Mortgages for First Time Buyers
A mortgage for First-Time Buyers is the same as any other type of mortgage for a house purchase, although a more thorough discussion regarding regular budgets and affordability is normally appropriate to ensure that applicants are fully aware of all the ongoing costs associated with home ownership.
First Time Buyer
First Time Buyer topics
First time buyer mortgage advice
As a potential first time buyer, you will probably have a lot of questions and concerns regarding the whole property buying process and need to borrow money by way of a mortgage to enable the purchase to take place. By having an initial discussion with one of our team, we can answer your questions and guide you through the process to make sure you can move forward with confidence.
What are the benefits of using a mortgage broker if I am a first time buyer?
As a first time buyer, no doubt with many questions and possibly a limited understanding of the whole house purchase process, a discussion with a suitably qualified mortgage broker may prove invaluable. You will be guided through the purchase process, where the adviser will make sure you understand some of the key points.
Once the mortgage broker has a full understanding of your current circumstances and objectives, he or she will be in an ideal position to research the marketplace and select a suitable mortgage lender and rate to match your needs.
Following on from the completion of the purchase, the broker will make contact with you before your mortgage rate finishes, to review your circumstances and assist with finding another good deal, either with your existing lender of by moving to a new lender.
In addition to having access to lenders, deals and rate from the mainstream and high street lender, it is highly likely that some exclusive rates and terms may be available through a mortgage broker. Membership of a variety of professional mortgage networks or mortgage clubs will from time to time attract rates or scheme terms (for example, lower arrangement fees or fees assistance) from lenders which are not available elsewhere. This is possible because of the volumes of business provided to the lenders by intermediaries.
Generally speaking, a deposit of at least 5% of the purchase price will be required, although there may be some exceptions to this in the event that you are buying a property under the market value, possibly with a gifted equity deposit from the vendor who would usually be a family member. A larger deposit will influence the rates of interest and mortgage deals that will be available. Deposit can come from a variety of sources.
Most commonly this will be from personal savings and investments, although in recent years there has been a growing number of borrowers receiving financial help from family by way of gifted deposits. This is normally acceptable to a lender, provided that the funds are not repayable and the donor of the gift will not have any financial interest in the property or be living in the property. Regardless of the amount of deposit you have, the amount of borrowing must still fit within the lender affordability calculations.
It is important that an affordable monthly budget is established at the early stage of a discussion to ensure that your expectations can be met. Traditionally a lender used to calculate lending based on a multiple of income. This is no longer the case as individual circumstances are very different when it comes to how people spend their disposable income. A lender will have a specific affordability calculator into which all income and known commitments are entered. Any future unknown costs may be estimated or the lender may assume a figure based on information from the Office of National Statistics. Income used in the calculation can be from employment or self-employment.
Some types of benefits may also be acceptable and these can be clarified by our experts. A detailed analysis of all your income and expenditure by one of our specialists will provide an accurate indication of a maximum mortgage that may be available. However, in some circumstances it may be that this is actually greater than you are comfortable with, once you have established your monthly budget for mortgage and related costs. The amount of deposit may also influence the amount available to borrow, with some lenders applying a “cap” on higher loan to value cases which may be 4 or 4.5 x the income, regardless of the affordability calculation.
Mortgage costs for First-Time Buyers are as follows.
- In the first instance you will need a deposit to put down. This usually starts at 5% of the value of the property you are looking to purchase.
- Stamp Duty will be payable if you purchase a property for over £300,000.
- You will also need to pay for a Solicitor or Conveyancer who will take care of all the legal paperwork when purchasing a property.
- Your Solicitor will also collect payments for The Land Registry (For when your property is registered in your name), HMRC (to pay the Stamp Duty), Local Authority and various other third parties (while they carry out the due diligence on the property you are looking to purchase).
- You may also be required to pay for a Survey/ Mortgage Valuation fee.
- And lastly you may also be required to pay for a Mortgage Advisers fee, and depending on your mortgage product any product related fees to the lender.
When you apply for a mortgage, the lender will make a full assessment of your financial situation. Your income from all sources will be taken into account, together with any regular outgoings and commitments. These commitments will include loans, credit cards, child care and travel costs. It is important that you do not over commit yourself and the lender affordability calculations will take account of potentially higher interest rates in the future.
In addition to assessing affordability, lenders will carry out a check of your credit profile and history. They will also need to establish your address history for at least the last 3 years and would expect that you are registered on the electoral roll at your current address. To support a mortgage application, you will need to provide evidence of your income, usually the latest 3 months payslips if you are employed or tax calculations and accounts if you are self-employed, together with your latest 3 months banks statements, proof of Identification and address. Documentary evidence of your deposit will also be required at the application stage.
At Just Mortgage Brokers, we have access to over 12.000 mortgage products from over 90 lenders. Our Mortgage Advisers will always endeavour to find the most suitable First Time Buyer mortgage for you based on your specific circumstance. Call us to see how we can help.