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Mistakes to avoid for first time buyers

Getting your dream home can be easier than you think, you just need to know what common first time buyer mistakes to avoid.

First Time Buyer Mistakes

Failing to sort your finances

A common mistake many first time buyers make is failing to sort their finances. Before you start looking for that perfect home, you should ensure your finances are in shape and ready for your mortgage application. An easy way to check your financial health is to obtain a copy of your credit report. Before a bank or building society offers you a home loan, they will often look up your credit score to get an idea of how likely you are to pay the money back.  

Under the Consumer Credit Act, you can write to one of the credit reference agencies, such as Experian or Equifax, and ask to see your file for a cost of £2. Alternatively, if you need to see your report in a hurry, you can check your file online. CreditExpert from Experian offers a free 30-day trial, which enables you to see your credit report, and then charges £14.99 a month for continued access. Equifax’s Credit Watch Gold service also offers a 30-day free trial and charges £7.50 a month for the rest of the year, but these can be cancelled once you have seen your report.

And it doesn’t take much to negatively impact your credit score either. Just one missed or late payment on a credit card, loan or mobile phone bill, could knock you out of the running for the best deals or interest rates.

If your credit rating isn’t in the best shape, don’t fret – there are things you can do to fix it. For instance, if you spot any mistakes, such as an incorrect address (surprisingly common), contact the credit reference agency to set it right. According to the Money Advice Service, they have 28 days in which to remove the information or explain why it will remain on record. During that time the ‘mistake’ will be marked as ‘disputed information’ and lenders are not allowed to rely on it when assessing your credit rating.

Similarly, if there’s information on your file that, while accurate, may not reflect your current situation – for example, you got into debt after being made redundant but you are now employed – you can add a ‘notice of correction’ to your credit report. This is a statement of up to 200 words about what happened.

Its also worth seeking expert advice when preparing to buy your first home. For instance, a financial adviser can help you build a savings plan to grow your money for a deposit and work out your budget so that you don’t end up borrowing more than you can afford. Choosing a good mortgage broker can help you through the whole process of getting onto the property ladder, right from working out how much you can afford, to finding the right mortgage and completing your purchase.

Check out our guide on how to make sure you are in the best possible position to have a mortgage approved.

Check your finances are in shape


Check your credit score


Speak to a financial advisor

Overlooking extra costs

Stamp duty may need to be paid

A home valuation or survey may be required

Solicitor's fees should be included in your budget

When you buy a house, it’s not just the asking price you need to think about, there are a number of extra costs that can soon add up.

For a start, there is Stamp Duty to pay, plus solicitor’s and mortgage arrangement fees. Then there are moving costs, insurance premiums, as well the cost of furniture to fill your home. And if you aren’t buying a new build home and anything goes wrong, such as your boiler breaks or your windows start to leak, it is you that will have to foot the bill – not a landlord.

So it is essential that you ensure you have a sensible budget that considers more than just your monthly mortgage costs, as well as an adequate emergency fund.

The good news is that if you have a pre-approved mortgage then you will at least be aware of the arrangement fee – some lenders have been known to charge as much as £2,999. This can be added to your mortgage amount but you will have to pay interest on the amount if you decide to do this.

Some lenders charge a mortgage-booking fee to reserve funds on a fixed or capped rate product and this can range from £99–£250, according to the Money Advice Service. It may be refundable if the mortgage application falls through before completion.

Before granting you a mortgage, your lender may also require you to pay for a valuation of the property when you submit your initial application. This is to ensure that the house in question will form sufficient security against their loan. The amount varies (usually between £150-£1,500) and is largely dependent on the size of the property.

It is sensible to have a building survey in addition to the valuation, which may well save you money in the long run by flagging up any problems with the property. Prices vary depending on how comprehensive you want the survey to be, but they can cost as much as £600. If a survey determines that work needs to be done on the property, you may be able to negotiate a reduction on the house price.

Then, depending on the price you pay for the property, you may be required to pay Stamp Duty Land Tax of between 0 and 12%. This tax is payable to the government and what you pay depends on the property price, and it can add a significant amount to your bill. For instance, on the average selling price of £275,000 for a family home, you will be required to pay 1.4% or £3,750.

You will also be required to take out life insurance so that, in the event of your death, the mortgage lender can recoup the value of the loan. Similarly, you will need buildings insurance.

But brace yourself, there’s more. You will also have to shell out solicitor’s fees of an average of £500–£750 – remember to budget for VAT on top of the price quoted.

Ignoring property problems

When it comes to viewing properties, it is often a good idea to bring a friend or family member with you. If you fall in love with a particular house or flat, they will be able to keep your feet on the ground and remind you to ask for the important details.

What’s more, the more often you look around the place, the more likely you are to spot potential problems before you move in.

If you do spot faults, you shouldn’t necessarily be put off buying, but you should at least get a professional opinion and use this to renegotiate the price.

It’s a good idea to find out if the home has cavity wall or loft insulation. Has the roof been repaired? Have any appliances or systems been replaced and, if so, when? It’s a plus if older plumbing and electricals have been updated. Moreover, some older appliances can’t be repaired because parts are no longer available.

“While it’s only natural to get drawn in by aesthetics, it’s important to think about the potential costs of running and improving the property too,” said David Bird, managing director of E.ON’s Residential business.

Research by the firm found that a third of house hunters place little importance on energy efficiency measures like the central heating system, double glazing or the energy efficiency rating when looking around a property for the first time – leaving you £2,524 worse off in the process.

Damp by windows

Does loft insulation need replacing?

Having unrealistic expectations

Be realistic with your expectations

“First-time buyers sometimes aren’t realistic about what they can afford,” said Adrian Anderson, director of mortgage broker Anderson Harris. “They may be renting in a fairly smart area but then find when they come to buy that they have been priced out and need to go to a cheaper, less appealing area.”

At the same time, try to buy for the neighbourhood, and then the house – where you live is key. It’s better to have the worst house on a great block than the best house on a bad block if you can afford it. You can always renovate your property, but have no control over your neighbours.

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