7 questions every first-time buyer should ask themselves before a single viewing

Think you’re ready to buy a home? Before you get caught up in browsing Rightmove like it’s a sport, you’ll need to get your financial ducks in a row.

For most first-time buyers, choosing a mortgage product is the first big financial decision they’ll make. There are many variables to consider, including different providers, fixed or floating rates and complicated fees and penalties.

‘This can be quite daunting,’ says mortgage broker Paul Collinson from Brick 2 Brick Mortgage Solutions.

The important thing, though, is to remember to do the prep before you even start to house hunt. Know what you can afford and what your options are, so you can make informed choices.

Give yourself time and before you are wooed by a kitchen island, breathtaking view or light-flooded conservatory, make sure you’ve asked yourself all the questions below. You can also enlist the help of a financial adviser to provide support.

Should you improve your credit record?

Your first step is to make yourself an attractive candidate.

Show potential lenders that you can handle repaying debt and have a good-sized deposit to go with your loan.

Check your credit record. This is what mortgage lenders will see when they decide whether you are a good candidate for a loan.

You can see it free by signing up with major credit reference sites such as Experian, ClearScore and Equifax.

Look for red flags relating to missed payments or other debt problems. If there are mistakes, write and ask for them to be corrected.

Ensure you’re on the electoral register at your correct address and (if you have never had one) consider taking out a credit card, spending on it and paying it off every month to prove you can handle debt.

How large a deposit can you manage?

Meanwhile, save towards a deposit. Most lenders require you to put down a substantial sum, although there are now some that allow you to pay a lower percentage of the property’s value or to ask a parent or other homeowner to guarantee your loan.

Those with large deposits usually have access to better mortgage rates, so save what you can.

You could turbo-charge your savings with a Lifetime Isa, which tops up your deposit savings with a government bonus.

What can you borrow?

Put your salary and other details into the government’s mortgage affordability calculator at Money Helper to see what is feasible.

Have you taken into account the extra costs?

Paul, at Brick 2 Brick, says that solicitors’ costs can be between £1,700 and £2,200 for buying a home and you may have stamp duty to pay as well if the property you are buying is worth over £300,000. You should also look at how you’d cope if rates went up.

The current average mortgage rate is five per cent and if you borrowed £150,000 at this rate your repayments would be just under £877 a month on a 25-year loan.

But as Alice Haine, personal finance expert at investment group BestInvest, says, the average two-year fixed mortgage was at 6.7 per cent two years ago, so anyone taking out a mortgage then would be paying about £1,030 a month.

What term should my mortgage be over?

If the mortgage repayments seem too high, then you may find that longer term will buy you breathing space.

The standard time to repay a mortgage is 25 years but if you opt for a longer-term one, you’ll be paying less per month, although you’ll pay more interest overall in the long run. 

Some people suggest an interest-only mortgage, where you don’t repay any of the loan, only the interest on it. These have fallen away in the past few years.

Although mortgages are cheaper each month, you won’t be paying any money back, so you will still owe your lender what you started with and will have to pay that back at the end of the mortgage term.

Furthermore, they are now only allowed in specific circumstances and if you have another plan to repay the bank.

Have you shopped around?

Mortgage deals vary and you should look around – and, of course, key among them is the interest rate – but there are a few more things you should consider before making your decision.

Here are some points you should consider while shopping about:

Fees: As well as the interest rate, you’ll need to consider whether the mortgage charges an upfront fee – some are around £1,000.

Rates: Just a few percentage points on the interest rate can make a huge difference over time.

Check rates online at sites such as Moneysupermarket and Moneyfacts, but also consider using a broker who will shop around for you and help you secure an agreement.

Many will not charge for this service as they receive a fee from the lender you end up borrowing from.

A broker is also useful if you have unusual circumstances, such as being self-employed or having a poor credit record.

Regulation: Always check any broker you use is regulated by the government regulator, the Financial Conduct Authority.

To fix or not to fix: Consider whether you want to fix your mortgage rate for two years, five years or even longer.

A fixed rate means your repayments won’t move for a period, but once that period rate is up, you’ll be moved onto a (usually expensive) standard rate unless you remortgage.

Fixed rates can give you certainty, but you won’t benefit if rates go
down, unless you are remortgaging at the time.

Have you sorted out an AIP?

The last step before viewing a property and putting in an offer is to get an agreement in principle (AIP) from a lender.

This shows that the lender has seen some financial information and performed a ‘soft’ credit check on you and is happy to lend to you, assuming no further nasties come up on further scrutiny.

You may need payslips and other identity documents to obtain this. It shows an estate agent or buyer you are serious.

If you’ve got all that in place, now comes the fun part.

You’re all set to find a house or flat in your budget and start the formal house-buying process, safe in the knowledge your financial foundations are in place.