First Time Buyer
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Important Advice For First Time Buyers
What is a First Time Buyer?
Anyone buying a home for the first time is classed as a First Time Buyer, as long the property is intended as their primary residence.
There’s no doubt that First Time Buyers notoriously have a more difficult time getting a mortgage than those already on the property ladder. Whilst the economy in recent years and Coronavirus haven’t helped this, armed with the right advice and some considered preparation, it’s perfectly achievable for First Time Buyers to find a competitive mortgage deal. Below are some top tips to point you in the right direction.
What is an Agreement in Principle and do I need one?
An agreement in principle is a conditional mortgage offer that you can obtain from a lender, prior to making your full application. It’s important to realise, however, that this is not a mortgage offer. If you decided to go ahead with the full application, the lender would require proof of income and circumstances. Equally, you could choose a different lender as you’re not bound by this.
It’s by no means a requirement for First Time Buyers, but can be beneficial. As well as providing you with a budget, it can instill confidence in sellers that you are a credible buyer.
How much can I borrow as a First Time Buyer?
All lenders calculate how much you can borrow based on affordability and credit score, so being a First Time Buyer shouldn’t make a difference to this.
Most lenders offer between three and five times your annual income, however, the exact multiple used will vary between lenders and based on your circumstances.
How do I improve my credit score and how does this help First Time Buyers?
When you buy a house, your credit score is an important consideration for lenders. It will help them decide both whether to lend to you and how much. Improving your credit score before you apply for a mortgage can help your chance of acceptance and access to competitive deals.
How to improve your credit score
- Check that your address is accurate on all accounts held
- Ensure you appear on the electoral roll
- If you have credit agreements, remain with 50% of your credit limits
- Repay all loans and bills promptly for at least a year prior to your application
- Credit builder credit cards can be used responsibly to build your score, where your low score is a result of never having credit
How much deposit do First Time Buyers need?
Whilst some lenders will ask for a higher deposit from First Time Buyers, this is not a rule and therefore a standard deposit of between 10% and 20% should be adequate.
What fees are involved with buying your first home?
Arrangement fees are charged by most lenders for the preparation of your mortgage. Costs vary between lenders.
Whenever you buy a property, an independent valuation has to be taken out in order for the mortgage to be approved. Fees will depend on the firm and level of valuation you choose.
Legal fees will be due to your solicitor, who will arrange conveyancing and local authority searches on your new home.
If you purchase a home above, you may need to pay stamp duty. There is currently a stamp duty holiday in the UK until 31st June 2021, however, which means you will only pay stamp duty on a property costing over £500,000 until then. From 1st of July the nil rate stamp duty will be £250,00 until 31st October 2021. Returning to standard stamp duty from 1st November 2021.
Is there any help available for First Time Buyers?
There are homeownership schemes available to help those who will struggle to save a large deposit or are on a lower income to get onto the property ladder. These are all available to First Time Buyers, but availability varies across the UK.
Help to Buy
This scheme lets you borrow 20% (40% in London) of the property value, towards your deposit. This means you only need a 75% Loan to Value mortgage, which will be easier to obtain and more affordable due to lower rates. The maximum property price will vary depending upon where you live in the UK.
This scheme offers you a 95% mortgage at a reduced interest rate of about 75% of the market price.
This scheme allows you to buy a share of your property, which results in a much lower mortgage requirement. Both the deposit and monthly payments are therefore much more affordable, but rent is also payable on the remaining share of your home.
How can a Mortgage Broker help First Time Buyers?
Completing your first mortgage application can be a daunting process. At Heritage, our Mortgage Brokers can help ensure that you find a lender who offers competitive rates to First Time Buyers, as well as helping with the administrative side of things.
We have plenty of experience helping First Time Buyers and can guide you through the whole process step by step. Our goal is to save you time, money, and much of the stress that goes along with buying your first home.