First Time Buyer’s Frequently Asked Questions
Listen below as Chris Needham talks all about mortgages for First Time Buyers.
In just 10 minutes, you’ll know a lot more about getting your first mortgage sorted.
How is the mortgage process different for First Time Buyers?
It can be quite overwhelming as a First Time Buyer – you haven’t been through the house purchasing process before, and mortgage lenders do use quite a lot of strange terminology and acronyms.
It can be quite daunting to someone buying their first property. The process is slightly different because you’re not selling one property to buy another one. This is your first purchase – that makes it slightly easier in that you haven’t got to rely on the sale of your existing property going through.
There’s lots of information to take in and learning to do. You’re not sure how long it’s going to take. That’s what mortgage brokers are here to help you with – not just finding you the most suitable mortgage deal but also helping you through that process.
What is an agreement in principle?
An agreement in principle, a mortgage in principle, decision in principle or mortgage promise (just to confuse things even further) is effectively a certificate from a lender to suggest that they would offer you a mortgage. That’s based on the information that we’ve provided with them. We will generate an agreement in principle for First Time Buyers before you go out to look at properties.
It gives you peace of mind that you can get a mortgage. We will select a lender that offers a ‘soft search’ because that doesn’t damage your credit file. It doesn’t leave a trace behind.
In summary, it’s a certificate from a lender that says based on the information provided we are likely to give you a mortgage for a certain amount.
How much can a First Time Buyer borrow?
Every lender has a different criteria and affordability calculation. So our role is to understand your circumstances, such as how long you’ve had your role and whether you’re paid weekly or monthly.
We’ll look at whether you get a basic salary or bonuses or commission and take that into account alongside your existing commitments. That might be whether you have children or a car on finance, personal loans or credit card debt. It can all impact how much a lender is prepared to let you borrow.
Once we have taken all of that information into account we can come back and suggest how much you would be able to borrow and how much that’s likely to cost a month. We will always make sure that it is affordable.
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What deposit is needed for a First Time Buyer?
The minimum deposit you’re going to need is 5% of the purchase price of the property. The deposit can be either your savings, or perhaps can be a gifted deposit from a family member. It can also be a combination of two.
If you have a 10% or a 15% deposit you will get a slightly better interest rate from the lender. While 5% deposit mortgages are available, they are a lot harder to get than a mortgage with a 15% deposit – because there’s obviously more risk being taken on by the lender.
How do I know what my credit score is and how do I improve it?
A credit score is a snapshot of how a lender would view your situation. Someone who has had a credit card for the last two years, has been using it on a regular basis but paying it in full each month, will have a good credit score. It shows a lender that they are behaving responsibly with the money they are borrowing.
You can boost your credit score by making sure you’re on the electoral roll at the property where you’re living. Make sure that you pay your debts on time and look after your bank account – don’t go overdrawn or have payments declined on your regular commitments. The more of that you do, the higher your credit score will be.
Lenders look at your credit score when they are deciding whether to grant you a mortgage or not. You may have heard of some of the main credit score agencies like Equifax or Experian. You can register with one of those and have a look at your credit score to see how the lender will view you.
We often advise First Time Buyers right at the start of the process to get a copy of their credit file. We can look through that credit file with you and suggest how you could improve your score.
Then, by the time you’re ready to buy your property, your score will be high enough for lenders to offer you a loan.
What fees are involved when buying a house? How does stamp duty work?
The fees can vary depending on the property that you’re buying. As well as advising on the mortgage and how much the mortgage repayments are going to be, we also like to make sure that you are protected.
That might be life insurance or critical illness insurance or income protection insurance. When we’re giving mortgage quotes for the monthly repayments, we also take into account how much the protection is likely to be. It’s very important.
Stamp duty is a government tax for buying property. If you’re a First Time Buyer then stamp duty is free up to £425,000.
Some mortgages have a product fee so a lender will often offer two rates where one is slightly higher but there’s no product fee; while you might get a cheaper rate by paying a product fee at the start. As part of our role we run all the numbers to understand which is the most cost-effective scheme for you. So you may have a mortgage fee to pay, you may not.
Then, as part of the transaction, you’ll have to engage a conveyancer or solicitor to handle the legal side of the purchase – including any searches on the property. A solicitor Is usually somewhere between £1,200 and £1,500 for the whole transaction.
Depending on the type and age of the property, you may want to have a survey carried out. This is where an independent specialist goes out to the property to check that it’s safe, that there are no holes in the roof or cracks in the building. Costs can vary but are usually between £300 and £700.
How can a mortgage broker help with First Time Buyer mortgages?
Get in touch with a mortgage broker at the start of the process so that you’re prepared. Then. you’ll have everything lined up so that when you go out viewing properties, you’re ready to proceed.
Talk to us in plenty of time, make sure your credit score is as good as it can be, get your deposit lined up. We can help you not only understand how much it’s likely to cost and how much you can borrow but also help you understand the purchasing process and hold your hand all the way through. We’re also available to come to housewarming parties as well!
Your home may be repossessed if you do not keep up repayments on your mortgage