How to buy your first home in London this year
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It’s been hard to keep pace with house price rises in Camden for the past few years, making first time buyers despair of ever being able to get a foot on the ladder but there are mounting signs that 2017 could be a good year for first time buyers in London. Now is a good time to get prepared so you can swoop in as soon as your finances and the property of your dreams align.
1. Get on the electoral roll
There’s all sorts of scaremongering about moving too much having a negative effect on your credit rating but, says Colin Payne, associate director of Belsize Park-based mortgage broker Chapelgate Private Finance, “it’s all about being proactive each time you move, telling the council that you’ve moved and getting on the electoral roll each time.”
2. Visit a mortgage broker
Most brokers will offer an initial meeting for free. “I don’t think there’s a bad time to have a conversation with a broker,” says Payne. “If somebody has a half hour advice conversation with me now and doesn’t come back till 2020 I don’t care.”
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“And it doesn’t matter what your budget is. If someone’s on £15,000 and wants a £60,000 mortgage we won’t treat them any differently to anyone else.”
This initial meeting is the best way to find out how much you should save, what you need to improve and what you will realistically be able to afford.
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3. Check your credit rating
Find out what your credit rating is so that you can work on improving it if necessary and correct any mistakes as soon as possible. “There are a lot of old wives’ tales about how to improve your credit rating and people try to play the system by taking out multiple credit cards, for example,” says one St John’s Wood broker. “This can end up looking bad, which is why it’s best to get some advice from a broker early on.”
4. Get your paperwork in order
Typically if you’re employed you’ll need a form of ID (passport or driving licence); proof of address (for example a utility bill); the last three months’ personal bank statements; and three months’ payslips and a P60. If you’re self employed you should also have three years’ accounts or tax calculations.
5. Clean up your bank statements
Lenders aren’t as strict as they were when the new affordability restrictions were introduced in 2014 – if you have a one off birthday blowout meal it shouldn’t automatically count against you – but there are still a few major no nos. Never touch payday loans because these stay on your credit file for years.
Avoid online betting from your main bank account – it doesn’t matter whether you’re building a deposit from your gargantuan winnings, lenders view betting as risky behaviour. Stay within your overdraft limit and avoid bank charges for going over. It also doesn’t look good if you spend up to your overdraft limit each month – you need to show that you have a buffer.
It can also backfire to put your savings into a separate account as the lender will see a bank account that gets emptied each month. Consider transferring a portion of your savings to your bank account before you apply to show you have a decent buffer.
6. Have money
Get your mortgage agreement in principle before you approach an estate agent to view properties because many agents won’t show houses to people unless they know they can afford it.
However, buying agent Henry Pryor says that buyers shouldn’t feel under any obligation to use an estate agent’s recommended mortgage advisor. “Estate agents need confirmation of your ability to proceed but they do not need forensic knowledge of your financial situation by having their mortgage provider crawl all over your finances,” he says. “Remember, agents sometimes earn as much from introducing mortgage business as they do from selling houses. Be prepared before you visit the estate agent to avoid this situation.”
Make sure your deposit is also easy to access, not in an account where you need to give notice to withdraw funds. “If you’re ready you can then pounce and you can drive a hard bargain because you have the money and everything ready to go,” says Pryor.
7. Once you get a mortgage agreed in principle, do nothing
“Once we get the mortgage agreed a first time buyer’s next question is often ‘what shall I do next?’ The answer is absolutely nothing,” says the St John’s Wood broker. “Don’t buy a mobile phone, don’t take out any credit cards, don’t do anything, because we don’t know if your mortgage was agreed with a large margin or if it was borderline.”
8. Learn as much about the market – and any estate agents you’re dealing with – as possible
Make sure you understand the local property market and who’s in it – there’s lots of information available online nowadays. “Estate agents are not brokers, they’re agents acting for one party and it ain’t you,” says Pryor. “Get an understanding of what they know about the local market. Is this the only house they’re selling for three miles or do they have 60 per cent of every house in the parish?
“Some agents also have better reputations than others for being fair with buyers. It’s good to look at online feedback once you know who you’re dealing with although, sadly, if some bandit is selling the flat you want to buy you’ve got to deal with them.”
9. Be professional
“Estate agents shouldn’t judge first time buyers based on experiences with other first time buyers. We don’t do that here, but I have heard it happen in other places,” says Ben Felfeli of CH Peppiatt in Chalk Farm. “To be taken seriously by an agent I would probably avoid saying to the agent ‘I’ve been looking for two years and I’ve noticed the prices keep on going up and up and up’. The agent will think you’re never going to buy.”
It also helps to be specific to the agent you’re dealing with, advises Felfeli. Don’t walk in and say you’re looking to buy anywhere in London. “If you’re going to an agent in NW1, don’t mention a viewing you went on yesterday in south London. You don’t have to lay all your cards on the table,” he suggests.
Double check everything you’re told and confirm everything by email so there’s a paper trail if it all goes wrong.
“Don’t be all fluffy and vague. Estate agents and house sellers feel confident if you look like you know what you’re doing. This is almost certainly the most expensive thing you’ll ever buy and you need to be careful, sober and mature,” says Pryor.
10. Woo the agent
Home baked brownies might work but money is probably more effective. “Estate agents are paid by the vendor so you could suggest that when you come to sell the property you’ll make sure it’s through the same agent, or if you plan to rent it out you’ll do so through them,” suggests Felfeli. “You might need to woo the agent a little bit and build a rapport with them. Don’t make jokes about how awful estate agents are.”
11. Engage with the seller
You may plan to knock down and rip out the entire interior of your new home but you don’t need to tell the seller that. “Lots of people would like to sell their property to somebody who’s going to enjoy it as they have,” says Pryor. “Some people will forgo money if they feel that the people that are going to be there are going to carry on living and enjoying the place that they’ve called home for many years.”
As a result, less experienced buyers might have more success buying from an owner occupier, rather than a professional developer or investor. Eve Mitchell, 31, a charity worker, learned the hard way when buying her first home in north London. She says: “I would avoid buying from a property developer. They do properties up cheaply and sell them above value and have no personal connection to the sale so they can be difficult to work with. If you are dealing with another person trying to sell/buy a home they are more sympathetic to the buyer.”