First Time Buyers
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First Time Buyer Mortgage
What are the typical requirements to apply for a mortgage as a First Time Buyer?
With any mortgage, whether you’re a First Time Buyer or an experienced homeowner, you will have to prove your identity and address. It’s also important to make sure you’re on the electoral roll.
You need to prove your income, whether you’re employed or self-employed. You typically need to provide three months’ bank statements to show your general income and expenditure, plus your credit report to inform us of any commitments, your credit score and credit history.
Then, of course, the all important thing is having a deposit and proving the source of funds for that.
What is the maximum amount that can be borrowed for a mortgage as a First Time Buyer?
It’s very lender dependent. Several lenders at the moment do things specifically for First Time Buyers and offer enhanced affordability. You may be able to borrow more if you are a First Time Buyer if you meet the criteria on those products. It’s difficult to give you a maximum, because it varies across the board.
What’s the minimum deposit required for a First Time Buyer?
Generally speaking, the minimum you need for a deposit is 5% of the property’s purchase price. Some First Time Buyers are in need of support – and we’ve started to see a few lenders come up with schemes where less than 5% deposit can be considered. That’s subject to your overall circumstances and whether you fit with that lender’s criteria.
What types of interest rates are available on a mortgage for a First Time Buyer?
They are the same as what’s out there in general. The main options are fixed rates, tracker mortgages and discounted products.
In our meeting with you we would discuss what these are and the pros and cons. First Time Buyers might not know what a discounted or tracker rate is. We explain how it all works.
What are the pros and cons of fixed versus variable interest rate mortgages for First Time Buyers?
A lot of First Time Buyers may be fortunate enough not to have needed to live in rented accommodation and might not have the experience of paying rent and budgeting.
The big benefit of a fixed rate is to understand exactly what your mortgage payments are. They’re not going to change for a certain period, which helps you to learn how to budget effectively.
With a tracker rate or a discounted variable rate, your payments will fluctuate, depending on what is happening to the Bank of England base rate and the lender’s interest rates. What you should choose will depend on your specific circumstances and your risk appetite for interest rate fluctuations.
With a fixed rate, you’re going to be tied into that product for two years, three years or whatever you’ve selected. That could restrict you in the future if you decide to move. It’s important to have an understanding of that, so we always talk through the overall circumstances and what you want to do going forward.
You might choose to fix your mortgage for five years because you want payment security. But if there is a downward turn in interest rates, you would face penalties to break that contract. That’s why you should seek advice from a mortgage advisor. We’ll determine the right type of product and duration for you.
What government schemes are available currently at the time of recording to help First Time Buyers?
There aren’t any specific government schemes out there for First Time Buyers at the moment, as we sit here in December 2024.
However, one thing to be aware of is the Lifetime saving ISA (LISA). That’s designed to help you purchase property, because you’ll potentially benefit from the reward that they give you for saving towards your deposit.
There are certain schemes to consider, such as shared ownership. With this, if you have a smaller deposit, you might be able to buy a bigger property that you part rent, part buy. There is also shared equity, which some developers are offering.
Developers might also offer you a gifted deposit. It’s always worth looking around and seeing what is available on new build homes.
What documents do I need to get pre-approved for a mortgage as a First Time Buyer?
It can vary, depending on who you’re speaking to. Some lenders and brokers will process Agreements in Principle without obtaining documents.
But our process is to reassure you that we’ve reviewed your documents and we know whether there are any problems before we approach a lender. That way, we can help you address them.
Although an Agreement in Principle is not an offer and it’s not a guarantee, it is still a provisional indication of what you may be able to borrow with that lender. We obtain your ID, proof of income, bank statements and credit report in preparation for that Agreement in Principle.
This approach proves to reduce stress and give you more confidence. You’ve had an Approval in Principle, you’ve provided the documents and now hopefully nothing will go wrong – unless your circumstances suddenly change.
Once you’ve found a property and had your offer accepted, you would then fully apply for the mortgage with the most suitable lender.
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What are the steps to follow when applying for a mortgage as a First Time Buyer?
The main thing for a First Time Buyer is to know that you can borrow the money to buy a property. A Decision in Principle will give you that reassurance. So you need to get one as soon as you decide to buy a property.
Some estate agents might ask you for a Decision in Principle before you can even view a property. Getting one will make sure you’re in the strongest position to make an offer on a home you like.
What are the most common mistakes to avoid when applying for a mortgage as a First Time Buyer?
