First Time Buyer

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All About First Time Buyer Mortgages

What is a First Time Buyer?

If you are looking to buy your first home and it will be your primary residence, then you are classified as a first time buyer. Whilst it’s become increasingly difficult for first time buyers to find a mortgage in recent years, being properly prepared can have a real impact on the outcome of your application. 

What is an Agreement in Principle?

An Agreement in Principle, which is sometimes also known as a decision in principle, is a conditional mortgage offer from the lender, prior to applying for a mortgage in full.

An Agreement in principle is by no means a requirement, however, it can sometimes be helpful for first time buyers specifically. It lets vendors know that you’re a serious buyer, which often improves the chances they’ll accept your offer.

How much can a First Time Buyer borrow?

The amount you can borrow should not be affected by the fact that you’re a first time buyer. Mortgage lenders base your loan amount on your affordability and credit score.

There are a range of other issues that can affect how much you can borrow, for example, whether or not you apply jointly with a partner and how much your current financial responsibilities are. 

How to improve your credit score

One of the most advantageous things that you can do in preparation for a mortgage application is to ensure that your credit rating is as strong as possible. A strong credit score will not only improve your chances of securing a mortgage, it will give you access to more competitive interest rates.

There are a range of things you can to do improve your score:

  • Make sure you’re on the electoral roll at your current address
  • Check that your current address is correct on all accounts
  • Stay within 50% of your available credit limits
  • Pay all bills in full and in a timely manner
  • If your low score is due to a lack of credit, a special credit builder credit card can help
  • Ensure any debts are cleared, at least a year before application, where possible

How much deposit do I need?

Lenders typically require a higher deposit from first time buyers, particularly in the midst of Covid-19. You should expect to need between 10% and 20% of the property value. 

What help is available for First Time Buyers?

A range of schemes, designed to help first time buyers in particular get onto the property ladder, are currently available. If you are struggling to raise a large deposit or have a lower income, these schemes are worth consideration:

The Help to Buy tops up your 5% required deposit with a 20% government loan, meaning that you only need to borrow 75% towards the cost of your home. This is only available on new build properties.

The NewBuy scheme also only has a 5% deposit requirement, but you then borrow the remaining 95% from the government. Your interest rate will be around 75% of standard mortgage rates, although this is also only available on newly built homes.

The shared ownership scheme allows you to purchase a share of the property (usually between 25-75%), rather than the whole property. This makes both the deposit and monthly payments far more affordable, however you will also be liable to pay rent on the remaining share. 

All schemes are subject to regional variation and may not be available UK-wide.

Speak To An Expert

We’re able to tap into our local knowledge to guide you through your house purchase in your chosen area.

What Fees are involved with buying a home?

Arrangement Fees

Most lenders charge a fee to organise the mortgage. The amount varies from lender to lender and some lenders may even waive fees for those in certain professions.

Valuation Fees

All lenders require an independent evaluation to be carried out on your new home, prior to accepting the mortgage application. You are ordinarily responsible for these costs, however, some lenders offer free valuation as part of the mortgage deal.

Stamp Duty

All homes that are sold for £125,000 or above are liable for stamp duty. The cost depends upon the property value.

It’s important to note that the UK are currently benefiting from a stamp duty holiday until 31 March 2021. If you purchase a property below £500,000 before then, you will not have to pay any stamp duty. 

Legal Fees

A solicitor is appointed as part of your mortgage application process to carry out roles such as conveyancing and local authority searches. Fees will vary between firms, your mortgage adviser should be able to recommend a range of competitive solicitors.

How can a Mortgage Broker help a First Time Buyer?

Buying your first home is a huge responsibility and there are a wide range of options to consider, not to mention approaching the right lender for your needs. Mortgage Brokers can guide you through the whole process, ensuring that you secure the most appropriate type of mortgage offer for your individual circumstances.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it. 

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