What’s on the line for first-time buyers?

89% of first-time buyers describe the process as ‘really difficult’ with deposits, mortgage refusals, and purchases falling through being the biggest struggles. Find out how to make the process smoother.

First-time buyers are facing an array of difficulties due to the pressures of the market as they embark on their home buying journey. According to research, almost nine in 10 (89%) of prospective first-time buyers describe the process as ‘really difficult’.

A survey from challenger bank Aldermore revealed there are four key areas that first-time buyers struggle with when they’re aiming to buy the perfect starter home.

1. Raising a deposit

Four in 10 prospective buyers cited raising a deposit as their number one obstacle to owning a home. With home buyers taking an average of eight years to save a 20% deposit, according to Nationwide, it’s no surprise that it is seen as an intimidating task. To make the process easier, 27% of future homeowners are living with friends or family while they save, and a further 33% would consider it if it sped up the process.

2. Being refused a mortgage

Once a deposit has been saved, it’s not the end of woes for first-time buyers. While being refused a mortgage was the biggest concern for just 10% of prospective buyers, a quarter find that their application is initially refused. The findings indicate that it’s critical for first-time buyers to assess their financial health and credit score before approaching lenders.

3. Purchases falling through

Having secured a mortgage, almost half (48%) of first-time buyers find that the deal on their first home falls through. With the associated losses of a deal falling through mounting up to £2,200, it’s a costly setback. For the 10% that took three or more attempts to secure a deal on a house they wanted, they can find the expenses rival the deposit.

Of those that have experienced purchases falling through, almost two-thirds had to delay buying their first home as a direct result, with 23% putting off the milestone for more than a year.

4. The uncertainty of the house buying process

Next on the list of concerns is simply a lack of knowledge about the steps that need to be taken during the buying process. Some 9% said it was the hardest part of buying a house, with 52% stating it made them ill and 46% saying it caused tension and issues within their relationship. A lack of knowledge can make what should be a time for celebrating unnecessarily stressful but seeking support can help.

How to make your home buying process easier

Despite the challenges of getting on the property ladder, the research also found that, for most, it was worth it. Some 79% of survey participants said that owning their own home made them more financially stable, which is allowing them to plan for the future. For four in five people, it was also considered a bonus that they were no longer wasting money on rent and they believed they would be in a position to move up the property ladder when the time came.

Luckily, there are some steps you can take to improve your home buying process.

  • Saving for a deposit: The first hurdle for most first-time buyers is getting the all-important deposit together. With typical deposits being 10% of the property value, it can seem like a daunting task. However, using a Lifetime ISA (LISA), assuming you qualify, is one way to build your savings up quickly. Each tax year you can add up to £4,000 into the account and the government will provide a bonus of 25%.
  • Improve and maintain your credit score: Your credit score will dictate what mortgages are open to you. The better your credit score, the more competitive your interest rate will be, it can make a big difference to your monthly repayments and how long it takes you to pay off your mortgage. Taking steps to improve your score, such as clearing debt, making credit card payments on time and registering on the electoral roll should be a priority.
  • Assessing location and prices: If you’re finding that house prices are out of your range or you’re putting in offers that are being beaten, it might be time to reassess where you’re looking. A slight postcode change could mean you knock thousands off asking prices, making your first home more affordable.
  • Researching types of mortgages: If your first mortgage application is refused, don’t panic, there’s more than one option available. Just because one mortgage lender says ‘no’, it doesn’t mean that every bank or building society will take the same view. For example, some lenders offer mortgages that require lower deposit amounts or allow you to use a guarantor to access better interest rates.
  • Check available help: For first-time buyers that are struggling, it’s important to remember that help is available. Often your first port of call will be family. While some first-time buyers are lucky enough to be able to use the bank of mum and dad to gather a deposit, others aren’t but acting as a guarantor and simply offering advice can still be invaluable.

The government also provides support for first-time buyers, for example, through the Help to Buy equity loan scheme, which can give you access to up to 20% (40% in London) of the property value to minimise the mortgage needed.

If you’re embarking on your journey to buy your first home, talk to us for more information on how to make the process smoother from beginning to end.