Fellow UK (wannabe) first time buyer here:
Can I afford to buy a house in the first place?
Edit: In my original answer, I forgot to take into account the maximum mortgage amount in the UK, which - as @Justin Cave explained - is roughly between 4 and 5 times the combined annual gross income of the applicants.
So, with that in mind...
No, you can't. Or, at least, you cannot reach £200,000 in the situation described above. This is because, with an annual gross salary of £25000, the maximum amount that most banks will lend you will be around £125000, which combined with your total savings (£60000), gives you a combined total of £185000 (from where you'd need to discount all the associated costs that are discussed below)
Realistically, you'd need to either budget for properties in the range of £160000 (or lower) or wait until you have a higher annual income (maybe as a result of promotions/different jobs, additional means of income or maybe just applying for a mortgage with a partner).
What are the 'hidden' costs I should be aware of as a first time buyer?
- Stamp duty: £0 if you are a first time buyer and want to buy the property as your primary residence. If not, for £350000 you'd need to pay about £7500 in tax (there are a lot of online calculators that you can use for this).
- Various mortgages fees: Sometimes £0, sometimes up to £2000. Be careful here, because it is very likely that a mortgage without a fee can end up being more expensive on the longer term. Check all your numbers before committing to anything.
- Solicitor: Depends on where you leave/want to find him. For London I'd budget up to £2000.
- Surveyor: Only necessary if you want to buy a house. May be free (paid by the bank/not needed), may need to be a full structural survey (£1500).
- Land registry: I am almost sure you need this only for houses, but just in case, budget a few hundred for this.
- Plus moving costs, furniture...
That should cover most cases (some of them may not apply in your current situation)
How easily would I be able to rent out the property if I decided to stop living there?
Depends on the area and how desirable is the property for your would-be tenants.
A caveat here is that you may have to convert your regular mortgage into a buy-to-let one, and you may be liable to pay stamp duty (if you paid nothing at the beginning). Also, over time buy-to-let in the UK is becoming less lucrative than what it was several years ago.
Assuming I don't use the full £60k as a deposit, what would be the best amount to put down?
The amount that lets you minimise the mortgage interest rate, of course!
In the UK, the major factor in mortgage prices is the loan to value ratio (LTV), which basically is the ratio of money that the bank lends you VS the total value of the property. So, if you want a house of £250000 and you put £50000 as deposit, then you have a LTV of 80%.
Cheapest deals are at a 60% LTV. Then you have 75% LTV, 80%, 90%, 95% (and I am not sure if there will be more tranches, may be even bank dependent). So, a good strategy is to try budget for extras, and then optimise for the smaller LTV you can realistically achieve, and finally keep the rest of the money as liquidity (emergency fund, invest in something that could give you more return than the mortgage interest... depends on your financial situation).
Any other potential risks I should be aware of?
In the future, you may want to just sell the property instead of letting it. Also, people always assume that house prices will continue growing in the future - which may not be true. And it would be good for you to have a plan B just in case of, say, the company goes south or lets you go and you cannot find easily a new job for a few months.