Lockdown: preparing to buy your first home

At the time of writing (26th April 2020), coronavirus has effectively shut down the housing market. If you were hoping to buy a home this spring/summer, it looks likely that you’ll have to wait a while longer than you’d hoped. BUT, there’s plenty you can do to make sure you’re in a strong position which is particularly important as there’ll inevitably be a huge amount of pent up demand when we come out the other side. Plus, government initiatives designed to get people into their first home may well be reviewed in the coming months, so being prepared to act quickly could save you a few grand.

Get an approval in principle/decision in principle

Whilst you may struggle to find a bank or building society willing to give you a mortgage at the moment, you can certainly find out how much you’re likely to be able to borrow. An AIP (sometimes called DIP) is an informal confirmation from a mortgage lender that indicates how big a mortgage that you’ll be able to get.

It’s really simple to get hold of – you just input a few details including income and outgoings and the max amount that you’re likely to be able to get a mortgage for is calculated. This is helpful for providing A) an understanding what you can afford and B) proof to an estate agent that you can afford what you’re offering (not useful right now, but will be once the market reopens).

AIPs can be gotten hold of either directly from banks/building societies or through a broker – a quick Google will bring up loads of options. They’re not a commitment at all and you can get multiple AIPs through different mortgage lenders if you want to compare how much you can borrow. Most will involve a soft credit check which won’t leave a mark on your credit history so there’s nothing to lose.

The validity period of an AIP will vary but it’s typically between 30 and 90 days so with a bit of luck, your AIP may still be valid when the housing market reopens. And if not, an AIP can very easily be extended.

For now, the main benefit of getting an AIP is so that you can start putting a realistic filter on your Rightmove searches rather than spending your time noseying at the mansions in your local area. Here are some tips on how to decide what you need from your first home.

Get your money in order

It’s so easy to put your head in the sand with this stuff but sorting out your finances may not only save you a wad of cash, but it could also be the difference between waiting 6 months and 3 years before you’re in a position to buy. Here are a few pointers to get you started.

  • ‘Pay yourself first’ – something that massively helped me save for a deposit was to have a standing order from my current account into my savings account on payday. If you give this a go, you’ll find that after a few months you’ve accidentally saved a big ol’ chunk of cash towards your deposit and probably have bought a lot less stuff that you don’t need. Setting yourself a monthly savings goal is really helpful too.
  • Make your savings go further – interest rates are rock bottom at the moment so you’ll likely be earning diddly squat in your bog standard current or savings account. One way to boost your savings towards buying your first place is to open a lifetime ISA (LISA). It’s won’t be for everyone so make sure you do your research but by saving in our LISAs we got a £6,300 bonus towards our deposit which obviously made a huge difference.
  • Reduce your borrowing – if you’ve borrowed money it’s a good idea to reduce this where possible, particularly if you’re paying a high rate of interest on it eg: payday loan, rent-to-own products, credit cards with big APRs. The more money you owe, the smaller mortgage that you’ll be able to get as your existing borrowing will be seen as a commitment.
  • Keep an eye on your credit score – if your credit score is crap then you’ll have a very limited choice of mortgages and will likely be required to pay a premium. Download one of the thousands of apps that allows you to check your credit score and if it comes out poor, take the measures that it suggests to ramp it back up.
  • Prepare for other costs – when the time comes to buy, your deposit will be your biggest cost. However, there are several other costs involved in buying a house that it’s important to be aware of as they can add a few grand. You can read about these costs here.

Educate yourself!

There’s no need to spend years studying what buying a house involves; however, it’s well worth at least familiarising yourself with the process. The main benefits of this are to avoid any nasty surprises and give yourself the best possible chance of securing the house you want. Here are some ideas as a starting point.

  • The stages of buying a house – from viewings all the way through to moving in day. You can read about the process of buying our house here.
  • Direct through bank/building society or mortgage broker – you can arrange a mortgage through a high street bank/building society or through a broker. Which is more appropriate for you will depend on your financial circumstances and how confident you are with searching for mortgages yourself.
  • Basic mortgage principles – a lot of people seem to think mortgages are scary but they’re really not. Realistically, you’re likely to have a mortgage for around half of your life so spending an hour or two understanding what they are and how they work is worth it!
  • Read the first time buyer advice on this blog 🙂

Keep an eye on what’s available

Just because you can’t buy right now doesn’t mean you can’t window shop. Having a big ol’ browse of what’s available on Rightmove is not only a fantastic hobby, it will also help you work out what’s available in your preferred area and what you’re able to afford. We came across our place through a Rightmove alert so whilst you won’t get many alerts at the mo, it’s worth setting-up alerts now so that when the market does come back you’ll be (one of) the first to know.

Remember that the listing prices on Rightmove are purely what the seller thinks their house is worth and not what it’s actually worth. To build a picture of what houses in your preferred area are objectively worth, the Zoopla ‘sold prices’ feature allows you to see, well, sold prices, for pretty much every house in the UK going back years. If nothing else, it’s a great way to be nosey.

If you’re still not sure where you want to live, you might want to read this post to help narrow down your favourite areas.

Nobody knows when the housing market will return to relative normality, but all of these tips are valid regardless. If you are hoping to get your first house soon then bear in mind that there’ll be a shed loads of people wanting to buy at the same time so make sure you’re on it!

When it does come to buying your first place, here are my top 10 tips for giving yourself the best chance of making your dream home yours.

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