What is a First Time Buyer?
You’re considered a first time buyer if you are purchasing your first property to be used as a main residence. It’s more difficult than ever before for a first time buyer to get onto the property ladder due to more rigid affordability checks following the economic downturn in the UK. Coronovirus has also impacted the property market, with lenders now even more cautious to approve mortgage applications.
On the other hand, being a first time buyer allows you to offer the seller a no-chain sale. This will speed up the process for them, making it mutually beneficial.
How Much can a First Time Buyer Borrow?
The amount you can borrow will be based on your individual financial circumstances. Your total income, financial responsibilities and outgoings and whether or not you are buying alone or with a partner, all contribute to this. It’s worth noting that some lenders will include overtime and discretionary payments, whilst others won’t.
If you’re buying your first home, think about the mortgage term and interest rate and ensure you can afford the mortgage payments. Many sites offer a free mortgage calculator, which makes forward planning a little easier. Also bear in mind potential changes in circumstance, such as becoming a parent or losing your job. The mortgage lender will likely have ‘stress checks’ in place that do this.
What Deposit will a First Time Buyer need?
When applying for a mortgage, the deposit required depends upon both the lender and the type of mortgage you choose. As a result of coronavirus, you’ll need a much larger deposit to persuade the lender. Most lenders will ask for at least 10%, but 20% or more is likely to get you a more competitive mortgage offer.
A range of government backed schemes are available, which intended to help first time buyers get onto the housing ladder. Some of these, such as the help to buy and NewBuy schemes only require a 5% deposit. The shared ownership scheme gives you the opportunity to purchase a share of the property, making the overall deposit lower. In this case, you pay rent on the remaining share of the property, usually to a local authority.
What help is available for First Time Buyers?
There are some offers available to first time buyers, such as lower interest rates and fees. The schemes mentioned above are also aimed specifically at helping first time buyers.
How do I Find out and Improve my Credit Score?
There are a number of places online where you can check your credit score. Your credit score can have a huge impact on mortgage acceptance. It’s important, therefore, to take steps to improve your score, in advance of your application.
Make sure you are on the electoral roll and only have current addresses on your accounts. Keep on top of any credit agreements you have in place, as late or missed payments will affect your score. Ironically, never having used credit can also lower your score. You can use a single credit card and pay the balance in full each month, this will show you’re a reliable borrower.
What is an Agreement in Principle (AIP)?
An agreement in principle, sometimes known as a decision in principle, is an initial decision that your mortgage application will be accepted. However, this is subject to their own valuation of the chosen property and their receipt of your proof of income.
What Fees are Involved with Buying a House?
There are many fees involved with house purchase, which will vary by lender. A mortgage broker is able to help you find the best lender for your circumstances. The main fee types to consider are:
This charge is for organising the mortgage and is variable.
This is the cost for the lender to have your home independently evaluated.
This fee has quite a complex calculation that is based on the cost of your home across various tax bands. Until 31 March 2021, however, no stamp duty will be due on first properties below £500k.
These include conveyancing and local authority search fees which are carried out by your solicitor.
How can a Mortgage Broker Help First Time Buyers?
Mortgage brokers are able to see mortgage offers that you don’t have access to. They are best placed to find the most suitable mortgage deals for you. They can also help to explain the full process of becoming a homeowner.