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Guide to getting a First Time Buyer mortgage
Buying your first house is a really great moment in your life. It can also be quite overwhelming as it is often the most expensive thing you’ll ever buy.
In this Guide to getting a First Time Buyer mortgage, we explain the whole process step by step. We talk about everything from how to get yourself mortgage ready, to the schemes to help with your affordability.
We use in simple terms and try to limit the jargon. But if there’s anything you’d like explaining in a little more detail, please don’t hesitate to get in touch with us.
What is a mortgage
If you don’t have enough money to buy a house outright with cash, then you’ll need to take out a mortgage. In simple terms, this is what a mortgage is:
- A mortgage is a loan that enables you to buy your property.
- The money you borrow will need to be paid back over a set period of time. Usually at least 25 years and is repaid via monthly payments.
- The lender will take into consideration your income and your outgoings. This is to determine how much money you’re able to borrow. This is your “affordability”.
- You’ll need to put down a deposit, which is usually a minimum of 5% of the cost of the property.
- Your mortgage is taken out against the property. Therefore your home will be repossessed if you don’t meet your mortgage repayments.
Need more information about something you’ve read in this section of our Guide to getting a First Time Buyer Mortgage? Please don’t hesitate to get in touch with us, we would love to help.
How to get yourself mortgage ready
When the time comes for you to buy your first house, there are certain things you can do to speed up the process. This can make you more acceptable to a lender.
Get yourself as mortgage ready as possible. And start around 6 months before you need a mortgage. Then, when the time finally comes, you will be in a stronger position.
So what can you do to get yourself mortgage ready?
When applying for a mortgage the lender will ‘stress test’ your affordability. This will determine whether you’re able to afford the repayments, alongside any other financial commitments you have. Ultimately they want to make sure you have a mortgage you can afford.
The tests will include a look at your income vs your expenditure. So, it’s important that you’re able to show you are keeping your finances in order.
If you have any outstanding loans, it’s advisable to pay these off before you apply for your mortgage. And, avoid taking out any more loans in the meantime. However, don’t let this put you off speaking to a mortgage adviser as having a loan doesn’t necessarily mean you aren’t suitable for a mortgage.
- Keep on top of payments
Pay all your bills on time. This can be anything from a phone bill, to general household utility bills. This will prove you’re reliable and financially independent.
- Electoral roll
A simple but effective thing to do is to register on the electoral roll to vote where you live. This makes it easy for the lender to trace you to officially living at the address. Also, make sure any bills you have are registered to your current address, so everything is easy to trace. This is surprisingly important and one of the simplest ways to boost your credit score.
- Regular saving
If regular savings can be traced on your bank statements, this can be good for a number of reasons. Not only can it show where the money for your deposit has come from. But it can also prove to your lender that if you’re able to save a lump sum or regular amount each month. Then, this money could go towards paying off a mortgage.
- Cut back where you can
If there are any cutbacks you can make, then now is the time to make them. Perhaps you have a gym membership that you don’t use regularly. Or you have a subscription to satellite TV that you probably don’t need. Then it would be a good idea to cancel them for now, just to save you that extra bit of money. Afterall, every penny counts!
Something you’ve read in this section of our Guide to getting a First Time Buyer Mortgage that you’d like explaining in a little more detail? Please don’t hesitate to get in touch with us.
Your Credit Rating
All lenders want to see that you have a good credit score to help decide whether to:
- Lend you money
- How much to lend you and sometimes,
- How much interest to charge
If you have a good credit score, then you’ll stand a better chance of getting the mortgage deal you want. Ultimately you will be able to borrow the maximum amount to help you buy the house that you want.
- Check your credit score
Your credit score is the first place to start to find out how good or bad your credit score is. There are various companies who can give you your credit score. They will provide a thorough report of all your credit accounts. It will include outstanding loans and any missed or late payments over the last six years. As well as any other people who are financially linked to you. Sometimes the reports do contain inaccurate information, if this is the case, you can get this put right before applying for a mortgage.
- Show an account history
Start by proving you have a good history when it comes to managing your finances. Having a history of bank accounts will give your mortgage adviser a decent history of your credit to look back through.
- Declare your address
Lenders will need to see proof of your name and address in order to trust you are who you say you are. Register on the electoral roll and make sure all of your bills and credit commitments are registered to your current address. This way, everything is easy to trace back to you and confirms your identity.
- Use a credit card responsibly
Always try to retain a good amount of available credit. Available credit is the difference between what your outstanding balance is and your total credit limit. If your available credit is low, this would indicate that you’re struggling to keep tabs on your finances. Also, never withdraw cash from your credit card. This will go against your credit score as it looks like you’re having to make the withdrawal because you have no money left in your own bank account, even if this isn’t the case.
- Don’t miss repayments
This may sound like an obvious one but missing payments will have am detrimental affect on your credit score. Despite your hard efforts to do everything else, missing repayments shows that you are incapable of managing your finances and paying your bills on time – which isn’t great if you’re trying to get a mortgage.
