If you’re like many others, you dream of owning your own home. As is the case for most people, you will have to borrow money for your new purchase before you can get on the property ladder.
It can be challenging to find and arrange a mortgage as a first-time buyer. You are not only faced with making big decisions about where you want to live, but also with learning about the mortgage market and the numerous steps involved in financing your home.
The wrong mortgage deal could spell disaster for your finances in the future, since a mortgage is such a huge commitment. Therefore, you need to speak with an expert mortgage broker as soon as you begin searching for the perfect house. First-time buyers should not just look for an advisor who can offer them competitive mortgage deals – a good advisor will also be able to help them weigh up their options, choose a deal that will benefit them long term, and budget for all the different costs associated with buying a home.
We pride ourselves on offering a comprehensive service to our first-time buyers at MDFS. From your initial enquiry to completion, we’ll collaborate closely with you, explaining each step of the process enroute and keeping you up to date on the progress of your application. In addition, if you’re struggling to find a suitable deal from mainstream lenders and High Street banks, we’ll browse the whole market to find you one from a niche lender that may fit your needs.
If you are looking for a mortgage broker in Croydon, MDFS Mortgages are your go-to mortgage professionals for video or phone mortgage advice.
If you are buying your first home or investment property, you are a first-time buyer.
If you have previously owned property, or if you inherited property from a family member or friend, you do not qualify as a first-time buyer.
Similarly, if you already own a house or flat but your partner does not, and you want to buy somewhere new with him or her, you may not be eligible for first-time buyer schemes.
There are times when mortgage lending providers are hesitant to lend to people who have never had a mortgage before. If you meet their eligibility requirements, however, these companies also recognize that everyone must start somewhere and will be happy to offer you a loan.
Lenders usually want to see that:
Rest assured, however, that if you have a steady income and can demonstrate that you can manage your money, you will be able to secure a mortgage.
Estate agents and vendors often dream of receiving offers from first time buyers like you!
First-time buyers like you are often the dream of agents and vendors! It's likely that you will be the one to complete the chain because you don't have a property to sell. In addition, you're likely to have more flexibility with your move-in date. All these factors combined make you much more attractive to a seller than someone who is still looking for a buyer - and you can often take advantage of this when putting an offer together.
Save as much as you can for your initial deposit - the less you will need to borrow towards your purchase, and the greater your chances of getting a competitive mortgage rate.
To purchase a property, you will need a minimum deposit of 5%.
If you only have this relatively low amount to put toward your purchase, then your options for mortgages are limited.
Sometimes it is possible to buy a property without a deposit. A lender must agree to let you borrow this amount unsecured in this case. This arrangement has the drawback that you will be signing up for two separate loans and will need to prove you are able to afford both repayments every month for the duration of the loan.
Your mortgage amount will be determined by a variety of factors, often referred to as eligibility or affordability criteria, things such as:
It will be necessary for you to tell your lender how much you earn - including the amount that you receive from government benefits, overtime pay, bonuses, holiday pay, investment income, and/or pension payments - along with bank statements and wage slips as evidence. If you are self-employed, you may also need to provide at least 12 months’ worth of accounts, along with SA302 forms from previous tax forms.
In the case of self-employment, you will also need 12 months' worth of accounts and SA302 forms from previous tax returns.
Using your annual income, your mortgage provider will determine how much you can afford to borrow. In most cases, lenders multiply your earnings by four or five to reach your maximum borrowing limit.
For instance, if you earn £30,000 per year, you may qualify for a mortgage of £120,000 from a lender using income multiples of 4, and a mortgage of £150,000 from a lender using income multiples of 5.
The lender wants to see how much of your income goes towards bills, groceries, and other expenses to figure out how much you can put towards your mortgage each month.
If you owe credit card debts or student loans, be prepared to provide more information about them. By calculating your outgoings, the lender will be able to calculate your debt-to-income ratio, which lets them know how much debt you have relative to your income. When your debt-to-income ratio is low, you stand a better chance of finding a good mortgage deal.
The age at which you can apply for a mortgage in the UK is normally 18 years old, but in exceptional circumstances you might have to be over 21 or 25. Over 65s and people whose mortgage terms are set to end after 75 may find it more difficult to borrow money toward a property. However, there are some more niche lenders who specialize in lending to would-be homeowners well into their retirement - so don't assume that a mortgage is out of reach if you are considering buying a home in your golden years.
Your credit history:
Many lenders will want to see that you are able to manage your financial affairs responsibly. A lender will look at your credit reports to determine whether you are a suitable candidate for a loan, as well as whether you have managed to meet your payments on time and in full.
You can obtain a credit score from Experian, Equifax, and TransUnion, each of which produces its own version of your credit report. The agencies will calculate your score differently, but in general, if you have made all payments and have not had any financial problems in the last six years, you will be given a healthy credit rating.
Your credit score will be significantly lowered if your credit report contains evidence of defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs), debt management plans, and/or bankruptcy.
Different mortgage companies will assess your suitability in separate ways. Your annual income may be more important to some lenders, while your credit score may be more important to others. Check out our advice on adverse credit mortgages if you're worried about past financial mistakes preventing you from getting a mortgage.
In a repayment mortgage, you'll pay back a portion of the loan, along with the added interest charged by the lender. Your debt will be paid off at the end of the term, and you will own the property outright.
