Advice for (lone) first time buyer (please!)

[DepartFromTheIllegitimateChild]

Thanks to having moved back in with my parents for some months during the pandemic whilst working from home, I will have managed to save up enough for a house deposit sooner than an anticipated. (I know I am very lucky to have financially benefitted from 2020, I don't take it for granted)

It turns out that the prospect of buying a first property alone is quite daunting though. While I've been trying to think through the practicalities and consider every possible pro and con of every option I don't quite trust myself to do this perfectly so I thought I'd pop a bit of info here and hopefully benefit a bit from the wisdom of the great MN hive mind.

Requirements:
Location:

• Under two hours from London by train, I don't drive and although I work remotely now, easy access to London is important as it's likely that if I move jobs I may need to be in an office there semi-regularly (not everyday, I'd never go back to that)
• As I am single and under thirty I want to live somewhere (or with very easy access to somewhere) that is populated with a good proportion of interesting and clever young people for me to date and make friends with.
• I do not want a very towny town, either seaside or proper beautiful country would be very nice to have with in walking distance. I run and want a dog so scenery and pedestrian routes are important! - Could be swayed by investment potential, if somewhere is "up and coming" and flip side of that - would not want to buy anywhere risky where property prices are inflated stupidly and may crash (I know this isn't likely anywhere and that people have been saying it about London for years but the world is so weird at the moment it seems like anything is possible)

Property:
- I don't mind living somewhere tiny, I don't want it to be horrible but tiny is fine. And so much better than living with strangers in a house share (realistically what I expected to be doing for a few more years)
- Must have some form of outside space though as absolute non-negotiable for me is potential for (very small) dog ownership.
- As per above, from what I've gathered, I will almost certainly need freehold as otherwise chance of dog potential much lower (?)

Money stuff:
- I will have a deposit of around £30,000
- My salary is around £50,000 (including bonus/equity so not exact)

Conclusions I have come to that may be wrong:
- A reasonable budget would be £230,000 (working on borrowing 4 * earnings). But maybe getting a mortgage alone right now will be tricky,. especially as I don't think I have a credit score? (need to Google how to check this!)
- I have spent lots of time on Rightmove and know there are teeny tiny little flats with access to garden by the sea in Brighton/Hove that basically tick all of my boxes. I'm also thinking that this might be a sensible option as I would then very easily be able to sublet/ Airbnb as so many students/ tourists if I ever needed/wanted to go somewhere else for a longer stretch.

Right now I am quite Brighton focussed but I would quite like for this to not be my only option. I have spent lots of time researching other seaside towns like Eastbourne etc and while I can see they might work for a young family, maybe not so much for someone looking to date/ socialise with people in their thirties?

I'm open to any suggestion really --- any town, any place, anything. If it seems like I'd be better off renting for longer and saving up more or waiting until the property market is more stable, then totally willing to consider that too.

Oh and because of the whole "situation", I wouldn't want to actually move into somewhere until May/June-ish, when (fingers crossed) we will basically have things under control. Not sure that makes any difference to anything but I've read some stuff about potential impact of end of Stamp Duty holiday impacting prices etc.

If anyone has read all of this, then thank you. Any pointers/musings will be greatly appreciated.

My salary is around £50,000 (including bonus/equity so not exact)

Equity doesn't come into it as far as I'm aware, though I'm hearing the affordability criteria will be less strict after brexit. Be mindful that you will have had to have received a bonus for at least 2 years in order for them to consider this, otherwise, your mortgage offer will be based on basic salary.

I'm hearing the stamp duty holiday will be extended, it would certainly make sense for the government to do this, so I don't think property price will be affected by the time you hope to buy.

I can't comment on areas, sorry. I live in London and don't know a great deal about living outside.

Ah, thanks Smallgoon, that's very useful. I'd used a mortgage calculator thing and it had asked for bonus without specifying the two year thing. My budget shall be revised down to £215,000 in that case!

Looks like 2021 is going to be an exciting year!

