First Time Buyer Mortgage

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First Time Buyer Mortgage

Luke Platt talks to us about the mortgage process for First Time Buyers. 

What are the typical requirements to apply for a mortgage as a First Time Buyer?

As a first port call for any First Time Buyer, reach out to a mortgage broker.

We have up-to-date and relevant information about any schemes out there for First Time Buyers. In order to get started, you would need a 5% deposit. That’s generally the lender’s minimum requirement.

However, there are schemes with some lenders that only require a £5,000 deposit, or you could potentially look at a Track Record mortgage with no deposit. You would need a good credit score rating for these products.

The right thing is to reach out to a mortgage broker – we’ll have a good discussion with you.

What is the maximum amount that can be borrowed for a mortgage as a First Time Buyer?

It’s all dependent on your level of income that’s used for affordability. Affordability is also based on your outgoings – any liabilities or credit commitments in place, which will impact on the amount of lending that’s available.

As a mortgage broker, we’ve got our own affordability calculations and can go to different lenders who can vary widely in how they assess what you can afford on a mortgage. It’s worth checking this out with a mortgage broker to see the maximum you’d be able to borrow.

What’s the minimum deposit required for a First Time Buyer?

A 5% deposit is required to purchase a property with a mortgage. The more deposit you have, however, could mean a lower Loan to Value, which in turn would mean that your monthly repayments could be lower, too.

If you do have a 5% deposit, that’s great. If you have more, that’s also great. The more deposit you have, the more lenders there are to choose from. If you’re eligible for the schemes mentioned above, you may not need a deposit at all. But it’s right to speak to a broker to see if these products are suitable for you.

What are the types of interest rates available on a mortgage for a First Time Buyer?

There are so many different types of rates and products available out there. When it comes to choosing the right one, speak to a mortgage broker. We’ll go through these with you and discuss the various options available to you as a First Time Buyer.

Interest rates change – they go up, they go down, and there are different products out there. A mortgage broker will have this conversation with you.

What are the pros and cons of fixed versus variable interest rate mortgages for First Time Buyers?

We would go through these with you anyway, as part of our conversation explaining how the mortgage works. We’ll explore your preferences.

Some clients like certainty when it comes to their monthly payments, so they may choose to fix their interest rates, or others might like a variable rate for the option to re-evaluate their circumstances at any given point.

It’s down to having that discussion with us as mortgage brokers around the pros and the cons of fixed and variable, depending on your own needs and preferences.

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What government schemes are available to help First Time Buyers?

[information correct at the time of recording in November 2024]

There are quite a few schemes out there. One that is prevalent and popular at the moment is Shared Ownership, which is an affordable housing solution available for those who either can’t quite raise the deposit required to buy on the open market, or people with lower borrowing power.

Again, speak to a mortgage broker, and we’ll take you through the various schemes available. For Shared Ownership, the first step would be to check if you’re eligible to apply and what your affordability looks like. That’s something we can arrange for you.

What documents do I need to get pre-approved for a mortgage as a First Time Buyer?

Always, in the first instance, double check with us on what documents you would need to provide. As a minimum, you’d probably need recent pay slips and bank statements, personal identification, proof of address and proof of deposit.

Mortgage brokers are probably going to need a copy of your credit report as well. Generally, all those things would be discussed at the outset when you first meet a broker. If you can get those things together, you’re ready to go.

What are the steps to follow when applying for a mortgage as a First Time Buyer?

It’s probably a good idea to start by speaking to a broker to get an idea of how much you could borrow and check you against the lenders’ criteria. If you have any adverse credit, we would see which lenders are available for you.

The next step would be to get a Decision in Principle, Mortgage in Principle or Agreement in Principle – which are all different names for the same thing.

We then instruct solicitors. That way, you’re ready to proceed immediately with an offer on a property you like. You can go out there and start viewing properties, and if one comes up that you really want to buy, you’ll be a ‘hot buyer’ who can put an offer in straight away.

