The first time home buyer's guide

Check your credit score

You’ll need a healthy credit history to give lenders confidence in your ability to repay your mortgage. To see where you stand, start by checking your credit score with any or all of the three main credit reference agencies. Each looks at your credit history, debts and banking patterns to predict how much of a risk you pose to potential lenders. To learn more, read our guide on how to check your credit score.

Manage your budget

‘Financial planning’ can sound a bit boring, but when it’s with the end goal of buying your dream home, it’s anything but.

The little things add up

Mortgage lenders consider your credit score and earning power, but also your spending habits. It’s worth totting up how much you spend each month on small but frequent purchases like travel and eating out. Finding cheaper options can add up to hundreds saved each month. Our Barclays Budget Planner can help manage costs and stay on top of your finances.

Putting the money you save towards paying off outstanding credit card balances and overdrafts will make you look better on paper to potential lenders.  And if you don’t have debts to clear, the spare cash is bound to come in handy for paying house-buying fees and taking care of essential DIY jobs after move-in day.

Help from the government

The Help to Buy ISA is no longer open to new customers as of 30 November 2019. However, if you already have one, you can continue saving into your account until 30 November 2029 and claim your bonus at any point up to 1 December 2030.

The Help to Buy ISA is a tax-free way for first time buyers to save up for a deposit to buy their first home. As long as you add at least £1,600, the government will top up your savings by 25%, up to a maximum £3,000 bonus. Conditions apply, including a maximum amount you can deposit each month and an upper limit on the property price.

Alternatively, shared ownership, is aimed at households that earn less than £80,000 (or £90,000 in London) and first-time home buyers. If you can’t afford the mortgage on your own, they’ll step in and buy 25–75% of the house. You’ll then pay rent on the rest, with the option to buy more shares when you can afford to.

Different types of mortgage

Once you’ve got your credit score and savings under control, it’s time to consider mortgages. There are fixed-rate, tracker, cashback, and interest-only mortgages. The variety can be daunting at first, but once you know the pros and cons of each, they’re pretty straightforward.

The basic premise is always the same: you borrow money for your property, then pay it back with interest to the bank or lender. Mortgages vary by interest rates, repayment terms, built-in charges, and the length of time agreed to pay the money back.

An interest-only mortgage involves paying back just the interest instead of repaying the money you borrowed to buy your house. Paying less back each month might sound great, but you have to remember that when the term ends you’ll still owe the full amount you borrowed and will need to pay it back, so don’t forget to have a plan on how you’ll make the repayments later on.

Fixed-rate mortgages are a particular type of standard repayment mortgage and are popular because they offer certainty. Your interest rate is fixed until an agreed date, so you’ll know exactly what you’ll be paying back each month. Your interest rate is fixed, meaning you know exactly what you’ll be paying back each month. That’s good news if rates go up, but if the rates drop, you’ll have to continue paying the higher rate.

You may also be offered a Tracker mortgage, which means you won't be tied down to a fixed rate, so your payments could go up or down depending on interest rates.

Finding the right mortgage for you largely depends on your finances and how much risk you feel comfortable with. A fixed-rate mortgage offers certainty, which many first-time buyers consider important. But if you have more financial knowledge and experience, you might be able to gain an advantage by using a tracker mortgage. Picking the right mortgage for your situation is important, so speak to a mortgage broker for free advice before signing on the dotted line.

Extra home-buying costs

That rainy day fund you’ve been working on will come in very handy when it’s nearly time to take the big step. Here are some of the less obvious but no less important fees you’ll need to bear in mind when buying a house for the first time.

• Stamp duty. This is a government tax on homes over £125,000, but there are different rules if you’re buying your first home and the purchase price is £500,000 or less.
• Legal fees. These will vary by solicitor, but expect to pay around £850–£1,500.
• Mortgage fees. As well as the loan, the lender may charge you a booking fee.
• Surveyor fees. A basic valuation could cost around £250, with a full survey costing closer to £600.
• Valuation costs. These fees vary from £150 to £1,500 depending on the house value.
• Money transfer fees. This is the cost of actually moving the money from the lender to the seller. 

• You might need to buy new furniture and furnishings to make your new house feel like a proper home. If money’s tight after all the paperwork fees, paying on a credit card could give you some wiggle room, as long as you have a plan in place for paying back what you borrow. Barclaycard has lots of credit cards that could help you manage your money.