Seven simple steps to become a first time buyer

You certainly don’t need to learn all the words used in the mortgage market, but here are some common ones that might come in handy on your road to homeownership.

 

LTV – Loan to Value – this is the amount you want to borrow via a mortgage compared to the value of the home you want to buy.

 

For example – the value of your first home is £200,000 and you need to borrow £160,000, then the LTV is 80%.

 

The larger the deposit you’re able to save toward the cost of your first home, the lower the LTV will be. And you’ll find that many lenders offer lower mortgage interest rates for customers who have saved a bigger deposit.

 

APR – annual percentage rate – the interest rate which is charged on your mortgage over the year and which will inform how much interest you pay as part of your monthly mortgage repayments.

 

AIP - Agreement in Principle – this is a statement from a lender to say that ‘in principle’, they’ll lend you a certain amount. It’s based on you providing them with some information, such as your income and outgoings, without having to go through a full mortgage application. At this stage it’s just an indication, you’ll need to complete a full application as part of the mortgage process.

 

Mortgage application – Whether you talk to a lender directly or an independent expert mortgage advisor, they'll talk you through your mortgage needs, covering your budget, when you’d next like to review your mortgage, any plans to overpay or future plans to move. This will enable them to build a picture of what’s important to you and recommend a mortgage based on your needs.

 

Valuation of the property – once your application’s been submitted the lender instructs a valuation of the property, this is to make sure that you’re paying the right amount for it.

 

Mortgage offer – once the valuation has been received and income checks have been completed a copy or your mortgage offer will be sent to you and your solicitor.

 

Conveyancing solicitor – you’ll need a conveyancing solicitor to cover all the legal aspects for you. They’ll complete checks to make sure you’re protected, and your purchase can go ahead without any problems.

 

House prices can go up and down based on lots of factors, such as the economy and where other people are looking to buy. It’s a good idea to have a look at the house prices for the area where you’d like to live. This will give you a good idea of what’s affordable for you.

 

The UK House Price Index is a useful set of government statistics showing you national price averages and price changes for different types of property. And if you have your heart set on a particular area, the data also tracks average prices in regions across the country, so keep an eye on how these figures change.

 

Knowing what you can comfortably afford is the next step.

 

Start by calculating your budget and setting a realistic deposit target, which typically ranges from 5% to 20% of a property’s value¹. For example, if you’re buying a home worth £250,000 then a 10% deposit would be £25,000. To make things easier, you can use our affordability calculator to help you work out how much you could borrow.

 

Keep in mind, the cost of buying a home isn't just the purchase price. It includes other expenses like surveys, product fees and legal fees. Our research recently found that many first time buyers are not aware of most of these costs².

 

That's why we've published a guide to some of the most common hidden costs for first time buyers.

 

Your savings will play a key role in your homeownership journey, so cultivating a habit of putting money away regularly, even in small amounts, will help build up that all-important deposit.

 

There are plenty of different savings accounts to choose from and some are specifically designed with home savers in mind. We offer a First Home Saver account that gives you a £500 bonus if you take out a mortgage with us. You can also access your money charge-free, subject to 60 days’ notice.

 

Another option is to choose a Cash ISA. Individual Savings Accounts (ISAs) provide a comparatively good rate of growth on your savings because they are tax-free.

 

When you apply to borrow money for a home, the lender will run a credit check on you. This is where the lender reviews your financial history to see how you've handled money and debts in the past. If you have a good history of taking on debt and paying it back on time it will improve your chances of getting that all-important mortgage.

 

Your score is an approximate reflection of how reliable you are with money – paying bills when they’re due, not maxing out credit cards, and not applying for too much credit at once can help boost your score.

 

Don’t worry if you’re only just starting to think about this. Anyone can improve their rating!

 

Have you considered how long you want your mortgage to run? A shorter mortgage term means you'll pay off your mortgage quicker, and usually with less interest to pay in total. But stretching the term over more years will make your repayments smaller and easier to manage.

 

If you go for a fixed-rate deal, it can be reassuring because you know exactly what you'll pay each month. With variable-rate mortgages, however, although you will pay more if rates increase, you could save money if rates drop.

 

Whichever route you go, it’s important you understand each option in order to make the right choice that gives you peace of mind. At Coventry Building Society, we’ll guide you through these choices with all the key information you need.