First Time Buyer

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First Time Buyers

How is the mortgage process different for First Time Buyers?

The mortgage process for a first-time buyer can be quite daunting, but the reality is that it isn’t different to a person buying a second or third home. Everyone has varying experiences when they buy a home, some say it’s the most stressful time in their life, whereas some have no issues at all.

What is an Agreement in Principle?

An ‘Agreement in Principle’ is the first stage in the mortgage process application. It confirms the amount you can borrow based on your income and outgoings against the mortgage you require. It’s still subject to full underwriting by the lender, but it’s just the agreement before the full mortgage application is submitted.

How much can First Time Buyers borrow?

It’s based on individual circumstances, but ‘Help to Buy’ for example will allow you up to a maximum of 4.5 times your salary, but some lenders will let you apply up to 4.9 times your salary.

It’s best to speak to a mortgage broker who will be able to help you by combining your income, outgoings, purchase price and how much the loan to value will be, they can then determine how much you can borrow.

However, what people forget to take into account is the fact that they have other credit commitments. They might have a credit card, a personal loan or they might have a higher purchase on a car loan.

What deposit is needed for a First Time Buyer?

Different schemes have different rules. There are First Time Buyer schemes that are possible with 5% deposits, but there are also mortgages at the moment with 5% deposits too. The interest rate on these products is naturally higher due to the higher risk to the lender. But the best way to look at this is the more deposit you set down, the lower your monthly mortgage payment and interest rate will be.

The best place to start is with a 10% deposit as the interest rate will be significantly lower than a 5% deposit. The difference between payments per month can be significant too when you take in the full term of the mortgage, so I would always suggest paying a larger deposit if you’re able to.

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We help customers navigate the options available to them through clear information and guidance, this in turn enables them to understand their choices and make informed decisions.

How do I know what my credit score is – How do I improve it?

A credit score is the main scoring system lenders will look at. If you have bad credit, it won’t stop you from getting a mortgage, but it can affect how much you can borrow. Lenders may question the possibility of missing a mortgage payment if your bad credit has come from a missed payment on a mobile phone bill or a car loan. Credit agencies such as Equifax, Transunion and Experian all offer a variety of services, mostly free or paid options with a 30-day free trial.

What is a First Time Buyer ISA?

The ’First Time Buyer’ scheme was launched with a 25% bonus on savings held in an ISA which you’re able to top up to a maximum of £200 per month with a maximum bonus of £3000 at the end of the term.

This scheme ended in November 2019, so are no longer available, however, if you do have one you can still top these up. It’s now been replaced by a Lifetime ISA and you still receive a 25% bonus by adding £200 per month, but you can use this towards later life savings.

What help is available for First Time Buyers?

Help to Buy gives the buyer flexibility to put down a smaller deposit against the total purchase price. It is only available on new build properties, but you can receive a 20% equity loan (outside London) or 40% equity loan (within London) from the government, which you do not pay interest on for the first 5 years, but after that, it does become payable and is based on your property price at the time.

Other options out in the market are ‘shared ownership’ which is where you own a portion of your property, usually 25% but will depend on the housing scheme operator. With the percentage you own, you’re able to put down a minimum of a 5% deposit and the remaining percentage you pay as your mortgage plus rent to whichever value the Housing Scheme Operator owns. This option is generally more expensive than using the ‘Help to Buy’ scheme, but it is a good way to get onto the market.

Speak To An Expert

We help customers navigate the options available to them through clear information and guidance, this in turn enables them to understand their choices and make informed decisions.

What fees are involved when buying a house?

The main fee you will be looking at is Stamp Duty, which is a land tax and is payable on completion of your house purchase. At the moment, first-time buyers receive a discount on the first £300,000 of their property price and thereafter you will start paying more in stamp duty.

Other fees could be a ‘product fee’ once you’ve selected and are accepted for a mortgage. This is normally around £995 and is paid upfront but does provide you with a lower interest rate than ones that do not have a product fee.

Searches are carried out by your conveyancer (solicitor) which include environmental and drainage searches. Essentially, these searches are to protect you and your home from any environmental issues that may arise in the future.

Surveys are carried out on your home to establish if there are any structural issues and if it is worth the value you’re paying for. If you’re buying a new-build house, a survey isn’t typically required as you’re covered by the NHBC (National House Building Council) for 10 years which covers you for anything structural.

There are 3 types of surveys, a mortgage survey and valuation, a homebuyer’s report and a structural survey. Mortgage Survey and valuation is one where they check that the property you’re buying is at the right acceptable price and is classed as ‘appropriate’.

Homebuyers Report provides you with slightly more information such as the condition of the property and includes any issues such as electrics and defects to the house. A structural survey goes into more detail than the homebuyers report and covers the condition of the building, structural defects through to areas of the house such as chimney breasts.

There are also different types of protection insurance, such as life insurance and buildings/contents insurance. Life insurance will cover you should you pass away and can have options such as ‘critical illness’ which will payout if you’re diagnosed with a critical illness such as cancer. These types of insurances are not compulsory when taking out a mortgage but they are certainly recommended for peace of mind.

Buildings and / or contents insurance is also recommended as this will be asked for once you have completed your purchase. This insurance covers the whole building and your contents up to a certain value should anything happen such as a fire, broken window or personal possessions being stolen in a burglary

How can a Mortgage Broker help if you are a First Time Buyer?

In short and simple terms, brokers can potentially save you time and money than going via your bank. I have recently helped a couple of clients secure their property quicker than going via their bank as they have a couple of weeks lead time for an appointment. We process our client’s mortgage applications between 24 to 48 hours after we have received all the required documentation and the correct product has been selected.

Your property may be repossessed if you do not keep up with your mortgage repayments. The Financial Conduct Authority does not regulate some Buy to Let Mortgages.

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