Preparing to buy a home

BORROWING ESSENTIALS

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Introduction 1. What is a mortgage? 2. What can you afford? 3. Check your budget 4. Grow your savings 5. Your credit score 6. What's next?

Introduction to 'Preparing to buy a home'

Buying your own home is exciting! It’s also likely to be the most expensive thing you’ll ever buy, so it’s normal to feel nervous.

Planning ahead and finding the right mortgage is key. Plus, there are other costs to think about too, from insuring your home to paying for solicitors.

As you start to plan, you’ll need to work out what these costs will be for you. You’ll also be thinking about how you’ll save and pay for them.

In this lesson, we’ll help you to get started. You’ll find out what you need to research and do, before you take the first steps in home-buying.

What you'll learn

  • What a mortgage is.
  • How to work out what you can afford.
  • What lenders will check for when assessing your affordability.
  • How to prepare by checking your budget, growing your savings and improving your credit score.

How long it takes

10 minutes

Chapter 1 - What is a mortgage?

What is a mortgage?

Chapter 1

How long it takes

2 minutes

Getting started with mortgages

Watch this short video to find out more.

 Please be aware this video has been produced using AI video tools.

Introduction - Preparing to buy a home
Chapter 2 - What can you afford?

What can you afford?

Chapter 2

How long it takes

2 minutes

Set a goal

When you first start thinking about buying a home, it can be tempting to jump straight onto the property hunt and start dreaming of your first days in your new home. However, a key step is to work out what you can afford. Doing this will help you set a goal so you can start to plan for your future home.

 

How much can you borrow?

Many lenders will let you borrow up to 5 times your yearly income. Sometimes it’s higher. It also depends on whether you're buying on your own or together with someone else. But, you’ll need to look at how much that works out for you to repay each month.

Be aware

Most lenders have their own online tools to help you work out how much you can borrow. For example: Lloyds mortgage calculator.

The Money Helper site has one, too. But do bear in mind that these tools may only give you a rough guide, based on your income and outgoings.

Ask a lender

You can also get in touch with a lender to find out what they might be willing to lend you. One way to do this is to ask them for an ‘Agreement in Principle’ (AIP). This tells you the most they might lend you. It’s not a formal mortgage offer, but it can help you work out what you can realistically afford. Estate agents like to know you’ve worked this out too. So having an AIP can help when you start to look at homes. 

 

How AIPs work

It’s called an Agreement in Principle, because though it’s not a guarantee, this agreement indicates that you have the money to afford a home in a certain price range.

To work this out, your lender will want to know your income and outgoings. They’ll also ask for your addresses for the past three years. They may look up your credit score, though this check won't affect your score.

You can do one of these at an early stage of the buying process. It’s free and doesn’t take long.

 

Want to apply for an AIP?

Here at Lloyds we have a dedicated mortgages page that can help you with tools and links to help you apply. 

Go to the Lloyds mortgage page

Be aware

AIP checks don’t cover everything. When you come to apply for a mortgage, lenders will check for more.

This includes a more detailed look at your credit history, plus any outstanding loans or other debts.  They’ll ask for proof of income / employment, too. 

The other thing they'll check is the property itself, to see if it's worth the amount you've asked them for.

How to prepare

Now you know what mortgage lenders check, you can start to prepare by:

Checking your budget

Go to the company’s website.

Growing your savings

Enter the tracking number.

Improving your credit score

So it's the best it can be when lenders view it.

Working on these three things doesn’t just help you understand what you can afford. It can also help you take steps to increase it.

We’ll cover each of these in the next 3 chapters.

More on this topic

Lenders will look at many things to work out how much they'll let you borrow. For example, how much you've saved for a deposit and whether you're buying together with someone else. We explore these more in our Buying a home lesson.

Buying a home Opens in a new tab
Chapter 1 - What is a mortgage?
Chapter 3 - Check your budget

Check your budget

Chapter 3

How long it takes

1 minute

What's in a budget?

A budget shows how much money you have coming in and going out each month, plus how much you have left over. You may already have a budget. If not, now’s a good time to create one.

How a budget can help

Home buying is expensive. It’s not the only cost you have, though. Working out your budget can help you plan how you’ll get your new home. When you do this, it can give you an idea of how much you could save each month. You may also be able to see where you can add to your income or cut down on your expenses.

