What First-Time homebuyers need to know
Buying your first home is an exciting time when you plant roots for your future. It also comes with a hefty price tag and will most likely be your largest investment and biggest decision to date. With so many moving parts to the process (including moving all your things), knowing the facts can truly be the key to opening the front door of your new home. This month, Granite and TREND Transformations has put together an easy-to-follow first-time homebuyer’s guide to sort out the steps you’ll need to know when buying your first home.
Speak to a mortgage lender―or two or three
You’ve decided it’s time to buy your own home. But how do you know if it really is the right time or if you can afford it? Speaking with multiple lenders is the best way to explore your financial options to assess if buying a home is financially possible. The goal is to get pre-approved for a home loan. You’ll receive an estimate of the size of the loan you qualify for, along with the interest rate. Pre-approvals are typically good for 90-to-120 days. There is a significant amount of choice of mortgage and paperwork you’ll need to submit to the lender, so it’s best to start gathering it all early so you’re ahead of the game.
Here’s what you’ll need:
Proof of identity and address
All financial firms are required by law to get proof of identity and address.
You need at least one proof of identity and one proof address for each person on the mortgage.
List A – Proof of Identity – normally one of the following
- Current Full Signed Passport (or EU state ID card).
- Current EU Photo Driving License (with any paper counterpart).
List B – Proof of address – normally one of the following
- Latest Residential Mortgage Statement.
- Latest Council Tax Bill.
- Bank/Building Society statement dated within last 3 months.
- Utility Bill dated within the last 3 months (not a mobile phone bill).
- Current EU Photo Driving License (with any paper counterpart).
- Current UK Paper Driving License.
Proof of income
Each lender has different requirements but if you can get the following then you should be covered for whatever mortgage you decide on.
Employed proof of income
- Latest 3 months’ payslips.
- Latest 2 years’ P60s.
Self Employed/Own Company proof of income
Proof of income for the self-employed (including company director/owners) can be a little complex so we have prepared a special guide for this topic, click here.
Three months bank statements, it needs to be 3 full month. If you are downloading them, make sure that you get “previous statements” (normally showing your name and address).
Choose the right loan for you
You will be amazed at how many types of home loans are out there today. We will discuss some of the more popular ones so you can determine which loan is best for you.
Fixed rate mortgage—Just as the name implies, this traditional mortgage is fixed at an agreed rate and can be spread out for a determined number of years, including a 5-year, 10-year, 20-year, 30-year, and even 50 years. Just remember: The longer the time frame, the more interest you will be paying.
Interest-only mortgages—Don’t let the name fool you. Interest-only mortgages do not mean you only pay the interest on the loan. In fact, it means the loan has the option to make an interest-only payment. Although this type of mortgage may keep your payment lower than a principal and interest payment, it’s important to know your money is only going toward interest and not being applied to the principal amount to pay down the loan.
Set a budget
Now that you know the amount of loan you qualify for, it’s time to crunch the numbers to see if you can afford to buy your first home. Here are the top three questions to keep in mind:
Do you have enough money to make the mortgage payment? This may sound like an obvious question, but keep in mind there are other payments that come along with paying a mortgage. This brings us to our second question.
Do you have enough income to pay the property taxes and homeowner’s insurance? Did you forget about those? You can have those payments rolled into your mortgage payment, so it’s important to factor those costs into your monthly payment. If the payment is out of your budget, now may not be the right time to buy.
Do you have enough money to maintain the property? Owning your own home comes with great responsibility. If you’ve been renting, then you know the cost and responsibility of repairs has always been on your landlord. Homeowners are their own landlords. With that comes the responsibility of maintaining your home and keeping it in good repair. Be sure you have enough money saved for unexpected repairs, or you could find yourself in a bad situation.
Skip the online search and choose a real estate agent
It may difficult to resist the urge to search for your dream home online, but experts agree it’s best to work with a professional real estate agent instead. Here’s why:
Browsing online listings can tempt you to fall in love with a home that is out of your price range. This is not the time to want something you can’t afford, especially when you’ll be paying for it over the next few decades.
Working with a professional takes the guess work out of the home-buying process.
There’s no cost to working with a estate agent. (That won’t happen often when buying your first home.) This is a great way to get free advice from someone who knows the industry and can advise you on first-time homebuyer tips.
(Tip: When searching for an estate agent, be sure to check out what neighbourhoods they cover, how many years of experience they have, the number of homes they’ve sold, and most importantly― read the reviews carefully.)
Determine where you want to live
House hunting is easier when you narrow down where you want to live. Remember, the greatest neighbourhood might not be in your best interest. Here are some things to consider:
Commuting to work
Proximity to family and friends
School district if you have school-aged children or are planning on starting a family.
(Tip: Explore your favourite neighbourhoods to get a feel for the community. You may even want to dine at some local restaurants or check out the local shops. And make sure you explore at different times of day so you can understand the area both at night and during the day)
A ‘project’ ―to buy, or not to buy
Buying a project may be a tempting option since you can potentially add a lot of value and hence increase your ROI rapidly. A project property can put you in a larger house in a desirable neighbourhood that you would not have otherwise been able to afford. This decision can go either way, however, depending on some important factors.
Here are some home buying questions to consider before buying a project:
Do you have the vision and creativity to see the possibilities of what an older home has the potential to become?
Do you have the money needed to put into the renovations?
Do you have the skills to do some of the work yourself, or enough cash on hand to hire someone?
Do you have the time to commit to the renovation?
Do you have the patience to live in a work zone while renovations are going on?
(Tip: If you answered “yes” to most of the above questions, then buying a fixer-upper may be the way to go.)
Decorating and renovating your new home
This is the fun part, when you can finally turn your house into a home. Putting personal unique touches and creative decorating into play starts with a game plan.
Here are some decorating tips to help you get started:
Start with your bedroom—Did you know you spend almost one-third of your time in your bedroom? Getting your bedroom up to par is a great way to set the tone for your home. If you’re on a tight budget, you can start by buying quality bedding. It can make all the difference in creating a beautiful sanctuary.
Resist the temptation to buy everything at once—Now that you’re in your new home, it’s normal to want every room “just so.” The reality is you just spent a large amount of money to buy your home, so going overboard by furnishing it too soon can cause a financial drain. (Remember: You must have enough money to make the payments!) It’s best to live with the space for a few months to get a feel for what you really want and where you want it to go.
Remodelling-kitchen and bath renovations—Chances are you’ll want to spruce up the kitchen and baths at some point. These renovations can be costly but there are ways to refresh these rooms inexpensively without busting your budget. Switching out cabinet hardware or lighting fixtures in a bathroom go a long way in giving the space a lift without going all out. If your budget allows for a bit more renovating, then Granite and TREND Transformations is your go-to partner for beautiful replacement doors and today’s most trending and popular worktops and surfaces. With most jobs completed in one day with little or no demolition, you can transform your new home into the space you’ve always dreamed of.
(Tip: Declutter when packing up your old place by selling or donating things you haven’t used in a while. This will not only save you time and money with your moving expenses, but it gives you a fresh start.)
Everyone at Granite and TREND Transformations wishes you all the best in buying your first home. Contact us today to learn more about our beautiful etheriumTM by E-Stone surfaces, or to schedule your free in-home design consultation.
Happy house hunting!