First Time Buyers
First Time Buyers
- Expert Mortgage Advisers
- Fee-Free Initial Consultation
- Access to Competitive Rates From Dozens Of Lenders
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Mortgages For First Time Buyers
PLEASE NOTE: This podcast and transcripts were correct at the point of recording in 2021. Some of the facts/figures quoted may have since changed, however when you speak with a Mortgage Adviser, they’ll be able to provide you with the most up to date facts/figures.
How is the mortgage process different for First Time Buyers?
Contrary to popular belief, there isn’t a lot of difference. The main thing is that First Time Buyers don’t have a property to sell. So it’s simpler for a First Time Buyer, because all they have to worry about is getting their deposit together and approaching a broker – we take the process from there.
From that point there’s no difference from the process that a home mover would follow. The big bonus, too, is that a First Time Buyer doesn’t have to pay stamp duty on the first £425,000.
What is an Agreement in Principle?
This is also called a Mortgage in Principle or a Decision in Principle. It’s basically a statement to say that a mortgage provider has agreed to lend to you. To get one, you provide paperwork to prove how much you earn, such as payslips and your bank statements. Your broker will give a lender all your figures for them to perform a credit check. It’s only what we call a soft credit check, so it doesn’t negatively impact your record.
Having looked at all your figures and the credit check, the lender is now in a position to produce a certificate to say that in principle you can have a mortgage with them. It’s only ‘in principle’ in case your situation changes before you move onto a full application. It’s a decision based on what you’ve told them at that stage.
How much can a First Time Buyer borrow and what deposit is needed?
It doesn’t matter whether you are buying a new house or a second hand property, the minimum deposit you need is 5% of the purchase price. If you’re purchasing a property for £100,000 that means you’ll need a minimum of £5,000; or for a £200,000 purchase you’ll need a minimum of £10,000.
The more deposit you put down, the less you’re borrowing, which means you will get a better interest rate and lower monthly mortgage repayments. How much you can borrow in monetary terms is a complicated calculation, based on your income and outgoings – but it’s something we can tell you once we have explored your specific situation.
How do I know what my credit score is and how do I improve it?
It’s a really good idea, especially for First Time Buyers, to obtain a copy of your credit report. Most brokers will ask you for a copy. With First Time Buyers it’s not necessarily a case of adverse or bad credit. Sometimes they haven’t got much of a credit record at all.
When you apply for a mortgage, the lender needs to see that you’ve got a good track record of paying bills and payments on time. But if you haven’t taken on any debt before that can be difficult. Once your broker knows your credit score and your background we can find a lender that’s suitable for you.
There’s loads of free services to look at your credit score: Credit Karma, ClearScore and Money Supermarket all offer a free credit report. The only restriction with the free providers is that you can’t share the details. So, for example, if your broker wants to see a copy of your credit report you may need to subscribe to a paid service – which you can cancel as soon as you’ve got the report. Experian, Equifax and Transunion all offer you your full credit report.
Speak To An Expert
- Expert Mortgage Advisers
- Fee-free Initial Consultation
- Access to Competitive Rates
- Access to Dozens Of Lenders
What is a First Time Buyer ISA and are these still available?
It was called the First Time Buyer ISA when it was initially released. It’s now just called a Lifetime ISA or LISA for short. It’s brilliant because it gives you money towards a home.
You can save up to £200 a month into it as a saving scheme for your first property purchase. When you are ready to buy your property, the government will add 25% to whatever’s in the ISA up to a limit of £3,000.
If, for example, you’ve managed to save £12,000 as a deposit, the government will give you a bonus of £3,000 so your deposit becomes £15,000. It’s well worth taking advantage of this if you’re able to.
What government schemes are there to help First Time Buyers?
Shared Ownership:
This is a way of owning a share in a home. It’s great for First Time Buyers as you only need to find a mortgage to buy part of the value of the house. You will own that part of the property and pay rent on the remainder. At set times you can purchase extra shares in the property, which is called staircasing. So eventually you could own the whole property.
Joint Borrower Sole Proprietor Mortgages (JBSP):
This is another avenue for First Time Buyers who may not earn quite enough to qualify for a mortgage on a property. If they can get a joint borrower such as a parent or sibling to come on the mortgage application with them, then we can then use their income as well. The beauty of it is that mum, dad, brother or sister doesn’t have to live in the property or be on the deeds – they’re simply on the mortgage application.
Mortgage Guarantee Scheme:
This scheme was brought in so that lenders reintroduced 95% mortgages. Prior to last year there were plenty of these, but as soon as COVID hit, lenders tightened their criteria and dropped lending down to 90%. In 2021 when things started to relax, the government launched the mortgage guarantee scheme to drive the return of 95% mortgages, so you now only need a 5% deposit.
