Guide to buying your first home

Firstly, just to dampen your spirits a little, consider this question very carefully: Is buying your best option? Could you be better off renting for a longer period of time before committing to owning property?

Consider all the advantages and disadvantages of buying property:

Advantages:

• Avoiding paying ‘dead' rent money
• Increasing the value of your property over time and eventually making a profit in the re-sale
• No longer having to deal with landlords
• Having the option of keeping your mortgage repayments at a fixed rate year after year (while rent will often increase annually)

• Paying for unexpected repairs and maintenance, as opposed to your landlord dealing with them
• Affordability – if you can't keep up your mortgage repayments your home will be repossessed

If the answer to the big home-buying question is still a resounding yes, then read on.

Saving for a deposit

There are some fairly obvious benefits to having a sizeable deposit when you start the home-buying process. The obvious one is that it will make it that much easier for you to get a mortgage. Another advantage is that you will immediately have equity in your property. The bigger your deposit, the more protected you are in the event of your property dropping in value; the property would have to experience a drop in value the size of your entire deposit before you were in negative equity.

The first obvious step to saving a deposit for your home is to write yourself a budget. The second obvious step, and the one that will no doubt prove the more difficult, is sticking to that budget.

Evaluate all of your expenditure. Determine what is necessary (rent, council tax, etc) and what you could possibly cut back on or eliminate altogether. Ask yourself:

• Do I really need cable television?
• Could I eat and drink at home more often instead of going out?
• Do I make a lot of unnecessary and/or expensive phone calls?
• Do I have too many credit cards? Should I consolidate my debt?
• Do I actually use that expensive gym membership?
• Do I really need that new book/magazine/car/plasma TV/outfit etc, or do I just want it?

When you're talking about purchasing an item such as a house, it seems silly to be talking about comparatively small things like magazines and nights out. But in the scheme of things, all those small things can add up and make a huge difference to the size of your deposit when you're buying your first home.

If you're absolutely unable to save a decent deposit or you're concerned about being able to make the repayments, there are still options. Why not try pooling your resources with friends? Alternatively, new homes developers sometimes offer gifted deposits to help sell their properties.

Getting a mortgage

Searching for and selecting your home

• Location.
  How critical is your home's location relative to local schools, the hospital, commuting distance to your work, accessibility to public transport and closeness to family and friends? Think about what's going to be most important to you in an area: a low crime rate? Proximity to pubs, restaurants and entertainment? Make a list of your priorities.
• Property specifications.
  Detached or semi-detached? Freehold (you own the house and land) or leasehold (you have exclusive possession for a specific period, but not ownership)? How many bedrooms do you need? How many bathrooms? How big do the rooms need to be? Do you need off-street parking? Are the windows double-glazed?

Making an offer and negotiating

When you make an offer on a property, keep in mind that you should treat the asking price as a guide. The seller is probably not expecting you to match their asking price, but be prepared for them to counter your offer.

Deciding on an opening offer can be tricky business. Too low and you risk alienating the seller or being outbid. Too high and you could end up paying too much for the property. Firstly you should determine the maximum amount you are willing to offer, and then consider how low you'd like to start your offer on the property.

To determine this amount, it would be helpful to glean as much information as you can about the sellers, the house itself and the prices other homes in the area have sold for.

Some important questions to ask your estate agent include:

• How long has the property been on the market?
• Have any offers been made? If so, why were they withdrawn or not accepted? If not, why not?
• Why are the owners selling?
• Have they bought another property yet?
• When are they looking to move?
• What is and isn't included in the property? (For example, furniture, land, garage, fittings etc)

The answers to these questions could potentially give you some leverage in the negotiation process.

Also consider your own selling points as a buyer. As a first-time buyer you have no property to sell, and so presumably you're able to move quickly. This will be looked upon favourably by any seller who has already purchased another property or is in the process of doing so.

Do you already have a mortgage offer on the table? If so, the fact that you can progress as soon as your offer on the property is accepted is definitely a plus.

Other expenses to keep in mind

The price of your home isn't the only cost involved in buying it. You also need to think about home insurance, stamp duty, furnishings, moving costs, solicitor's fees, VAT etc.

A lot of buyers, especially first-timers, go over budget on the purchase of their house simply because they haven't factored in stamp duty.

Stamp duty is a tax levied by the government on the transfer of properties. The tax rates for 2008 are 1% on houses priced between £125,000 and £250,000, 3% on purchases between £250,000 and £500,000 and 4% on properties purchased for over £500,000.

If the purchase price of your house is less than £125,000 you won't need to pay stamp duty.

Home Information Packs (HIPs)

Home Information Packs (HIPs) were introduced to the UK in December 2007. Since then, every property being marketed in England and Wales requires a HIP, and as a buyer you should request one for the property you're interested in, and make sure that it has all the compulsory documents. These include:

• Home Information Pack index
• Energy performance certificate
• Sale statement
• Standard searches
• Evidence of title
• Additional information for leasehold and commonhold sales, where appropriate

In addition, a number of optional documents may be included in the HIP, such as:

• Home condition report
• Legal summary
• Home use/content forms
• Guarantees and warrantees for work previously carried out on the property
• Environmental or flood risk search
• Any other information that may be of interest to prospective buyers

As a buyer, you should ask whoever is marketing the property to show you a copy of the HIP. To learn more, read our Guide to HIPS when buying a property.

Survey

Once you've found the home you wish to buy, you'll most likely need to hire a chartered surveyor to check that the building is structurally sound and that it's worth the money you're investing in it.

Your mortgage provider will conduct their own valuation, and it can be tempting not to bother engaging your own surveyor – they are, after all, expensive. However, it's strongly advisable to really consider having your own independent and more detailed survey carried out. In the long run, you will have greater peace of mind knowing that any major faults in the property have been uncovered.

To learn more about this process, read our guide to choosing a surveyor and find out what your surveyor will do for you.

Legal process

Again, it can be tempting to cut out the cost of a property solicitor (conveyancer) and manage this part of the home-buying process yourself. This is very risky, especially for first-time home buyers. It's highly advisable to engage the services of a conveyancer, who will handle numerous tasks including drawing up and explaining contracts, dealing with the Land Registry and managing Stamp Duty charges, among other things.

For further information on the legal process when buying a home, read our guide to choosing a conveyancer and find out detailed information on what your conveyancer will do.