- If you have bad credit, stop applying for more credit
If you know for a fact that you have bad credit – having multiple credit searches carried out in a short space of time can go against you. It’s advisable that in the meantime, you don’t apply for anymore credit and concentrate in clearing your existing debt instead.
- Don’t keep unused cards
Holding on to credit cards you no longer can be misleading as to how much available credit you have. So make sure you cancel any accounts you don’t use and cut up the card before throwing it away.
If there’s anything you’ve read in this section of our Guide to getting a First Time Buyer Mortgage that you’d like explaining in a little more detail, please don’t hesitate to get in touch with us.
Help to buy explained
Trying to get your foot on the property ladder can be a challenge. Especially if you are paying rent as well.
To help more people purchase their first home the government has introduced the Help to Buy Equity Loan Scheme. This scheme is available on new build homes only and is open to first time buyers, providing they meet the necessary criteria.
How does a Help to Buy Equity Loan work?
There are different Equity Loan schemes for England, Greater London, Wales and Scotland. For more information visit: www.helptobuy.gov.uk. The following details refer to the Equity Loan Schemes for England and Greater London only.
- The government will lend you up to 20% of the cost of your new build home. This increases to up to 40% of the cost if the property is in London. This is called an equity loan.
- You’ll need to save a minimum of 5% of the purchase price as a deposit, and you can use contributions from your Help to Buy ISA or Lifetime ISA to pay this. The remaining 75% comes from a specialist Help to Buy mortgage product.
- As you’ll have a larger deposit, you won’t need to raise as much of a mortgage. This means your initial mortgage payments will be lower. It should also help with affordability calculations when you apply for your mortgage.
- The Equity Loan is interest-free for the first five years and you don’t need to make any repayments on it during that time. After five years, you’ll be charged 1.75%. After the sixth year this the interest on the equity loan will increase by the Consumer Price Index (CPI) plus 2%.
- Only first time buyers will be able to use the Help to Buy Equity Loan scheme
- There are regional price caps on how much you can buy. As a result, the maximum value of home that can be bought with the scheme’s help will be dramatically cut in most areas. The Caps have been set at 1.5 times the average first time buyer price in each region (as of Autumn 2018).
If there’s anything you’ve read in this section of our Guide to getting a First Time Buyer Mortgage that you’d like explaining in a little more detail. Or you want to find out more about the regional price caps please don’t hesitate to get in touch with us. We also have a page on our website dedicated to the Help to Buy Equity Loan scheme.
Help to Buy Shared Ownership
The Help to Buy Shared Ownership scheme is another option to help with affordability. It offers you the chance to buy a share of between 25% and 75% of your home’s value and then pay rent on the remaining share. Over time, as you earn more, you can increase the size of your mortgage until you own the property entirely, a process called ‘staircasing.’
Shared Ownership schemes might be a good option for some people who may not be able to raise a large enough loan. It also provides long-term security, which may be better than simply renting a property.
How does Help to Buy Shared Ownership work?
Typically, you would raise a mortgage on half of the purchase price of the property. And pay a deposit of 5% on this amount, rather than the full amount of the purchase price. Again, this can make it easier for those people on lower incomes or who are struggling to save a deposit.
There are a few conditions to determine if you’re eligible for the scheme. You could buy a home through the Help to Buy Shared Ownership in England, if:
- Your household earns £80,000 a year or less outside London
- Your household earns £90,000 a year or less in London
- You’re a first time buyer
- You used to own a home previously but can’t afford to buy one now in the normal way
- You’re an existing shared owner looking to move home
To find out more about Help To Buy Shared Ownership schemes, visit: www.helptobuy.gov.uk/shared-ownership. Or contact us and we can talk you through the whole process.
Can you borrow money from your parents or relatives?
Many people struggle to find the money to put down a cash deposit. So, it comes as no surprise that some lean on their parents to help them find the money. It’s important to be aware that there’s a set procedure to follow as this money has to be officially ‘gifted’ or “loaned”.
What is gifting money and what does it involve?
The difference between being loaned the money and gifted the money is that with a gift, you don’t have to pay it back. On the whole, mortgage lenders tend to prefer the money to be gifted. You will need to ask your parents to write a letter detailing how much they’ll be gifting. They will need to state that the money does not need to be repaid.
If your parents want the money to be paid back and therefore it is a loan. Your mortgage adviser will have to take these payments into consideration when working out your total repayment.
A close relative can act as a guarantor on your mortgage. This is often an attractive option for first time buyers as the guarantor’s income is taken into account when working out how much the borrower can afford to borrow. Therefore, you may be able to borrow more than if you were applying on your own. However, this does mean that if you’re unable to make your repayments, your guarantor will be expected to make them on your behalf. A guarantor would therefore need to be able to afford all of their own current commitments and lifestyle, as well as your mortgage.
