First Time Buyers

First Time Buyers
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First Time Buyers

First Time Buyers
First Time Buyers

Mark Schouten joins us to talk all about mortgages for First Time Buyers.

Whether you’re buying for the first time, moving, investing or remortgaging we’ve got it all covered.

Listen to the latest podcast below to find out more!

Mark Schouten joins us to talk all about mortgages for First Time Buyers.

How is the mortgage process different for First Time Buyers?

It’s definitely an exciting time when you’re buying your first home – but it can be daunting as well. You often don’t know where to start.

What’s positive for First Time Buyers is that you’re in a good position. When you want to make an offer on a house, there’s no chain to worry about. You don’t need to sell a house to be able to buy something else. It’s just about getting your finances sorted.

There are also a few schemes available for First Time Buyers to help them onto the property market, which are worth exploring.

What is an Agreement in Principle?

An Agreement in Principle is an indication from a lender of how much you can borrow. They have many names, such as a mortgage promise or a Decision in Principle.

The process is that a mortgage broker first does a ‘fact find’ with you to get an idea of your requirements. They would then go to a lender and do a credit check to confirm all the key details ready for when you apply for a mortgage.

The Agreement in Principle is important when you’re buying a property because one of the first things an estate agent will ask for when you’re interested in a home is your Agreement in Principle. So if you don’t have it at that stage, it puts you on the back foot compared to the other potential buyers.

How much can a First Time Buyer borrow?

It all depends really on your salary and commitments. As a rough starting point, if you’re putting down a 5% deposit you can multiply your salary by about 4.5 times to get an idea of how much you could borrow.

But again, that’s where a mortgage advisor can help. We will go through the full details: getting to know you and looking at all the different providers and schemes for First Time Buyers to increase what you can borrow. A lot of lenders, especially this year, are starting to provide specialist products for First Time Buyers where they will increase their lending to help you get onto the housing market.

What deposit is needed?

The starting deposit is a minimum of 5% of the property price. If you can get more than that together, it will often help you pass their credit scoring and the size of the loan. With the majority of lenders the minimum is now 5%.

Speak To An Expert

​We are always happy to hear from new clients, so please get in contact today to discuss your mortgage options.

How do I know what my credit score is and how do I improve it?

Credit scores are a big factor in terms of how lenders will see you. I always suggest using a company called Check My File, which offers a 30-day free trial. It provides your credit profile from four of the main credit referencing companies that mortgage lenders use. Once it’s set up you can see your credit score and whether there’s anything that might cause you any issues.

A lot of mortgage brokers will ask for your credit file. For First Time Buyers if you haven’t got any credit history then sometimes that can go against you. It can help to get a credit builder credit card and use it to pay for a few essentials such as petrol, for example, and clearing the balance each month.

The other thing that will really help improve your credit score is making sure you’re registered on the electoral roll. If you’re on the electoral roll and you have a small amount of credit that you’re repaying on time, it will really help your chances with a lender.

What is a First Time Buyer ISA?

The First Time Buyer ISA was previously called the Help to Buy ISA, where you could open up an account with £1,200 and then put in a maximum of £200 a month. Then, when you came to buy a house the government would essentially give you an additional 25% of the total in your ISA.

The new First Time Buyer ISA is based on the same principle. It’s called a Lifetime ISA and while there’s no monthly restriction, you are limited to £4,000 a year. The government will still give you a 25% bonus when you’re ready to buy a home.

One thing to note with the Lifetime ISA is that you need to have had it for at least 12 months before you can get your bonus. So if you’re planning to buy a home in a year’s time, get your ISA set up now.
What government schemes are there to help First Time Buyers get on the Property Ladder?

Help to Buy Equity Loan

Check the maximum purchase price in your local area because it does differ by location. It’s available on a brand new property – which First Time Buyers like because there are no extra costs for repairs or new boilers.

With the Help to Buy Equity Loan you only need to put a 5% deposit down and then you get an interest free loan for five years from the government totalling 20%. That increases your deposit by quite a considerable amount, which means you can qualify for better products. Your monthly mortgage repayment will also be lower.

Speak To An Expert

​We are always happy to hear from new clients, so please get in contact today to discuss your mortgage options.

5% deposit mortgage guarantee scheme.

Essentially this is just a 5% mortgage. All that’s happening in the background is that the government is supporting lenders to offer these products. Low deposit mortgages are quite risky for lenders, so the government is insuring a percentage of the deposit in case a customer defaults on the loan.

Shared ownership

You don’t actually have to buy a whole property. You can buy 50% of a property and rent the remaining 50% from a housing association. This can be a good option, because you can start by buying a smaller share of a property and then as you get older and your salary starts increasing, you can buy more – say 75 % property in two years time and up to 100% in the future.

How do I decide what’s best?

Part of our first meeting with you is to get a general understanding of what you are looking for. We will discuss these schemes with you, as they might help you increase your property budget. You might have a maximum purchase price of £200,000, but the equity loan scheme might extend this to £220,000, for example. It’s our job to explain that as clearly and simply for you as possible.

What fees are involved when buying a first home?

The good news is that most First Time Buyers don’t have to pay stamp duty – in the Worcester area the maximum property price is £300,000 to qualify for zero duty.

One of the first things we do with a client is to sit down and go through all the fees you need to budget for. That starts with the solicitor costs, stamp duty, survey costs and fees to the lender. We’ll set out what you need to take into account on top of your deposit to buy your home.

How can a mortgage broker help if you’re a First Time Buyer?

It’s well worth finding a mortgage broker to help you through the process. We are in the perfect position to explain not just the mortgage side, but also the legal side – and help you deal with the estate agents and more.

At Mortgages Plain and Simple we love to help First Time Buyers from day one all the way through to completion. We’re also there when you start going to the next stages – of owning a property and refinancing it in the future.

It’s always a really rewarding feeling when our clients collect the keys to their first home.