You don’t need to wonder whether you can afford it. Having to stop and get a mortgage decision at that point could mean you potentially lose out on that property. So those are the main steps when looking for a mortgage as a First Time Buyer.

What are the most common mistakes to avoid when applying for a mortgage as a First Time Buyer?

When we’re looking at credit reports, we sometimes see that a client has recently taken out new credit cards, loans or hire purchase before they start looking to buy a new home. That’s probably the biggest mistake I see.

After that, it’s probably failing to pay bills on time and getting behind on any monthly subscriptions or payments.

Once you’ve got your mortgage offer, which happens a little later on, taking out further credit before you’ve actually completed could also have a negative effect. I would suggest you speak to a mortgage broker before applying for any sort of credit. If you decide to buy a new car, for example, check with us first.

What happens if I miss a mortgage payment as a First Time Buyer?

This shouldn’t really happen, as the mortgage should always be affordable in all instances, Mortgage brokers do affordability checks,, and so do lenders – they stress test your income and outgoings when you submit a full mortgage application.

The other point to note is that you should consider insurance alongside your mortgage, such as income protection, accident and sickness cover, as these can be crucial in protecting your biggest asset – your home.

If you did miss a payment for any reason, I would suggest contacting your lender. It’s always good to discuss this with them, rather than bury your head in the sand.

Can I qualify for a mortgage as a First Time Buyer with bad credit?

Yes, absolutely. But it’s all dependent on what level of bad credit is on your credit file. Some lenders out there take a positive stance with bad credit. It’s also known as adverse credit in the industry. A mortgage broker will discuss the options with you in terms of lenders, and go from there.

Can I get a Buy to Let mortgage as a First Time Buyer?

It is possible to get a Buy to Let mortgage as a First Time Buyer. A broker will discuss this with you and explore your requirements and then look for a Buy to Let lender that fits your criteria.

With somebody that doesn’t own a property currently, lenders might ask questions about your residential status at the moment. But it is possible to get a Buy to Let mortgage as a First Time Buyer.

How can a mortgage broker help me with my First Time Buyer mortgage application?

As a mortgage broker, we have access to lots of different lenders. You’ll get access to all that information. We’ll review your circumstances, your preferences and needs to get the right mortgage for you.

Plus, we’re on this journey with you throughout the whole process. That’s really crucial for some people – to have somebody there. We’re here to answer any questions without you worrying. There’s no such thing as a silly question. Our guidance and support can be really important to people, so speak to a mortgage broker that knows the industry inside and out.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.

Can I buy a bigger share of my home at a later date?

Absolutely. If you wish to purchase a 25% share initially, it’s possible to purchase more over time. Usually it happens in increments of about 10%. You can do that all the way up until you earn the house outright.

Some older properties have older leases which set the minimum increment at 25%. But newer properties might just allow you to buy an additional 5% each time.

That process is called staircasing. Each time you wish to purchase another share, you’d go back to the Housing Association and they would do a valuation on the property. You would purchase the additional shares based on the new value.

Can I ever fully own a shared ownership home?

Yes – staircasing can be done all the way up to 100% on shared ownership properties. Some properties are restricted to a maximum 80% ownership, so it is worth checking when you contact the housing association. Ask whether you will ultimately be able to own the home in full.

What happens if the value of my house changes?

When you’re staircasing and looking to purchase more shares, these will be based on the value of the home at that time, not when you first bought. A valuation would take place and the housing association would probably want their own valuer to do this. That would give you an indication of the new value of your house.

What if I have bad credit? Can I still get a shared ownership mortgage?

Absolutely. Bad credit isn’t the be-all and end-all. I would say use a mortgage broker, as we know which lenders would accept bad credit for shared ownership mortgages.

What else do we need to know about shared ownership mortgages?

With anything regarding mortgages, if you’re in doubt, you’re unsure or you’ve got questions, just pick up the phone or email a mortgage broker. We’re here to help you in all instances.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.