Sign up to a couple of credit checking companies (I have Credit Karma and Clear Score) to see the state of your finances. Mine shows active accounts, and credit agreements such as mobile phone and my Next store card. It shows how many payments are on time. It will give you a score, don't worry too much about the number, just check all is in order and nothing outstanding or unrecognised. You will have a higher 'score' taking our credit and proving you are reliable at paying it rather than never needing to take out a credit account. I'd consider taking out a credit card and spending on it and paying it off straight away to boost your score.

Banks/Building Societies use one of three agencies to check your credit history - Experian, Equifax and TransUnion. Sign up to a few credit check websites (they are free) as some show accounts others don't.

Insurance companies do an ID check called a soft search on your account, which are nothing to worry about - these cannot be seen by others. Credit companies do a hard search (which can be seen by those carrying out a check on you), so if you do lots of applications in a short period of time, it doesn't look so good as it looks like you're in need of some money! I would consider doing a mortgage in principle application (it is a soft search) to give you an idea of figures. Estate agents ask for this before allowing you to offer on a house (ie prove you can get a mortgage for said amount).

Ok, but that shouldn't deter you from looking for properties up to 30k over your budget, as sellers rarely get asking, especially if asking price is inflated in the first place (which in London is the norm!).

It's worth calling a mortgage provider, even your bank would be fine in this case as interest rates are so low, that I imagine the deals will be similar across the board. Have a convo with them and get an idea of what they'll be willing to offer, since affordability criteria will look at all outgoings. Do you have any debt (aside from student finance)? What do you mean you don't have credit? It's worth getting a credit card and spending on this to try and build up credit.

When I was looking to buy, my search included properties that were 50k over my budget and for any I really liked, I'd keep track of them. Essentially looking to see if they staying on the market months later, and waiting for price drops. There's a great extension that you can download called Property Log which tracks the price that properties are added to market, and when and how much the price is reduced by (right move doesn't provide this info). The that i ended up purchasing was on the market for over 6 months, and the price was dropped twice before I offered.

Start a Rightmove profile and start adding properties you like the look of to your 'watched' list and track price drops etc this way. Will also give you an idea of what the property market is like in the areas you're looking at.

Firstly speak to a good whole of market mortgage broker about the money bit, we were FTB a few years ago and our was worth his weight in gold.

Also (and I know some will disagree with this) trying to 'read the market' isn't a great idea, people have been talking for years about a house price crash and it hasn't happened yet. It may well happen, but if we had listened to everyone telling us to hold off as prices will drop, we would have been stuffed. We put our offer in Aug 2016, people told us to hold off because of Brexit and also 'because loads more come on the market in September'.

As it was the type of house we were looking for/our price bracket just stopped coming on the market so we would have quickly been priced out if we had waited (and faced a lot of competition for the few that did).

Take advice from anyone that hasn't bought a house in the last decade with a pinch of salt and do your own research. We had people giving us all sorts of advice that was completely incorrect eg you can add stamp duty to your mortgage, what counts towards affordability etc, because things have changed a lot. Hell we only bought 4 years ago and just after we bought SDLT changed for first time buyers.

We found a website called homeowners alliance which had really good step by step guides on the things to think about. That was the other thing that was a bit of a shock, you have to work the process out for yourself - I was expecting a bit more guidance (although in hindsight I'm not sure who from )

Have an open mind about what you are looking for, we saw a number of places that ticked the boxes on paper but we just didn't 'feel' when we looked. Nowhere will tick every box so what can you compromise on?

Oh and finally you probably will freak out a bit at some point - it is a LOT of money to spend so it's totally normal to doubt yourself.

Just on areas, if you’re looking at Brighton I think Hove is actually nicer and as you go along the coast towards Worthing prices get a bit cheaper. Worthing is the more ‘up and coming’ area and has a town centre where you’d definitely get more for your money and is about 20 to 30 mins (IIRC) on the train to Brighton. I would look at the towns all the way along that train line between Worthing and Brighton to get the best balance of price/size/lifestyle.

London! Or Bristol

Wow, so much fantastic advice! Thank you all so much. I will definitely make a plan to speak to bank/mortgage broker sooner rather than later to get a clearer idea of what's feasible financially.

NachoNachoMan That is all so bloody helpful, I will work my way through the credit stuff and get this sorted/under way as a priority.

