With house prices rising and the effects of a global pandemic, taking your first step onto the property ladder in 2021 is more challenging than ever. Buying your first home is a big decision, and you need to make sure you’re ready for it.
The pandemic hit UK first-time buyers hard. In 2021, only 20% of first-time buyers’ mortgage applications were approved on their first attempt. 20% is a lot lower than pre-covid figures, which were around 50%. So if you’re looking to buy your first house, you’ll need all the help you can get!
Although buying your first home will be challenging, you can still end up with a home you’ll love for years if you take all the proper steps.
Most first-time buyers don’t have lots of experience with house-hunting and negotiations. To help you climb the property ladder, we’ve outlined all the main problems with first-time buying and some tips to get around these obstacles.
Problems with first time buying
The biggest problem for most first-time buyers is not having enough money for the deposit. Recently, this problem has become a lot worse. Due to the recent stamp duty holiday, people have taken this advantage to buy houses without worrying about stamp duty.
Since demand for houses has increased, unfortunately, the prices of houses have increased as well! The deposit of a house will be a percentage of the house prices- so if houses become more expensive, you will need a larger deposit.
The average deposit for first-time buyers is 15%. Depending on the price of the house you buy, you’ll be looking at around £10,000 to £50,000 for the deposit. That’s a lot of saving to do!
Mortgage requirements are also becoming stricter. If you’re a first-time buyer, it’s a lot more likely that you’ll get rejected since you aren’t familiar with the process. So you’ll need to do a lot of research about what you need for the mortgage application.
With all these challenges, first-time buying is tricky, but many different options can help you make the process a bit easier.
Help from the Government
Luckily for first-time buyers, the government is on your side! There are many different schemes offered by the government that will make your buying process a little bit easier and even save you some money.
One of the most recent schemes is the government’s 2021 mortgage guarantee scheme. This allows buyers to get a mortgage for only a 5% deposit instead of the average 15% deposit.
This is quite a large deposit and will reduce the amount you have to save for a deposit. Furthermore, it could even allow you to afford a larger house or a house in a better area.
The deposit will be your biggest obstacle, so if you don’t have to reach a significant figure for your deposit, it will be much easier for you to buy your first house.
It’s important to note that this scheme does have limitations. For example, it is only valid for houses less than £600,000. You must also have a good credit score and regular income and prove you can afford all the monthly repayments.
There are many more government schemes available, so make sure to check online on the government website for more information.
Steps to take on your journey
Buying your first house will be a long and memorable journey. These tips will help you out on this journey.
Start saving early
When you reach a mortgage agreement, you will need at least 5% for the house deposit. 5% of the house price will be a large lump sum of money that you’ll need in your account to buy the house.
If you start saving as soon as possible, you will have enough money for the deposit nearer in the future.
Set out a lengthy plan for your saving with targets for each month. Make sure you track your spending to see where you could save the extra pennies.
Consider different options for your house
There are many different ways of buying your house that may save you some money.
If you’re prepared to do some renovation, you can find houses in need of renovation that will be at a lower price. The costs of the renovation plus the price of the house are usually cheaper than buying a standard house.
Asking your parents
Don’t be afraid to ask your parents for support. If they’re nice enough, they can bump up your savings a little!
Even if you’re not getting cash gifts or loans, staying with your parents while saving up for the deposit is a great idea.
