll will also damage the score making it less likely for a lender to lend.
- Check for Government schemes like the help-to-buy scheme or shared ownership.
- Can you get a gifted deposit from a family member? As long as that person signs a legal waiver stating that they have no interest in the property, gifted deposits are perfectly acceptable.
- Speak to your agent. When you give notice to leave your rented property, speak to us, we can offer our help to find you your new home and can even help you source a mortgage/financial advice.
The more you do to ensure that, when you come to apply for a mortgage, you are a low financial risk, the better it will be for you and the more likely that you will get that mortgage.
The next thing you will need to do is your research. How much can you borrow? What sort of property do you want? Where do you want to live? Doing your research on the area you are looking at is important. What schools are there? Where is the nearest train station? What are the bus links like? Shops? Doctors and dentists? Crime rates and types? All of this is important to help you make an informed choice, but the price of a property is location dependent so the location you choose will directly affect the property you choose. What about the property itself? What are the absolute must haves? Do you need a garage, an area for a home office, a garden, how many bedrooms? What are the areas for compromise on the property? Making a list will make choosing your new home easier as it takes out the emotion to a large extent and will help you to focus on what you need rather than be tempted to get carried away when it comes time to start viewing potential homes.
The final bit of advice for those looking to transition from renter to homeowner is to be realistic. It can take years to save the money for the deposit and all the associated home buying costs like stamp duty. There will be set backs and some pretty large compromises that will have to be made in your day-to-day life to get you on the property ladder. Don’t expect to start the journey and be in your new home within weeks. Plan, prepare and get your finances sorted, you can do this!