How we can help
By speaking to Your Mortgage Expert, you’ll get access to expert advice to help you work out how much you can afford to borrow. While online mortgage calculators can provide a good guide. We will take the time to fully go through your circumstances. We will let you know what your repayments would be and what type of mortgage is most suitable for your personal circumstances. And, if you need it, we can break down all the jargon so you understand whether to opt for a tracker mortgage, fixed rate mortgage or something more flexible.
Not only do we have access to the current deals on the market, some of which are not available to First Time Buyers directly. Having access to over 90 lenders will ultimately save you time. As you won’t have to search or contact each individual lender to compare the mortgage terms and rates. We will do all that for you. We also have extensive knowledge of all the current Government schemes designed to give you a helping hand.
We don’t charge for the initial consultation, so by speaking to us, you are under no obligation. So why not get in touch for expert first time buyer advice and take that first important step. We are based in Salisbury but can help you no matter where in the UK you live. We can carry out face to face meetings for those based locally. Alternatively, we can carry out the whole process remotely via the telephone, email or video call.
We hope you have found this Guide to getting a First Time Buyer mortgage useful. And we look forward to helping you get onto the property ladder.
A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 2% but a typical fee is 0.6% of the amount borrowed.
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“This was knight in shining armour stuff. Our conscientious mortgage broker was a delight to deal with from the off and the key to our dream home.”
Max and Martha, First Time Buyer customers from Cardiff
“Being in the Armed Forces I am away a lot, meaning it can be hard to attend meetings, answer emails and especially hard to fill in forms. Adam and his team were extremely helpful and understanding of our situation and provided help wherever they could. After our initial meeting where we provided our required details, we actually did very little of the hard work, apart from signing a couple of papers.”
Callum and Verena, First Time Buyer Armed Forces Mortgage Customer from Salisbury
“I expect my circumstances were fairly rare, but the help and guidance I received from you was invaluable. I feel that the personal touch you provide offers something that appeals to the soldier in me. During my service I always liked to have a point of contact, someone who was the “go to” specialist in their field. This provides a degree of assurance about a situation and it was refreshing to find that same degree of certainty transitioning to civilian life, particularly with something as important as a mortgage and buying our family home.”
Andrew and Helen, Armed Forces Mortgage Customers from Salisbury
“Even though we were used to having a mortgage on the rental property, paying a mortgage on your own home was still a bit of a shock after years of having married quarter rental deducted from your pay at source. But, at every step along the way, we felt reassured, understood and that we really mattered to Adam. Trust is an important concept for military families and we trusted Adam.”
Fiona and Graham, Armed Forces Mortgage Customers from Wilton
“As a contractor, it was difficult for me to obtain a mortgage through normal channels so it was great to find a mortgage adviser that specialised in contractor remortgages and understood the challenges. In addition, I had fairly tight timescales, so wanted someone who could make the process quick and hassle free.”
Andrea, Contractor Mortgage Customer from Warminster
“I am a contractor, therefore require specialist mortgage advice. Adam has now concluded two mortgages for us (new mortgage then a contractor remortgage), and is currently arranging a buy-to-let mortgage for us. He also arranged our life insurance for us. We keep returning to him for some great reasons – he is always available, and ready to help. He provides great advice, and always ensures that he meets our requirements exactly. He is prepared to explain things in such a way that even a lummox like me can understand, and his level of service has remained consistently good over the last three years.”
Matt, Contractor Mortgage Customer from Southampton
“Adam’s advice on the different types of critical illness and life insurance were really useful. He also worked with us to decide the best combination of policies that would work with our existing policies to cover our needs. When doing this he happily tweaked quotes for us until we came out with an arrangement that was both affordable and would provide us with the level of cover we thought appropriate.”
Hannah and Steve, Protection Insurance Customers from Stamford
“Adam provided us with factual advice and also with options of which we were unaware. The advice on gifted equity was something we hadn’t heard about and this assisted us hugely to ensure repayments worked within our affordability. He provided us with a very personal service that made the journey from initial call, to mortgage offer and completion hassle free. We have already recommended Adam to someone and will continue to recommend his services in the future.”
Saul and Laura, Home Mover Mortgage Customers from Salisbury
“Mike and I collected the keys to our flat this weekend and we couldn’t be happier. It’s been a long time coming but we got there! We just wanted to say a MASSIVE thank you for everything you have done for us so far. We’ve really appreciated all the help, advice and reassurance you’ve given us all the way through this process. It’s really nice to have a friendly voice on the other end of the phone.”
Mike and Bethan, First Time Buyer Mortgage Customers from London
“Without question Adam found me a deal the estate agent’s broker couldn’t. He was very easy to contact whenever I needed him and he took time to explain the ins and outs of the Help to Buy equity loan scheme mortgage that he found me. I would rate him five out of five and will be back to use him when the time comes to remortgage or move.”
Chris, Help to Buy Mortgage Customer from Southampton