Smallgoon Also, amazing. By "no credit", I meant to write "no credit card". I don't have any debt other than student loan though, no. Really good tips re what to look at price wise as well and methods for organising the search. Downloading Property Log imminently!

gurglebelly Really good point about how much things have changed and to not necessarily trust people without recent experience. And bookmarking homeowners alliance now - that sounds super useful. I suspected what you say about the futility of trying to read the market but wanted to put it out there as a potential consideration. Also good to know that freaking out is normal - I imagine I will do this often!

SollaSollew thanks for the area input, I had actually already honed in on Hove rather than Brighton during my preliminary searching but the tip about Worthing is very useful - I will do a bit of research as haven't looked that far out but would consider it for sure.

Palavah As much as I quite like (some areas of) London, I'm not sure I fancy the prospect of living in a tent set-up in the single parking space that £215,000 would buy me Bristol on the other hand, is actually where I grew up and where most of my family are, I am sort of vaguely considering it but it is a bit "been there, done that" for me. This seems like a good opportunity to try something new.

Just to further add that I agree with @gurglebelly - there are lots of doom-mongers around, a fair few on MN too who seem to believe a property crash will slash property price by 50% - but they've been saying this since the referendum result 4 years ago... Don't take their advice. If you wait it out, you'll be waiting forever.

I purchased earlier this year amidst murmurings that I was making a massive mistake... I'm pleased I ignored the pessimists and went with my gut. I consulted an investor friend of mine before I purchased as I knew his advice was credible. He said it was likely there would be a correction to the property market, however, so long as I wasn't buying at the very top (and potentially over-stretching myself) and if I felt I was getting a 'bargain' (so that any potential crash wouldn't wipe off enough for me to feel it), that I should proceed with my sale.

P.S. I also bought by myself and it is daunting when you've spent years and years renting without any understanding of what purchasing a home entails, and the list of crap you have to sort out to faciliate this. Feel free to dm me if you have any questions etc, I'd be happy to help.

I would definitely recommend getting an AIP as that will tell you what you can actually afford. Lenders now look at affordability not just a multiple of your salary.
Also, depending on your purchase it can take several months to go from offer to completion, especially with backlogs at the moment. Even if you don’t want to move until later in the year you will need to start the process in advance.

Ideally I'd say make sure you have enough left in savings to cover 12 months mortgage/other payments but at a minimum have enough in savings to cover at least six months.

The worst thing you can do is put all your money into a property and then struggle to make any savings or have an unexpected job loss/unexpected outgoings (I.e. if you get a pet and it gets an illness not covered by insurance...)etc. This is, of course, unless you have parents/relatives who can bail you out and lend you the money if something awful happens.

I'll be buying my first property by the end of next year and will keep back enough to cover me for a year of mortgage/council tax if something goes wrong. Appreciate not everyone can, but it's worth bearing in mind to avoid stress down the line.

I'd also work on the basis that any mortgage/council tax should be less than 33% of your monthly salary. Also factor in if you do change jobs/have to commute into London the cost of that.

You can also find nicer than Brighton with good commuter links and sea views for better prices i.e. Hastings/Rother area so consider that. Cost of living somewhere like that is also lower.

I might be being overly cautious but a lot of my friends have bought first houses recently and have virtually no savings (we're talking not enough to cover a months mortgage if something went wrong...) - which I think is incredibly risky.

Good luck

Thanks again Smallgoon, that is very kind and helpful of you. It's good to hear from someone who has gone through the process recently. Your attitude sounds very sensible. And congratulations on your purchase!

And thank you Magstermay, will definitely look at getting an AIP, I didn't think there was a chance of being lent more that 4 times salary (though appreciate some might be given less). Do you (or does anyone) know what else is taken into account to determine affordability, is it just debts and other financial outgoings? I have nothing other than student loan and pension.

Also thanks for your wise words theverygrumpysanta, I am actually in the incredibly privileged position of not having to worry about unforeseen financial emergencies as I do have close family with the funds and inclination to help me if I ever I really needed it. I know that might not always be the case and I will make sure I have a bit of a buffer but certainly not a year's worth of buffer! When you say 33% of monthly salary, is that gross or net? I'm hoping gross...

