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First Time Buyer Mortgages - What you need to know.
When it comes to getting on the property ladder, it can be incredibly difficult to know where to start, especially when it comes to getting a mortgage and starting the lending process for the first time.
To help, we have put together this handy guide for first time buyers, with the information you need to get started.
Should I use a Mortgage Broker?
Mortgage Brokers are able to offer advice when they recommend a mortgage for you. They will assess the level of mortgage repayments you can afford, by looking at your income as well as your debt repayments and day-to-day spending. As they are not tied to one lender their advice is tailored to you. They often have access to mortgage deals that are not available when you go directly and they are experts at the mortgage application process. This means you will end up with a mortgage that suits your needs and you can save money and time.
What is a first time buyer mortgage?
First time buyer mortgages, if you’re unsure, are aimed at those who have not yet owned property. This means that effectively, you don’t have anything to sell.
In a bid to help those that want to start their journey into home-ownership, the Government have launched a range of schemes that are designed to push lenders to offer more first time buyer friendly mortgages.
Typically a deposit required by a first time buyer is slightly lower than average, some providers will offer a mortgage with a 5% deposit, although this is likely to be closer to 10% in the current economic climate.
How Do Mortgages For First Time Buyers Work?
When you start to apply for a mortgage as a first time buyer, your lender will need to assess your affordability. To do this, they will look at your annual salary, any other income you may receive and all of your outgoings. This includes debts, credit card payments, household bills and childcare.
Alongside this, they will also check your credit history, as this will give them an idea as to whether or not you’re a reliable borrower, effectively using it as an affordability assessment.
You will find that most mortgage providers have a maximum loan-to-value that they are prepared to offer you, which is essentially the maximum loan you can take out as a percentage of the overall property value.
In comparison to standard mortgages, first time mortgages often have different rates based on credit history and affordability, as they don’t have a past mortgage to base the assessment on.
How Do You Go About Arranging A Mortgage?
Before you start to view any potential properties, you may want to consider getting a mortgage agreement in principle. Essentially, this will give you an idea of how much you can borrow at the same time as showing estate agents that you’re serious about buying.
As mentioned above, you will need to provide evidence of your income and your outgoings, which may result in having to produce payslips and bank statements. For those that are self-employed, you may be asked to provide your tax returns for as many as two years.
Once you receive an offer, it will be valid between 30 and 90 days.
How Much Can You Borrow?
The amount you can borrow really depends on the income commitments you have when you apply for your mortgage. In most cases, you will find it’s roughly four times your annual salary.
How Much Deposit Will You Need?
Finding a deposit is a common worry for first time buyers, as in most cases, deposits are around 10-15%. Certain schemes may be available with a deposit of 5%, however.
What Will My Repayments Be?
Your repayments will be determined by the amount you borrow, the rate and any fees that need to be added. Terms are usually flexible and you can set them to suit you.
For more information when it comes to mortgages for first time buyers, please do not hesitate to get in touch with a member of our friendly team.
Commercial mortgages and some buy to let mortgages are not regulated by the Financial Conduct Authority
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS. SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.