Getting started

Our Budgeting lesson helps you put together a simple budget. Check out our Money management topic and Managing bills lesson, too. You’ll find plenty of tips there on cutting your day-to-day spending.

Chapter 2 - What can you afford?
Chapter 4 - Grow your savings

Grow your savings

Chapter 4

How long it takes

3 minutes

Why you need to save

When you buy a home, your mortgage covers most of the cost. Don’t forget – this is money you’re borrowing. So, you’ll be paying it back, with interest. But you’ll also need to put up some money yourself – a deposit. The more you can put down as a deposit, the less you’ll need to borrow. This means you’ll pay less interest overall.

What you need to save for

Your deposit is the biggest thing to save for. There are other costs too, though. So it’s good to think about these costs when you’re planning to save.

 

They include:

Stamp duty

This is a tax you pay when you buy a home in England or Northern Ireland. Scotland and Wales have different schemes. You can find out more about stamp duty on the GOV.UK website. 

Surveys

A surveyor will check for any problems with the home you want to buy. They’ll list these in a report. There are different types of survey. This Which? article talks about the different types.

Mortgage fees

These may include the cost of a mortgage broker, fees for valuing the home to check it fits with the loan amount and for setting up the mortgage.

Legal fees

Conveyancers look after the legal side of things when you’re buying a home. They draw up contracts, raise questions about the property for you and your lender, and perform local searches. They'll talk to you and your lender, plus the estate agent and other conveyancers.

Moving costs

It’s a good idea to have some money set aside for removals. These costs can depend on how much stuff you need to move.  You may need anything from just be hiring a van to booking a full removals service. 

How much to save

It’s good to set a savings goal – how much you need to save. This is the first step in your home savings plan. Once you know your goal, you can start planning to reach it.

 

To work out your savings goal:

Step 1

Work out your deposit

How much do you think you’ll need for this? First, look at home prices. Deposits are usually between 5% and 20% of this.

Step 2

Add other costs

These are the taxes, fees and charges we mentioned earlier in this chapter. It’s a good idea to add these to your overall savings goal.

Step 3

Build a buffer

You may want to add an amount to your savings goal for extras. This buffer could help with unexpected costs or for furnishing your new place.

Idea

Want to know how long it will take to reach your savings goal? Or how much you’ll need to save each month? We've got the tools to help you.

Go to the savings calculator Opens in a new tab

Savings accounts

It's a good idea to look at the different savings accounts to see which one works best for your home-buying needs.

More on this topic

Want to find out about the different types of saving accounts? Our Introduction to saving lesson explores these.

It also explains how interest rates work, to help you find the right account for you.

Chapter 3 - Check your budget
Chapter 5 - Your credit score

Your credit score

Chapter 5

How long it takes

1 minute

Why your credit score is important

Lenders look at your credit score as part of their checks. It helps them build a picture of how good you are with money. A high score can help you get a mortgage, or one for a higher amount.

How to see and improve your score

Our Understanding your credit score lesson shows you how to find out what your score is. Plus, it has tips on how you can build your credit history and improve your score.

Chapter 4 - Grow your savings
Chapter 6 - What's next?

What's next?

Chapter 6

How long it takes

1 minute

When you're ready to buy your home

Preparing to buy your new home is just the start. When you’re close to your saving goal, you may want to start looking at homes and mortgages in more detail. We have lessons to help guide you through the whole process.

 

In our Buying a home lesson, we’ll help you to:

  • Work out exactly what you can afford.
  • Pick the right type of mortgage for you.
  • Apply for a mortgage.

Remember

If you'd like to find out what you can borrow, you can set up an appointment with Lloyds to apply for an 'Agreement in principle'. 

  • It's free to do.
  • Only takes 10 minutes to complete.
  • Plus, it won't affect your credit score.
Find out how to apply Opens in a new tab
Chapter 5 - Your credit score

Want to learn more?

There are more lessons to help when you're buying a home.

Go to next lesson

Go to borrowing topic

 

Lloyds Bank Academy is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Lloyds Bank does not endorse the services they provide. The information in this module was last updated on 1st September 2025.

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