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First Time Buyers Guide to Mortgages
What is a First Time Buyer?
A First Time Buyer is someone who is looking to buy their first property, it doesn’t matter if it is a house, boat, or caravan, if you are buying your first home you will fall into this category.
The process for a First Time Buyer mortgages can be slightly different as you haven’t had a mortgage before. You will need to make sure that you have a good credit report as you will go through affordability checks as a First Time Buyer.
What is an Agreement in Principle?
An Agreement in Principle is basically a mortgage offer from a mortgage lender based upon an assessment of your circumstances and credit. You do not need to obtain an agreement in principle but there are a number of benefits to getting one before you find a property:
- You will know how much you can borrow and spend on a purchase in the first place
- Lenders will be able to see that you are credible with your finances
- It shows estate agents that you are serious about negotiation
An Agreement in Principle involves a credit check and it is worth mentioning that too many of these can affect your credit rating.
How much can a First Time Buyer borrow?
Typically, you will be able to access up to four times your annual salary but this will depend upon your credit score.
If you are wanting to borrow more you must ensure that you have a good credit rating to improve your chances.
How do I know my credit score and how can I improve it?
You can check your credit score through websites like Experian for free. It is important to have a good credit score to show lenders that you can handle your money and you are reliable with it too.
You can improve your credit report over time by doing small things to boost your score:
- Keep up with outgoings and monthly payments
- Close any credit cards which are no longer being used
- Pay off any debts that you owe
- Ensure that you are up to date and present on the Electoral Roll
- Avoid payday loans and going over your agreed overdraft
- Make sure that you keep all lenders up to date with your financial situation
It can be hard to improve your credit quickly so it is best to try and keep a good rating if you can. If you have no credit too this can be an issue as lenders want to see that you can borrow money reliably.
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What help is available for First Time Buyer?
There are a range of options out there for First Time Buyers to help edge them onto the property ladder. You can use a guarantor alongside your mortgage application to give lenders a sense of security.
You may be able to use a guarantor to assist you with your mortgage application, however, it is important to understand that each individual bank will have its own criteria and this would need to be discussed with your financial adviser if this is applicable to your circumstances. Your guarantor will need to prove they can afford the monthly mortgage payments in addition to their own expenditure and lenders will usually assess the application against the age of your guarantor.
You can also go into your mortgage with another person meaning you will have more of a combined income. This is known as shared equity. There are also shared ownership mortgages where a developer or housing association will let you buy a share of the property and pay rent on the percentage you do not own.
It is important to know your options inside out and read into every mortgage deal in great detail. It is worth seeking the help of an expert mortgage adviser to ensure that you are picking the right option for you.
What fees are involved?
There are fees involved when it comes to purchasing your first property and you should be prepared to pay them.
Arrangement Fee
This is a fee that a lender will charge to arrange your mortgage. The amount this fee will be will greatly depend upon the lender and the value of your mortgage deal. You can be charged a percentage of your mortgage’s value or a fixed price.
Legal Fees
You will need to appoint a solicitor or conveyancer to sort the legal documentation involved with setting up your mortgage.
Valuation Fees
The lender will complete a valuation on the property to ensure the value of the property is in line with the purchase price. The valuation fee varies from lender to lender.
Stamp Duty
Stamp Duty Land Tax (SDLT) is a progressive tax paid when purchasing a freehold, leasehold or shared ownership residential property over £250,000 in England and Northern Ireland (separate taxes apply in Wales and Scotland).
How can a Mortgage Broker help?
A Choice Mortgage Broker can help advise you on the right mortgage for your personal needs and situation. As a First Time Buyer it can be daunting stepping into the mortgage market it can be a competitive and complex place. There is no point in getting lost and frustrated whilst searching for a mortgage, if you seek expert advice from the start you will be speeding the process up and giving yourself more of a chance of obtaining property you want to buy.
A Mortgage Broker can scour the market and find the right option for you. There are so many different types of mortgages – fixed-rates, variable rates, interest rates and it can take some time to go through them all. The one to one advice that a broker can offer will be unmatched due to it being catered specifically to you.
It doesn’t matter what stage you are at when applying for a mortgage even if you haven’t even started it yet; mortgage advisers are there to make sure you are getting the most out of your money and the best deal for you in the current mortgage market.
A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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