Mortgage Advice For First Time Buyers
There are many things to be aware of when buying your first property. Lenders have specific criteria which you will need to meet in order for your mortgage application to be accepted.
First time buyers are very important for the property industry, it may seem like the criteria is strict, however the government have numerous help to buy schemes which can help you onto the property ladder.
How The Government Can Help
Help to Buy Equity Loan: The government may lend up to 20 per cent towards the cost of a new build property (40 per cent in London). This means you only need a mortgage for 75 per cent of the property’s value (or 55 per cent in the Capital) and a 5 per cent deposit.
Help to Buy ISA: The government will top up your savings to put towards a deposit for your new home. For every £200 a month you save, they’ll give you £50. The most you can get as a top-up is £3000. The more deposit you put towards your new property, the less you’ll pay towards a mortgage.
Shared Ownership: With the shared ownership scheme you can take out a mortgage on a housing association property for just a portion of its value (25 per cent to 75 per cent) and pay rent on the rest. The idea is that when you have the money you increase your mortgage share until you’ve bought your home entirely.
Be Aware of What You Can Afford
It’s easy to work out how much you can afford to pay each month with the help of a Mortgage Calculator.
Other costs to think about when buying a property include Stamp Duty (if applicable) and conveyancing fees. Then there’s the cost of decorating your property and buying furniture. Do leave yourself some spare cash and remember that the interest rates can go up in the future. If you are moving from a rental property, make sure that you get your security deposit back as every penny counts when applying for a mortgage.
Do You Have a Good Credit History
One of the big hoops you have to jump through today to get a mortgage is a clean credit history, or at least having achieved a decent credit score by the time you apply for the mortgage. Don’t worry if you’ve had problems in the past though, there’s a lot of advice online to help you improve your credit score.
The Mortgage Application
Lenders will be interested in the following information when processing your mortgage application:
- How much your salary is (most will typically lend no more than x3)
- What you intend to put down as a deposit
- How much the property is worth (based on an independent survey)
- That you’ve been in your current job for at least six months (ie no longer on probation)
- If self-employed you must have at least three years worth of accounts
- You’ll be asked to give evidence of the above, such as pay slips or printed bank statements, your letter of employment, evidence of deposit savings and proof of identification.
The Bigger the Deposit the Better
The bigger the deposit you put down, the less of a mortgage you’ll need to take out and the better the repayment rate. Most lenders today are looking for a deposit of at least 20 per cent of the property’s value, some ask for more. Having a bigger deposit means you have more options in terms of which mortgage to choose.
Consulting a Mortgage Adviser can be very useful when applying for your first mortgage as they will help you assess what you can afford and help you find the best deals.
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