First Time Buyer Mortgages: The Process Explained
These days, First Time Buyers are a lot more aware of what is involved with buying their first property. We can guide you through the whole process, from booking the mortgage that best suits you, to how to deal with the other parties involved right up until completion. More recently with the Economic State being the way it is, Lenders are far more reluctant to lend and an application that is not spot on could mean your mortgage request denied.
Our knowledge of the mortgage processes of different Lenders is crucial to finding the right mortgage for you. Especially at the moment, your personal circumstances really dictate which Lender to approach.
To see a selection of the best rates please click First Time Buyer Mortgage Rates
How much can I borrow?
So a good point to start and what most First Time Buyers want to know is 'How much can I borrow?'. Traditionally you could borrow, before tax, around 3.5 times the main salary plus the second applicants' income or around 3 times the sum of both incomes. These figures can vary from lender to lender, and with our knowledge of the whole market, we can guide you to who would be your best option.
However, many lenders have chosen to adopt for an 'affordability assessment' to base the income multiples they will offer you. This means they take a deeper analysis of your finances when basing their decision. Deposit amount, debts, income and even job type can influence this figure.
Always bear in mind that the rate you may take will change at some point, whether its a tracker or a fixed rate dependant on the economic climate at the time. Will you be able to afford these repayments as many have struggled when their 4% fixed deals ended in mid 2008 and the rates they fell onto were around 7% which was the SVR for many Lenders. It's not always a good idea to borrow as much as you can at the time.
The best way for you to get a fairly accurate figure for the amount you are likely to be able borrow is to contact us and let us find out for you. We can then search all Lenders with your details to see how much you can borrow. You then really need to get an Agreement in Principal (AIP) before you approach Estate Agents for them to take you seriously, we'll explain why in more detail below.
You will need to bear in mind the following too- Work out the costs:
There are many extra costs that will mount up sooner that you would expect when buying a house. Even once you have purchased the house the cost of Council Tax, utility bills and insurances also make up a considerable amount of your monthly outgoings and then there's the mortgage!
We have broken down the basic costs of buying a house
- Administration/Book fee to the lender: from £200 - £1,000+
- Mortgage valuation survey from £170
- Legal fees: Selling £400+ ;Buying £500+
- Land registry: £220
- Other searches from £70
- Local authority search: approx £140
- Stamp duty: 1% house value>£175,000, 3% house value>£250,000, 4% house value>£500,000
- Independent Survey: £300+
There could be extras on top of this list too i.e. if you live on the Marina in Portishead, you will have to pay an additional annually recurring fee towards the Nature Reserve and Sea Wall. Things like this will be explained though when signing the covenants section on the house, your Solicitor will advise you here.
Start looking for your new Home!
Make sure you get an Agreement in Principle before you start looking so you know how much you can afford to borrow when you find a property you are interested in.
There are a number of reasons for this:
- Make sure you get your AIP from a whole of the market Mortgage Adviser, not from a limited panel of lenders that the Mortgage Adviser in the Estate Agent will have. We've been that Adviser!
- Bear in mind that the Estate Agent is trying to sell you the House for 'their' client, the Vendor. They will want to get the best price for the house being sold, and will want to get as much as possible from you. The mortgage adviser in the Estate Agent, works with the Estate Agent, so there is a possibility of the Estate Agent knowing how much you can afford. This may not get you the best deal!
- Already having an AIP in place means that you are 'qualified', which is a term used by Estate Agents so they know that there is a high likelihood that you can get access to the money you are going to buy the house with. Many will insist you are qualified for this reason, as they don't want to waste time showing you houses you can't afford. So having the AIP in place first means you don't have to tell them the maximum amount you can afford, but you can tell 'them' how much you want to pay for the house- as in point 2.
- Estate Agents will normally only put an offer forward if they know you have access to the money you say you have. Again the AIP will confirm this.
Remember, an AIP does not bind you to that particular lender and will cost you nothing, but there will be a credit score carried out in order to do this.
Once you have agreed to buy the House
We would check to make sure that your AIP for the chosen product was still the best for you and is still available as in this economic climate, rates can change quite frequently.
From here we would proceed to a full mortgage application and paying any upfront fees to the lender e.g. valuation fees.
You would instruct your chosen solicitor to begin the legal process. If you don't already know who you will be using, talk to friends and family about who they have used in the past and perhaps go off a recommendation.
The Legal Part
You will then need to instruct your Solicitor to begin the conveyancing. They will carry out all of the legal checks that are needed for the purchase to take place; rights of way, covenants, planning permissions, check local authority searches and environmental searches i.e. are you in a flood plain?
You will almost without doubt have to pay for the lender to carry out a mortgage valuation to make sure the house is suitable security for the mortgage.
This however doesn't tell you if the roof needs repairing or if there is subsidence that could cause immediate or future problems. The homebuyers survey should find any more serious problems and then the full buildings survey, which goes even further, but is normally recommended for older style houses.
If there are any major problems that are more than just cosmetic, you may wish to alter your offer price or walk away. Unfortunately this will leave you at a loss but could be saving you an unforeseen fortune!
Once the legal side is completed and any issues have been resolved, you will usually look to exchange. At this point your deposit is put forward and is non-refundable, if you pull out after signing at exchange you will lose your deposit. The next stage is completion- the time between exchange and completion is usually down to having the mortgage side all up together, agreement between the Vendor and you, and how fast you can push your Solicitor!