Mortgage advice first-time buyer
If this is your first time obtaining a mortgage, it can be a daunting prospect. Our first time buyers heads are racked with concerns and full of questions.
- Will I get a mortgage?
- Where can I get a mortgage?
- How much will they lend me?
- How much will it cost?
- How much deposit do I need?
- How long will it take?
Fortunately, when a first-time buyer takes mortgage advice from an independent mortgage broker, all these questions are easily answered as the experienced broker takes the responsibility and worry away from the client.
First time buyer mortgage advice – the process
Firstly, your mortgage broker needs to have some idea of what you are looking to achieve and what resources you have.
- What is the price range you are ideally targeting?
- Where are you in terms of deposit?
- What is your source of income?
- Do you have other debt?
- How is your credit history?
These initial questions enable your mortgage broker to get a feel for what may or may not be possible and start to give you an idea about potential maximum lending and costs.
Detail is then checked before an accurate maximum lending figure is calculated and discussed together with your first time buyer mortgage product options.
Often, the first-time buyer obtains a mortgage offer in principle through their broker to confirm their lending position prior to making an offer on any property. (A mortgage offer in principle is a confirmation from a lender, following credit score, that the Lender is prepared to lend to the borrower).
The real action starts when you have an offer accepted. You will need to appoint a solicitor to handle the legal side of the process, and your mortgage broker can make a suitable recommendation.
Your mortgage broker will collect details of the purchase property and put together your full mortgage application for submission to the mortgage lender.
On receipt of the mortgage application, the mortgage lender makes an initial assessment, and if they are comfortable, they will instruct valuation of the property. If there is anything the lender is unsure about, or any additional information they feel they require, they will go back to the mortgage broker for clarification. It is a mortgage broker’s job to handle the whole of the application on your behalf whilst keeping you informed.
The property needs to be valued for lending purposes and the mortgage lender appoints a valuer who arranges this direct with the estate agent. When the valuation is complete, and the report has been returned to the lender, the lender is in a position to issue you your formal mortgage offer.
Meanwhile, your solicitor has been doing the background work on the legal side of matters meaning that you should be in a position to exchange contracts and complete your purchase.
First-time mortgage advice and affordable housing schemes
Many first-time buyers use affordable housing schemes to get on to the housing ladder.
Affordable housing covers arrangements such as Help to Buy Equity Loan, Mortgage Guarantee Scheme or Shared ownership.
These affordable housing schemes only have a select number of lenders who will provide lending and your independent mortgage broker will be able to advise you which lenders are suitable for your own circumstances.
First-time mortgage advice – beyond your mortgage – what else to consider?
As a first-time buyer, arranging your mortgage is a key part of your purchase process. There are however, other matters that you should consider, including insurance.
When you take out a mortgage on a property, that property has to be insured against damage or fire in order to protect the lender’s interests. The lender will insist you take out an insurance policy to this effect and that policy will have to be in place when you exchange contracts.
(Please note that if you buy an apartment, your buildings insurance is typically on a group policy paid through your service charge on the building)
For a first-time buyer, taking a mortgage is a serious financial commitment and you will be relying on your regular income in order to make the mortgage payments. But what happens if you are unable to work due to accident or sickness, either for an extended period or permanently?
Remember, if you cannot pay your mortgage payments you could lose your home.
Fortunately, insurance is available to cover you against the effect of sickness or serious illness, and your independent mortgage broker will discuss your options with you.
If you were to die, what would you want to happen to the property? Will you be leaving the property to a family member? If so, do you want to leave that property mortgage free?
Are you buying with another person? If so, you should ensure that in the event of the death of either of you, the surviving party has sufficient cash to repay the mortgage in full. This can be achieved through life insurance.
Your independent mortgage broker will discuss life insurance options with you.
How we help first time home buyers
A first time home buyer should seek the services of an experienced person who can advise them on the right course of action – an independent mortgage broker.
Your mortgage broker will be able to explain all stages of the mortgage application process and give you an idea of the costs involved, and your maximum affordable lending.
First Time Home Buyer – Deposits
The first thing to consider is deposit. All Lenders will want a cash deposit, be it savings, or a gift from family. The minimum deposit will normally be ten per cent of the purchase price.
If a family member is contributing towards your deposit, they will be asked to confirm in writing that their contribution is a gift, not a loan, and that they have no claim on your proposed property.
Sometimes a builder will offer a gifted deposit to the applicant as part of a purchase deal. This is acceptable to some Lenders, but the purchaser will also be asked to provide some cash as deposit.
First Time Home Buyer – Credit Score
A good credit record is key for a first time buyer and, therefore, you should make sure that any monthly payments on loans, credit card, and mobile phones are paid every month without fail. If you are unsure of the status of your credit file, you can access a copy direct from providers such as Experian.
If you need help understanding your credit file, speak to your mortgage broker.
First Time Home Buyer – Debt
Any existing debt that you intend to keep in place alongside your new mortgage will reduce the total lending available to you. Credit card debts are considered particularly harshly by Lenders in this regard. For example, a two thousand pound credit card balance may reduce your mortgage lending potential by up to five thousand pounds.
For many young graduates, their student loan is their largest debt. However, the way that student loan repayments are calculated mean that they are normally not too much of a problem when arranging a mortgage.
First Time Home Buyer – Buying together
If you find you cannot afford the property you want on your sole income, you may consider buying with a friend. This has its advantages, but if you choose to do this, please make sure you have agreements in place at the outset as to how long you will co-own, and what happens if one of you wants to move on or buy another property.
If buying with a friend, make sure you are both adequately insured for sickness and death, and you should both write a will.
First Time Home Buyer – Golden Rules
Our golden rules for first time home buyers are –
- use an independent mortgage broker
- get a good size deposit together
- keep your credit record clean
- consider resale potential when you buy
- do not be over ambitious in your choice of property
The simplest and smoothest way to obtaining a mortgage is to use the services of an independent mortgage broker.
Our team are waiting to assist you, Call us now on 020 8979 9684