Buying A First Home During A Pandemic
In this post I will be sharing my experience with buying a first house as a first-time buyer, and how the pandemic has affected everything.
I’ve been looking to buy a house since 2019, and I agree it IS one of the most stressful things you can do. However, that being said, it is worth the stress. I am currently renting and essentially giving away my money, rather than paying off a house. This is one of the main reasons I have been looking to buy.
There’s a lot of let down
Buying A First Home During pandemic or not be prepared to be let down a lot. By estate agents, by houses, by vendors. I first ‘bought’ a house in winter 2019, only to be told a few months down the line the vendor no longer wants to sell it. That was my first major let down. I had created all the Pinterest boards and moved in, in my head! My first tip: even if you get an offer accepted don’t get emotionally attached!
Demand and availability
Pre lockdown you could view a house at your leisure, not rush the process and contemplate if that is your future home. Currently, demand in buying a first home is the highest it’s been, which means every properties’ viewing gets booked very quickly, and by the time you do view the house, it most likely will already have had at least one offer. This means you then have 24hours (roughly) to decide whether you would also like to put in an offer. Also, the price for that house will be higher than it would have been pre-pandemic. This does make the process more stressful. Also, viewing times have gone from 20-30-minute slots to just 10 minutes. You have 10 minutes to make a life-changing decision!!
The other problem with this is if you don’t get a viewing, the chances are that the property will be SSTC (Sold Subject To Contract).
Mortgages and LTV
My Second Tip: Don’t view a house you know you can’t afford. As much as it’s tempting to see what’s out there, in the long term it will only make you compare to what’s better. Also, when buying a property, the minimum deposit is 10%. If a property is on the market for £100,000 you need £10,000 in your bank to pay this deposit, plus all the other fees involved. You will need to prove you have this amount to your mortgage provider by supplying them with 3-months bank statements.
‘The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate.’
Buying a first home in a pandemic has majorly affected mortgage offerings for those in the 90% LTV range (10% deposit). Many banks have pulled their 90% LTV mortgages which (for me) makes it impossible to even consider buying a house. There are more predicted to return, but with less out there means I’m probably getting a worse deal, I have little flexibility, and demand for those mortgages is so high they only seem available for one day before filling up their quota. This has been one of the hardest struggles of buying a house during the pandemic. My Third Tip: Try remaining patient.
My Fourth Tip: Always look at what has sold within the area of the house you like. This may seem obvious, but it can affect your mortgage. This is what I’m currently battling.
Most property apps have a helpful tab to show what’s sold in the area. Take Rightmove for example. I’ve found a property on the market for £150,000. By looking not only at the photos and floorplan for the condition, but I can also look at what similar properties have sold for an idea of it’s current or potential value:
- Scroll down to the ‘Market Information’
- On the tabs select ‘Sold’
Another change since the pandemic is mortgage lenders are undervaluing properties. https://www.onlinemortgageadvisor.co.uk/property-types/undervalued-properties/
This means to say you bought a property for £100,000. The mortgage company values it at £80,000. The mortgage company would only offer you a mortgage for £80,000 (maybe less) as they think it is a bad investment. The other £20k would be up to you to pay (and potentially lose).
This is what has currently stung me, as the property I’m buying has been undervalued. There are only three option from here:
- Contest the mortgage
- Find a different mortgage provide (this option may end up in the same scenario)
- Pull out the sale
I’m currently evaluating option 1, as I do love this property, and thankfully I have a mortgage advisor to support me. To contest a mortgage you need two things:
- A survey with a valuation to prove it is undervalued
- A record of sales within the area in the last 6 months of like-to-like properties (meaning if you’re buying a 1-bed terraced house, you need other 1 bed terraced houses to compare to). Even with this proof, there are still no guarantees.
So that’s where I’m currently at right now… I’ll be doing a follow-up post with progress in the coming weeks.