With an interest-only mortgage, your monthly payments will only cover your loan's interest. The balance of your mortgage must be paid with other funds after your term ends.
Mortgages with repayments typically offer lower rates of interest and they're generally cheaper overall. Additionally, you will feel better knowing that your loan is slowly but surely getting paid off. In some cases, however, an interest-only mortgage might suit a first time buyer who wants to keep monthly outgoings as low as possible.
Fixed rate mortgages
Many homeowners find it helpful to know how much they need to set aside every month for their mortgage payments. Fixed rate mortgages allow you to lock in a set interest rate for a certain period - typically 2, 3, 5 or 10 years. For some homeowners, knowing exactly how much to put aside each month for their mortgage payments is helpful.
Tracker rate mortgages
Rates for tracker mortgages fluctuate according to the Bank of England's base rate. Choosing this type of product will result in your interest rate being set at a margin above the base rate. The payment amount may fluctuate depending on across-the-board interest rate changes, so it's likely your repayments are subject to frequent changes.
You may be able to borrow the amount you need to purchase your home even if you are a first-time buyer. Having said that, we always recommend taking active steps to improve your credit score before beginning your mortgage application process if you have a less-than-desirable credit history. Learn how to improve your credit score, read about imperfect credit mortgages, and even access your free credit report to improve your chances of getting a mortgage no matter what your situation may be.
A lot depends on how quickly you can gather the information you need to satisfy a lender. It is generally expected that the mortgage application process will take between 4 and 6 weeks if you have all the necessary documentation, you can answer any questions the lender might ask, and the owner of the property permits the lender to carry out the valuation or survey in good time.
An experienced mortgage advisor will take the time to understand your current financial and personal situation before sourcing quotes from mortgage lenders with the best chances of making you a mortgage offer based on their current guidelines.
It is possible to conduct this research by using online search engines, or you can contact your current bank or building society - however, by doing so, you won't be able to take advantage of direct-to-broker deals, and you won't find companies that specialize in mortgages for borrowers with low income, low deposits, and an adverse credit history.
A mortgage broker can help you find the perfect deal at the right rate, regardless of your circumstances, because they have access to the entire market!
In addition, a mortgage broker can provide answers to any questions you have, coordinate with your accountants, solicitors, conveyancers, and everyone else involved in your purchase. When you're first starting out as a homeowner, there's a lot to consider and the process can seem overwhelming. This kind of assistance can be invaluable.
We get asked this a lot, and the answer is always a big yes. If you want a solicitor to help you with your purchase, contact one of our brokers.
You'll need a solicitor to manage contracts, do all the legal work on your new place, deal with the Land Registry, and manage the funds on completion. If there's a hitch in the application process, or the searches turn up any concerns, they'll be able to advise you on what to do (and possibly prevent you from making the wrong decision).
In addition to the solicitor's fees, you will have to set aside some money for the necessary searches and Land Registry fees. Some solicitors charge an hourly rate; others charge a fixed fee. Verify the costs with your chosen conveyancer before they begin.
As well as making sure you have enough to cover your initial deposit, you will need to factor the following fees and charges into your house buying budget:
In England or Northern Ireland, you must pay stamp duty whenever you purchase a new property or a piece of land over a certain price.
We touched on them briefly earlier in this article. Depending on your solicitor's fee structure, you'll have to figure out whether he or she charges by the hour. Land Registry fees and searches will also need to be considered.
Mortgage brokers’ fees
Professional mortgage advice is likely to cost you money. Find out more about our fees here.
Mortgage booking fees
You may have to make a non-refundable booking deposit to ensure your mortgage lender is serious about working with you.
Mortgage arrangement fees
A fee is often charged by lenders upon completion. In some cases, a first-time buyer mortgage will allow you to include this fee in your monthly payment, enabling you to avoid paying extra costs upfront - but do so at your own risk.
If you plan to purchase the property for a certain price, your lender will check whether it is worth it. As part of their deal, some companies will conduct an initial valuation for free, while others will charge.
You may want to arrange an RICS survey or a homebuyer survey if you have questions about the condition of your property. Reports like these do not come cheap, but they go into greater detail about any structural or maintenance issues with your home, as well as what you need to do to correct them.
If your lender determines that your property is less valuable than you offered, how will you manage it? So, you can either contest their survey and instruct a second independent surveyor, or you can try to negotiate a lower price with the vendor (or their estate agent).
We offer free, no-obligation initial consultations with experienced first time buyer mortgage brokers.
Contact MDFS today if you're looking to buy a property for the first time.
If you're going to pick up the keys, you want to be 100% sure of not just your choice of property, but also the mortgage you've chosen.
Getting the right mortgage product that fits your budget can be tricky. Let one of our mortgage advisors guide you through all your affordability options.
Even when they find you a great deal, their work doesn't stop there. All your questions will be answered by our brokers, and they will stay connected with your accountant, solicitor, surveyors, and everyone else involved in the purchase to make sure everything runs smoothly and that you reach completion as soon as possible. Plus, they will be available to chat weekdays between 8am and 8pm, so you can check in on the status of your application.
Leave the stress of finding a mortgage behind. In short, let your local mortgage broker do the hard work for you.
Don’t spend hours surfing the internet or on hold to your bank. Free up time for family and friends, use a mortgage broker.
Make your mortgage advice appointment at a time suited to you. Pick your own appointment date and time.