Good luck to you as well! You sound like you probably don't need it though

If you want young interesting people under 30 (and I would agree this should be a priority for you, not having a big property) then really you need university towns/cities

Worthing does not have interesting, single people in their late 20s or early 30s. So you would need to go into Brighton every time to socialise - it might not be far but do you really want to travel 30mins every time to meet friends when hopefully you would be socialising a lot? And what about when you go out to 3am? Do you want to pay for a lot of expensive cabs.

I would say
Brighton and Hove
Bristol
Birmingham - like London, each neighbourhood is very different. Somewhere like Digbeth or Moseley (I don't know it well, just visited a friend there!)
Cambridge
Norwich

It might be worth looking at Chichester, or some of the towns on the North East of Kent.

If you'd be ok with a little over 2hr by train I'd head to Manchester, you'll get everything you ask for there. Otherwise Birmingham or maybe Bristol at a push? I'd avoid places like Worthing and agree with a pp that university towns are key.

DepartFromTheIllegitimateChild

Most financial advisors say less than 28% of your gross monthly income should go towards your mortgage/housing costs. Advice online varies between 28-36%.

Personally, I'm going up to 33%. However;

• I have no commuting costs (and it has been agreed that I never have to return full time to the office again (YAY)
• I have relatively few expenses as I haven't got a car on finance, low insurance costs, older phone, don't plan on having kids soon, batch cook meals, don't buy coffee etc. My friends and I do activities that don't tend to cost that much money...

Whilst that all makes me sound very boring it means I can be slightly riskier in my mortgage and spend more as my entertainment budget is minimal

I hope that helps & best of luck!

Worthing does have single people in their 20’s and 30’s and pre COVID had a thriving bar screen along the sea front. There is even a nightclub if that is your thing.
Worthing is not the gods waiting room that so many seem to think it is
www.citypopulation.de/en/uk/admin/west_sussex/E07000229__worthing/
The town centre is struggling but then so are most but if you are looking for space to walk a dog and easy access to London it is worth looking at.
A budget of £230k would buy a small maisonette or flat with a outdoor space
www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION%5E1487&maxPrice=230000&radius=3.0&propertyTypes=&includeSSTC=true&mustHave=garden&dontShow=&furnishTypes=&keywords=

MojoMoon That was exactly my thought process re location (though I must admit that I'm quite prematurely middle aged lifestyle wise and can't remember the last time I was out until 3am). Ideally I do want nice restaurants, lovely pubs and eligible men within walking distance (if any of any of those three things still exist come summer 2021).

PragmaticWench Thanks for the tip - I will do some research on Chichester (perhaps shamefully, I don't have even a vague idea of where it is or what it's like)

bravotango thanks yes, you're right that I'll get more of what I asked for plus more for my money further North, it's something to think about.

theverygrumpysanta thanks for the explanation. I was just fleetingly terrified that you might have meant net. I think my mortgage/council tax will end up being considerably less than 33% of gross monthly salary as that would be £1237.5 and from what I've got from the calculators with 40-50k deposit and a £215k property, mortgage will be around £800-£900 at most (?) I also don't have an expensive lifestyle at all as WFH, no car, no dependents (well, not until the dog), don't really drink, only buy second-hand clothes, don't eat meat, no expensive hobbies (so if you're boring I definitely am!). My monthly salary also doesn't take into account the £5-10k per year I get on top of that in bonus/equity so that would make it slightly safer if I did want to push it I suppose (not that I think I will).

above should say £30-40k deposit

And thank you Magstermay, will definitely look at getting an AIP, I didn't think there was a chance of being lent more that 4 times salary (though appreciate some might be given less). Do you (or does anyone) know what else is taken into account to determine affordability, is it just debts and other financial outgoings? I have nothing other than student loan and pension.

I was offered up to 4.75 of salary (not sure why they didn't round to 5). I didn't borrow that much in the end, and i'm not sure if the lending criteria has changed since Covid. My mortgage is with First Direct who I bank with.

In terms of affordability, essentially all of your outgoings (gym membership/travel costs etc), and any credit card/loan debt - I still have circa 30k Uni debt and they didn't seem to put a great deal of weight on this. my understanding is they're more concerned with credit card debt.