One of the most common things we see for First Time Buyers is around address history. We look at their credit report and they may have been to university and lived in rented accommodation, but as it’s only a temporary measure, they keep their bank statements registered to their parent’s address. They might still be on the electoral roll at the parent’s address.
That is not your legal address. Your address is the property that you’re currently residing in.. Mismatches can reduce your credit score, which of course is a key factor when applying for a mortgage.By looking at your credit profile, we can tell you which providers you need to update, and whether to get on the electoral roll so that everything correlates.
Another area is bank statement conduct. One of the main lender checks is to understand your spending habits. Avoid any irresponsible spending, such as high levels of gambling, and don’t put funny references on bank transfers. It might only be a joke with a friend, but it might not paint the right picture to a lender.
Realistically, as long as you have three months’ payslips, three months’ bank statements, your address history is up to date and you can prove your ID and deposit, hopefully there’s little that can go wrong once we’ve placed you with a suitable lender.
What happens if I miss a mortgage payment as a First Time Buyer?
It’s obviously not ideal and it will show on your credit file, which could affect you in the future. When you come to remortgage or move, a missed payment on your credit report is not good – because obviously that’s a secured debt.
If you start missing several payments, the worst case scenario could be a repossession of the property.
Can I qualify for a mortgage as a First Time Buyer with bad credit?
Each lender has different clientele they offer mortgages for. Even mainstream lenders will have a certain tolerance for bad credit, although it depends on the severity.
Is it still active or satisfied, how long ago it was satisfied, and what type of credit is it? Is it simply a few late payments or a default? Is it a County Court Judgement, an IVA or a bankruptcy?
There are many different types of bad credit, and each lender will have certain criteria that may be more appropriate for your circumstances. To get a mortgage as a First Time Buyer with bad credit, the sooner you speak to a mortgage broker the better.
It might be that we can help you straight away, or perhaps we need to put a plan in place to improve your score or your credit history. It really depends what you’re looking to achieve and when, and if you’re comfortable with the options available to you at the time.
Can I get a Buy to Let mortgage as a First Time Buyer?
Yes, you can get a Buy to Let mortgage as a First Time Buyer, but it is more difficult. The lenders aren’t just assessing you as a first-time landlord, there’s an added dimension because you’ve never had a property at all.
Most lenders will want you to be a homeowner before you get a Buy to Let mortgage, but other lenders out there will consider it. There’s criteria to check around that. Location could be a factor, and so could income. A number of things need to be considered on whether they would do it. But yes, it is possible.
We have just done a podcast on Buy to Let that you can listen to. Obviously, a lot of First Time Buyers are struggling to get a 5% deposit or a 10% deposit – but a Buy to Let typically requires 25%. You’re going to need to be either very fortunate or have worked very hard to save up that deposit and even consider a Buy to Let.
How can a mortgage broker help me with my First Time Buyer mortgage application?
It all depends on the brokerage you work with. We are very much brokers that will hold your hand from start to finish.
You could come to us with a pound in your bank account, wanting to know how much you need to save. We’d discuss a savings plan and where to put your money – should you choose a Lifetime ISA? We can steer you in the right direction.
Once you’re in a position where there are mortgage options available to you, you can start actively viewing properties. We will get that Agreement in Principle to put you in a good position with estate agents and for making offers. It shows that you are serious, and not a time waster.
Of course, the easiest transaction for anyone is the first property, because you’re not in a chain. It makes you attractive to someone selling a home.
We can provide support with solicitors – and when you make an offer on a property, being able to name your solicitor alongside your Agreement of Principle puts you in a much better position.
Can you help with more than just the mortgage?
Absolutely, and it’s all part of the service. We need to ensure that if life changes, if your income changes, or you’re unable to work due to ill health, you have the right financial insurances in place to protect you.
We’re more than happy to give our insights on the housing market. If you want to talk to us about a property you’ve seen and if it’s the right price, or where to start with an offer, we’re more than happy to give some guidance on that, too.
Buying your first property is probably one of life’s most stressful experiences. Having someone to help and guide you is invaluable. I’ve been doing this for 20 years, but there’s things I’m still learning. I’m here to help.
I’ll speak to the estate agent, the lender, the solicitor and anyone else for you. Perhaps you don’t understand something the solicitor has sent out – and that can be a minefield. I can read through it and give you some guidance. I’m not legal, so I can’t give you advice, but I can use my experience and give you some pointer questions to ask.
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.