The things you need to know as a First Time Buyer
Are you starting your first mortgage journey? Don’t worry, you’re not alone! Buying your first home and getting your first mortgage can feel overwhelming with so much to consider. I have access to an extensive panel of lenders which includes high street and specialist lenders, and therefore can provide you with a bespoke mortgage service tailored to your needs.
I will work with you to work out how much you can borrow, help secure your Mortgage Agreement in Principle (AIP) and eventually submit your application to the lender.
From our initial meeting to handling paperwork and coordinating with lenders, I’ll be with you every step of the way until you get the keys to unlock the door to your new home.
01 What is a first-time buyer?
02Do I need a ‘Decision in Principle’ before getting a mortgage offer? And what’s it for?
03How much can I borrow as a first-time buyer?
04What additional costs besides the property price should I budget for?
There are several additional costs to budget for when buying a property:
- Stamp duty – if this is applicable to you.
- Solicitor or conveyancing fees for handling the legal aspects of the purchase.
- Surveyor fees for property surveys unless included by the lender.
- Mortgage arrangement or broker fee.
- Removal / moving costs.
- Buildings and contents insurance
- Personal Insurances such as life insurance, income protection and critical illness cover.
- Buildings and Contents insurance
05How much deposit do I need?
06What is the maximum mortgage I can get as a first-time buyer?
The maximum mortgage amount you can get as a first-time buyer depends on various factors. Lenders will generally consider your income, expenses, credit history, and affordability when determining the loan amount.
Generally, lenders may offer a mortgage of up to 4.5 times your annual income. So, if your annual income is £40,000, you might be eligible for a maximum mortgage of around £180,000. However, this is a rough estimate, and different lenders may have varying criteria and can use up to 5.5 times your salary. It’s crucial to consult with a mortgage advisor who can assess your individual circumstances and guide you on the maximum mortgage amount you may be eligible for.
07Will bad credit affect my application for a first-time buyer mortgage?
If there’s previous bad credit showing on your credit file then, as with most forms of borrowing, this can limit the options available to you when looking to secure a first-time buyer mortgage.
The potential credit issues you may be faced with are having a low or impaired credit score, late / missed payments, defaults, County Court Judgements (CCJs), Individual Voluntary Arrangements (IVAs), and Debt Management Plans (DMPs).
However, there are lenders who will consider adverse credit, but this depends on the amount of debt you have, how recent it is and how much deposit you have. There may be occasions when you still are unable to secure a mortgage, if this is the case, I will work with you to improve your chances in the future.
08Do I have to pay a broker fee?
09What types of mortgages are available?
1. Fixed-Rate Mortgages: The interest rate remains the same for a set period, usually 2, 3, 5, or 10 years, providing security knowing what your monthly payments will be during the fixed rate period.
2. Variable-Rate Mortgages: The interest rate on these types of mortgages can change, which means that your monthly payments can increase or decrease. These include:
- Standard Variable Rate (SVR) – The lender’s current default rate, which can go up or down at any time.
- Tracker Mortgages: These follow the Bank of England base rate plus a set percentage. These can also increase or decrease at anytime.
- Discount Mortgages: These offer a discount off the lender’s SVR for a certain period.
3. Help to Buy Mortgages: These include schemes like Help to Buy Equity Loan, where the government lends you up to 20% (40% in London) of the property price.
4. Shared Ownership Mortgages: This scheme allows you to buy a share of a property (usually between 25% and 75%) and pay rent on the remaining share.
5. Guarantor Mortgages: These require a family member or friend to guarantee the mortgage repayments, useful if you have a small deposit or low credit score.
6. 95% Mortgages: These allow you to borrow 95% of the property’s value, so you only need a 5% deposit.
7. Offset Mortgages: These link your savings and mortgage together. Your savings reduce the amount of interest you pay on your mortgage.
These mortgage options have many advantages and disadvantages, so it’s essential to consider your financial situation and long-term plans when choosing the best mortgage for you. It’s therefore advisable to speak to a mortgage adviser to guide you through.