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Buying your first home: a step-by-step guide

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For many would-be first-time buyers, a first home remains tantalisingly out of reach because you’re not able to raise the deposit that lenders require.

The good news is that lending criteria are finally beginning to ease. A growing number of lenders now offer 95% loan-to-value mortgages, where the buyer has to put down a cash deposit of only 5% of the value of the property. But to get the best deals, you’ll need a really sizable deposit – 25% of the purchase price, or even more.

1. Start by planning for a deposit
Getting a sufficiently large deposit together may be hard work, but being able to put a sizable cash sum down on the property has advantages. For one thing, more and better mortgage deals will be available to you the larger your deposit is. Our impartial advisers can talk you through the size of deposit you’d need, and will tailor their advice to your personal circumstances.

2. Consider the additional costs
Remember that you’ll also need cash to meet the additional costs of buying a home. As a first-time buyer, if the home you’re purchasing is worth more than £300,000, you’ll need to pay stamp duty, so be careful looking at the houses for sale. You’ll also need to factor in mortgage arrangement fees charged by your lender. There will also be legal fees to pay your solicitor, plus charges for a survey of the property and Land Registry fees for registering your ownership of it. And don’t forget you may have to find money to furnish your new home.

3. Identify the right savings vehicles
Think carefully about how you save. Products such as bank and building society accounts offer greater security but currently pay very low rates of interest. You might also want to look into savings schemes like the Help to Buy ISA which could help you get your foot on the ladder.

4. Investigate the mortgage market
First-time buyers have access to all the same mortgage products as other borrowers and some lenders offer them special deals from time to time. It’s worth looking out for these.
5. Talk to your family
Several mortgage lenders offer products aimed at families, where parents or grandparents want to help their children out with a home purchase. These include guarantor mortgages, where a family member agrees they will make the repayments if the borrower can’t, and joint mortgages, which are for children and parents buying together. Family offset mortgages aim to use parents’ savings to help reduce children’s mortgage costs.

6. Consider shared ownership and shared equity schemes
These are similar but different ideas. With shared ownership schemes, typically offered by housing associations, you borrow enough to buy a proportion of the property – say 75%. Then you pay rent on the remaining proportion. With shared equity schemes, you buy the whole of the property, but you take out a loan to fund the deposit as part of the arrangement. What you owe rises in line with any rise in the property’s value.

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