EDUC Mortgages Blog

5 Expert Tips for First-Time Buyers

by | Mortgage Advice

Are you gearing up to buy your first home? Purchasing your first home is an exciting prospect. There is nothing like the feeling of turning the key in your own front door for the very first time.

As a first-time buyer, the journey can be both exciting and daunting. In this article we aim to highlight a few of the common pitfalls that can easily turn your house hunting dream into a rather squeamish nightmare.

Whether you are ready to embark on your first-home buying journey, or you are at the early stages of thinking about it, it is highly advisable to speak to a mortgage broker. Your broker can advise you on how to get yourself mortgage ready and have your finances and documentation in order so that you can strike when the time is right and have the best chance of securing the property of your dreams.

Keeping these 5 tips in mind as well as seeking early professional advice will help guarantee a much smoother first-time buyer journey.

 

1. Avoid Unrealistic Expectations

You drive through your dream neighbourhood every day. This is where you are going to live. A house has come up for sale and you are already imagining yourself in the garden on a sunny day and dreaming of your new commute to work. But have you done your research? Discovering that your dream location and your ideal property is out of your price range can be extremely disheartening. More so, if you have already over enthusiastically placed an offer with no research or financial planning advice.

Establishing your affordability early in the home buying process and having a clear price range within which to operate helps avoid any such disappointment and puts you on a more realistic path to buyer success.

Remember, just because you love it doesn’t mean you can afford it! Sometimes your first home isn’t your dream home but a stepping stone to getting there.

Getting Approval in Principle (AIP) from a lender before starting your property search helps you clarify your borrowing capacity. Once you have a clear budget in mind, you can then limit your search to the neighbourhoods and properties within your price range. Other benefits of having an AIP in place are removing some of the stress around and speeding up the loan offer process once you have gone sale agreed on a property you can afford.

Avoid having a too narrow vision of the exact location in which you want to live. You might find a much better property and get more value for money by expanding your search area by a few miles.

 

2. Get Your Finances in Order and Do it Soon!

There are very few people who can afford to buy their first home with cash. You will therefore need to avail of a mortgage – a long term loan from a bank or other lending institution on which you pay interest over the term of your borrowing.

As well as a 10% deposit required from all first-time buyers, to secure a loan from a lender you will need to demonstrate an ability to repay it. This means having your financial affairs in order and being able to show clean financial statements for at least 6 months prior to loan application. Red flags to a lender include:

  • Missed repayments on credit cards or other personal loans.
  • No demonstration of monthly savings.
  • Unpaid direct debits and standing orders.
  • Evidence of gambling.
  • Recurring transfers that can be deemed as a financial commitment (e.g. sending money home to abroad if a non-national for example).
  • Any unusual or out of the norm large transactions.

If applying for a joint mortgage with a partner, spouse, relative or friend, this applies to both sets of finances.

A mortgage broker will assess your finances, highlight any areas for improvement, and help you plan a course of action to get mortgage ready. How much time this will take varies from person to person. You might be mortgage ready tomorrow but it could take someone 1-2 years particularly in the case of self-employed individuals. Your mortgage broker will be able to give you a realistic timeframe in which your finances could be in perfect loan-approval-ready order!

3. Be Aware of All of the Costs Involved in Buying a Home

Many first-time buyers focus on the purchase price of a property, forgetting about the other additional costs associated with buying a home. Having a clear picture of ALL of the costs you are likely to incur will help you budget more effectively, preventing you from overextending yourself and ending up financially strained.

Additional costs to consider in the property-purchase process include:

o Stamp Duty 
Stamp duty is calculated as a percentage of the purchase price. In Ireland, stamp duty is calculated at 1% for properties values at under €1million and 2% for properties above this value. The exception to this is for new-build properties where the Stamp Duty is calculated at 1% of the base price (excluding VAT).
o Legal Fees
A solicitor plays a vital role in the home-buying process and is necessary from the point of going sale agreed. Your solicitor will handle all legal matters including reviewing contracts, ensuring legal adherence, facilitating the transfer of funds, and overseeing conveyancing – the legal transfer of property from seller to buyer. While fees may vary, you can expect to budget between €1000 and €3000 to cover this essential cost.
o Valuation Fees
A property valuation is necessary for mortgage approval as it establishes the market value of a property, ensuring the loan amount matches the property’s worth. This is carried out by an authorised valuer whose fees can vary depending on property location and size. You can typically expect to pay between €80 – €150 for a valuation to be carried out.
o Mortgage Protection
Having a mortgage protection policy in place is compulsory before a mortgage can be drawn down. This legally required insurance guarantees that your mortgage will be paid off in the event that you (the home-owner) die during the term of the loan. A benchmark for this monthly expense is in the region of circa €30 or less.
o Home Insurance
Another essential insurance that must in place prior to mortgage draw down is home insurance. The cost of this protection can vary dramatically depending on the location, size and age of the property as well as the value of the assets that it contains.
o Surveys and Inspections
Not to be overlooked, certain surveys and inspections are essential in the property purchase process. A structural survey is the most common type to be undertaken. Carried out by an engineer, it examines whether the property is suitable and safe to live in. It is delivered via an engineer’s report and may also include a snag list where issues are uncovered. Fees for a structural survey range from €400-800 for a mid-size residential property to between €800-1500 for larger or more unique properties.
o Land Registry Fee
Yet another element of the home-buying process looked after by your solicitor, the land registry fee covers the cost of having your new property registered in your name. If you have availed of a mortgage, your lender’s name will also need to be registered against the mortgage deed. The fee depends on the value of your property but you can expect to pay between €700 – €800.
o Renovations and Repairs
Less likely to be an issue in newer properties, you may need to set aside funds to address any snags identified in a survey or inspection (should you still wish to proceed with the purchase of the property depending on the severity of what was uncovered). You may also want to make cosmetic changes to your new home to align better with your design aesthetic and way of living.

 

4. Think of the Future as Well as the Now

You are a happy duo and have just fallen in love with a house within a reasonable commute to work and convenient for your social activities. Great! Suits us right now – let’s buy it!

But what about a few years’ time? Have you thought of the future and what that might bring? Purchasing a property that can adapt to a changing lifestyle is a wise move and can save a lot of stress and upheaval should your circumstances change sooner than you think.

Also consider the resale value which can impact your longer-term financial security. Your home is also likely to be your biggest financial asset and purchasing a property that is likely to retain or increase its value over time is a smart financial decision. Evaluate the location, amenities, and development potential outside of your own requirements in the here and now and you are more likely to make a very wise and profitable investment in your future.

5. Do Not Underestimate the Value of Professional Guidance

The mortgage and home-purchase process can be challenging for first-time buyers. The language is unfamiliar, the rules and regulations strict, the options many, and the potential for disaster huge.

Seeking the early advice of a professional mortgage broker, used to navigating the complexities of the process is without doubt one of the smartest decisions you can make as a first-time buyer.

Your broker works on your behalf to provide expert guidance, present all of the options available to you, and help you navigate the entire home-buying process working alongside your solicitor to help you drawn down your mortgage loan and close the deal on the house which will soon become your home.

 

Buy Your First Home With EDUC Mortgages

At EDUC Mortgages, we provide expert and tailored support to help you navigate the complexities of the mortgage process. Contact us today for a free consultation and let us bring you a step closer to turning the key in your new front door!