You are here: Ten first-time buyers mistakes to avoid

Ten first-time buyers mistakes to avoid

The millennials, those aged between 25 and 34, have been dubbed ‘generation rent’ as they struggle to buy their own home. Here are some common first-time buyer mistakes to avoid.

Getting stuck in the renting cycle

Perhaps the biggest mistake is to fork out huge sums in rent, making it an uphill struggle to save for a deposit. Chris Knapman, founder of The Mortgage Guy, advises young people to move back home and start saving. He said: “If you’re still young and living in rented accommodation, one of the best things to do is move back home and save the rent.  Not many parents are able to pay the deposit for their child but one way they can help is free lodgings, so the young person just pays a nominal amount for expenses like food.” Saving your rent each month will soon mount up to a sizeable sum and in a few years, you’ll have your deposit.

Failing to save

If moving back into your old family home isn’t an option, for example if there isn’t the space or you have children, it’s still possible to save a little bit of money each month. Mr Knapman’s other top tip is to sit down with an independent financial advisor who will look at your income and outgoings to identify possible savings. What are essentials and what can be cut back? It’s likely to involve some sacrifice, such as no expensive foreign holidays while you’re saving for a house deposit. After you’ve identified a realistic sum, set up a regular savings account. If you’re a spender rather than a saver, you may never get on the property ladder and escape the landlord. You need to decide what’s most important.

First time buyer mistakes
First time buyer mistakes

Not checking your credit score

You need a good credit rating to qualify for a mortgage. So, don’t forget to check your credit score before applying for a loan. Unfortunately, missed or late mobile phone payments, credit card or loan bills can damage your score. Maxing out a card – that is spending up to your credit limit – is also harmful as are payday loans. If your credit rating is poor, you may be refused a mortgage. So, make yourself mortgage attractive about a year before you apply. Try and pay all your bills on time, sort out your credit cards and reduce other debts.

Little or no credit history can also count against you as it makes it more difficult to predict future behaviour.  The good news is rent payments are now being included in credit scores, making it easier for tenants to build a credit history and jump on the property ladder.  Lenders will also need to see proof of your name and address, so make sure you’re on the electoral roll and bills are registered to your current address.  

Failing to get a pre-arranged mortgage

Buying a home is a major milestone and it’s understandable that many first-time buyers get excited and start searching for their dream home as soon they get a deposit together. While it’s good to go on lots of viewings, it’s deeply frustrating to fall in love with a property only to find out later that you can’t borrow the money from the bank.  Once you know you are credit-worthy, get a mortgage agreed in principle. This will give focus to your house-hunting as it will give you an idea of the price range that’s affordable. Moreover, the seller’s estate agent is more likely to take you seriously if you have a pre-arranged mortgage. 

Not getting independent mortgage advice

Going straight into the local branch of your High Street bank or building society for a mortgage is one of the biggest mistakes made by many first-time buyers. It’s best to get expert advice from an independent mortgage advisor to avoid missing out on the better deals. It could save you tens of thousands over the lifetime of your mortgage. It’s best to see an independent advisor - rather than one tied to a lender – for unbiased advice and a wider choice of products.

Failing to take advantage of Government funds.

If you are a first-time buyer, don’t forget to check out government schemes to help first-time buyers get on the property ladder. For example, if you save money into a Help to Buy ISA, the government will boost your savings by 25 per cent. So, for every £200 you save per month, receive a government bonus of £50.  Couples buying a home together can each save into their own Help to Buy Isa and get a total £6,000 bonus.  Other schemes involve giving a leg-up to people who can only scrape together a small deposit, such as Help to Buy equity loan, shared home ownership and starter home schemes. Each scheme has its pros and cons, so do your own research.

Skimping on a house survey

Buying a home is the most expensive purchase most people will ever make. Yet many first-time buyers make the mistake of scrimping on a proper property inspection.  This is usually to save money on the surveyor fees. But it’s always worth forking out for a property survey - even if the home is brand new.  While it might look great, there could be underlying structural problems which could end up costing you a lot of money to fix.  If the survey identifies a defect, and it’s not too serious, you can use it as a negotiating tool to knockdown the asking price. If it’s a major issue, such as subsidence, it may be better to look elsewhere.  

Failing to negotiate

Many first-time buyers feel nervous about negotiating a discount for their first property. This means they may end up paying an inflated price. As a first-time buyer, you aren’t locked in a chain; you won’t need to sell in order to move. This puts you in a strong position, so the seller may be willing to consider a lower offer, especially if they are in a hurry to move. Check if the property has been on the market for some time.

Being able to see beyond the surface

Even if you hate the avocado bathroom suite, it may be worth putting up with the outdated décor for a couple of years to get a house with the extra bedroom in the location you want. It’s easy to strip out old carpets and give walls a fresh coat of paint.  Don’t let minor imperfections which are easy to change put you off. After buying, you can save up to update the property to suite your individual tastes.  First-time buyers often have to compromise on something because their funds are likely to be more limited.

Not budgeting for all the costs.

Many first-time buyers under-estimate the cost of home ownership. While saving for a deposit and securing a mortgage are the most important steps, don’t forget you will have other expenses, including surveyor and solicitor fees plus moving costs. First-time buyers no longer pay stamp duty which is a big saving. But there are other costs after you’ve moved in, including council tax bill. Unlike renting, you’ll be responsible for making any repairs to the property and paying building insurance.

For many millennials, buying their first home is daunting but it need not be an impossible dream.