First time buyers guide

First Time Buyers Guide

Buying a home can be a daunting prospect. In addition to saving for the deposit, dealing with estate agents, solicitors, surveyors you also need to find an institution willing to lend you a large amount of money at an interest rate affordable within your household budget. The following guide is an introduction into some of the key points to consider when looking for and applying for a mortgage.

The Initial Steps for First Time Buyers

  • Save or borrow a deposit
  • Find out if you qualify for a mortgage
  • Choose the right mortgage
  • Submit an application

Do I qualify?

Deposit: In order to provide sufficient protection for their security, lenders require you to put down some of the purchase price yourself. Gone are the days of 100% mortgages, and now you typically need a deposit of at least 10-15%. In some circumstances it may still be possible to get a mortgage if you only have a 5% deposit, via either a shared ownership mortgage or through the mortgage indemnity guarantee scheme.

Earnings: You will need to be working already and earning enough money to show you can afford the loan payments and normal household expenditure. Each lender applies different criteria, but most will assess affordability using a mortgage calculator which takes into account all of your income and outgoings. If you have large loans or credit cards, these will reduce the amount you could borrow considerably.

Credit History: The success of any loan application will be dependent on your credit score. It is possible to get a free report from Experian. If you have a poor score with negative history, (such as missed credit payments or CCJs), it may be difficult to attain a mortgage, however specialist avenues are available and we may still be able to help.

Choosing the right mortgage;

If you meet the above criteria and do qualify for a mortgage, there are many options to choose from including but not limited to; interest rate, rate type, repayment method and term. Fees should also always be considered.

Interest Rate & Type: The interest rate determines how much mortgage interest you have to pay and the rate type, for example, fixed, tracker, variable or discount determines how and when the interest rate varies. A fixed rate is guaranteed to stay the same for the fixed period, whilst variable, tracker and discount can and will vary. A full explanation of mortgage interest rate types can be accessed here.

Repayment Method: Capital and Interest mortgages are the most common and are often dubbed ‘repayment’ because as well as paying interest, you also repay the mortgage over the selected term. The alternative is ‘interest only’ whereby each month you only pay the mortgage interest leaving the outstanding balance unchanged.

Term: The term of the mortgage determines how long you have to pay it back. A longer term reduces the monthly cost, however because borrowing is over a longer period the loan will cost more over time.

Fees & Overall Value: When looking for the best deal, it is essential to consider both the interest rate and all fees that apply. Fees come under a number of headings, but typically fall into the following categories; arrangement, valuation, legal and administration fees. Some lenders offer a better interest rate, but charge higher fees whilst others may offer other benefits including a free valuation. A realistic estimate of all the fees that are likely to apply is £1,000 - £2,000 and if possible, you should pay up front for the best overall value.

Any loan taken out should always be sustainable and affordable, to find out how much your mortgage payments could be, use our mortgage calculator.

Next Steps;

In order to apply for a mortgage, you first need to submit an offer on a property. Before submitting an offer, you can attain a provisional indication from a lender as to whether they might accept you by applying for a decision in principle. A decision in principle may also support your offer as it demonstrates to the vendor that you can back it up. To discuss applying for a decision in principle with one of our qualified advisors, please call 01626 360654.

Once you have an offer accepted, the final step is to submit a full mortgage application;

Submitting an application;

You will be required to fill in an application form and supply a variety of supporting documentation. The specific documents requested will depend on your employment status, but could include;

  • Payslips
  • Bank Statements
  • P60
  • Trading Accounts
  • Proof of any maintenance payments

Preparing the relevant documents at the beginning of the enquiry process can prevent future delays. The application process typically takes up to a month, however if any of the above documents are missing, or need further clarification, the process may take longer. For more information on our services for first time buyers click here

or call 01626 360654.

Your home may be repossessed if you do not keep up repayments on your mortgage.

For mortgage advice we can charge a fee of typically £500 or we can receive commission from the lender.

Buy to let mortgage adviceCondidering Buy to Let?

A Buy to let mortgage allows you to buy a property and rent it out for commercial gain. The rent that you receive should at least cover the monthly mortgage payments or you will have to pay the difference yourself. The benefits are the potential to gain from an uplift in valuation or provided the rent received is higher than the mortgage costs, equity can be accrued in the property over time or an income can be derived.

Continue Reading »

Blot on the landscape or beneficial financial outlay? the kingskerswell bypass..

Continue Reading »