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5 steps you need to take if you want to buy your first home in 2022

If you’re hoping to buy your first home in 2022, congratulations! It’s a huge milestone and one that’s exciting, if a little daunting too.

You’ve likely been thinking about purchasing a property and saving a deposit for some time. As you near your goal, there are some things you can do to prepare for the day you put in an offer that could help smooth out the process. Whether you hope to move in soon or at the end of 2022, you should start thinking about these five steps now.

1. Start looking at the property market now

If you haven’t already, start looking at what is on offer in the area you want to move to. Are there any properties that suit your needs? What is the average price of homes in the area?

When buying a home, there are lots of considerations. From the commute to work to whether you want to take on a project, having a clear idea about what you’re looking for can make it easier when it’s time to start booking viewings. It can also help you have realistic goals with your budget in mind.

2. Maximise your deposit

You may already have a Lifetime ISA (LISA) that you’ve been using to save your deposit. If you do, maximising your savings over the next few months can give your deposit a boost. If you don’t have a LISA, it’s not too late to open one.

A LISA is an efficient way to save for your first home. Each tax year, you can place up to £4,000 into a LISA, where it can benefit from interest or investment returns. On top of this, you will receive a 25% government bonus to add to your deposit. If you open a LISA now, you can deposit the maximum amount for the 2021/22 tax year and a further £4,000 when the 2022/23 tax year begins on 6 April 2022. That will give your deposit a £2,000 boost.

Keep in mind that you will face a penalty if you withdraw money from a LISA for a purpose other than buying your first home before you’re 65. As a result, you should only deposit money you want to use to buy a property or that you plan to save long-term. To open a LISA, you must be over 18 but under 40.

While Help-to-Buy ISAs are now closed to new applicants, if you already have one, it’s worth contributing as much as you can to receive the government bonus of 25% of your deposits.

3. Review your credit report

Mortgage lenders will use your credit report to assess how much you can borrow and whether to approve your application. You can review your own credit report free and without affecting the score. There are three main credit reference agencies: TransUnion, Equifax, and Experian.

You should take some time to go through the report and ask the provider to update any mistakes you find. There may also be easy steps you can take to improve your score, such as registering on the electoral roll.

By looking at your credit report in advance, you may also be able to fix red flags that could put a lender off. If your credit utilisation is high, reducing the amount you owe could increase the chances of your application being approved, for example. Being aware of red flags can help, as you may be able to add a note to your application to explain them.

Changes to your credit report and score can take a few months to show up. So, taking this step well in advance of submitting a mortgage application makes sense.

4. Apply for a mortgage in principle

A mortgage in principle, also known as an “agreement in principle”, can give you an idea of how much you can borrow to buy a home.

When you apply for a mortgage in principle, it won’t carry out a hard credit search, and is not a guarantee, but it is still useful. If accepted, it will tell you the maximum amount you could borrow and show an interest rate you could be offered. This can help you see how a mortgage will fit into your budget.

Some estate agents may ask to see a mortgage in principle when you book a viewing or put in an offer. It helps to show that you are a credible buyer. A mortgage in principle usually lasts for three months.

If you’d like help applying for a mortgage in principle, please contact us.

5. Create a budget of other costs

For first-time buyers, the biggest expense they face is often the deposit. It can take years to save the amount you need, but don’t forget about the other costs of buying a home.

In your budget, be sure to include conveyancing, surveys, searches, mortgage application fees, and, where necessary, Stamp Duty costs. On top of this, you may also need to use a moving company or buy furniture for your new place. If you fail to factor these in you could face some significant expenses that may put pressure on your budget and slow down the homebuying process.

Buying your first home is exciting and we’re here to help guide you through the process. Please contact us to talk about your mortgage options and how to start the application process.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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