What sort of fees are involved for a First Time Buyer?
You don’t pay stamp duty as a First Time Buyer on the first £425,000, which is one of the perks as this cost can be quite hefty depending on the purchase price.
With regards to broker fees, we charge a flat fee to find you the mortgage and do all the paperwork involved, submit it to the lender, and liaise with the estate agent and solicitor throughout your property journey. You don’t pay anything up front at all.
Each lender may also charge what’s called a product fee and/or an arrangement fee. These range from fee-frees up to around £2,000, but the arrangement fee can be added to the mortgage. You don’t have to pay upfront if you don’t want to. If you add it to the loan then you’re spreading it over the term of the mortgage and paying interest on it.
You will also need a survey. When we apply for a mortgage the lender may charge a valuation fee, where they instruct a surveyor to visit the property that you’re buying to make sure it’s suitable as security for the loan. This cost might be £200 to £300, but some lenders may not charge..
But if you’ve got any doubts about the property, if it’s very old or you’ve noticed signs of damp etc, you might want to get a more in-depth survey done. There’s the standard basic mortgage valuation which the lender will do, or a homebuyer’s report which you need to fund yourself. Here, the surveyor will go into more detail – they will go into the loft and lift carpets to do a more in-depth inspection. A further option is a full building survey which can be quite costly – from £700 to £1,000. They’ll inspect the property from head to toe and make you aware of any potential problems.
What will mortgage protection cost?
Over the sixteen years that I’ve been doing this job, I’ve seen firsthand what can happen if people don’t suitably protect their mortgage. For First Time Buyers you might be looking at around £20-30 a month to completely protect the mortgage. That means that if anything were to happen to you or your partner, the mortgage would be repaid in full. For me, if you’re spending £250,000 to buy a property, then another £30 a month to adequately protect it is an absolute no brainer.
There are no fees whatsoever to arrange protection – just the premium to the provider.
What else should I consider as a First Time Buyer?
The first thing to do when you’re thinking of buying a property is to get your mortgage sorted. Finding a broker is ideal for a First Time Buyer because you are going to need extra support. We will hold your hand from start to finish and give you advice at every step. It’s a minefield out there, so a good broker will save you time, money and stress.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Why us?
- Expert Mortgage Advisers
- Fee-free Initial Consultation
- Access to Competitive Rates From Dozens Of Lenders
Mortgages For First Time Buyers
How is the mortgage process different for First Time Buyers?
Contrary to popular belief, there isn’t a lot of difference. The main thing is that First Time Buyers don’t have a property to sell. So it’s simpler for a First Time Buyer, because all they have to worry about is getting their deposit together and approaching a broker – we take the process from there.
From that point there’s no difference from the process that a home mover would follow. The big bonus, too, is that a First Time Buyer doesn’t have to pay stamp duty on the first £425,000.
What is an Agreement in Principle?
This is also called a Mortgage in Principle or a Decision in Principle. It’s basically a statement to say that a mortgage provider has agreed to lend to you. To get one, you provide paperwork to prove how much you earn, such as payslips and your bank statements. Your broker will give a lender all your figures for them to perform a credit check. It’s only what we call a soft credit check, so it doesn’t negatively impact your record.
Having looked at all your figures and the credit check, the lender is now in a position to produce a certificate to say that in principle you can have a mortgage with them. It’s only ‘in principle’ in case your situation changes before you move onto a full application. It’s a decision based on what you’ve told them at that stage.
How much can a First Time Buyer borrow and what deposit is needed?
It doesn’t matter whether you are buying a new house or a second hand property, the minimum deposit you need is 5% of the purchase price. If you’re purchasing a property for £100,000 that means you’ll need a minimum of £5,000; or for a £200,000 purchase you’ll need a minimum of £10,000.
The more deposit you put down, the less you’re borrowing, which means you will get a better interest rate and lower monthly mortgage repayments. How much you can borrow in monetary terms is a complicated calculation, based on your income and outgoings – but it’s something we can tell you once we have explored your specific situation.
How do I know what my credit score is and how do I improve it?
It’s a really good idea, especially for First Time Buyers, to obtain a copy of your credit report. Most brokers will ask you for a copy. With First Time Buyers it’s not necessarily a case of adverse or bad credit. Sometimes they haven’t got much of a credit record at all.
When you apply for a mortgage, the lender needs to see that you’ve got a good track record of paying bills and payments on time. But if you haven’t taken on any debt before that can be difficult. Once your broker knows your credit score and your background we can find a lender that’s suitable for you.
There’s loads of free services to look at your credit score: Credit Karma, ClearScore and Money Supermarket all offer a free credit report. The only restriction with the free providers is that you can’t share the details. So, for example, if your broker wants to see a copy of your credit report you may need to subscribe to a paid service – which you can cancel as soon as you’ve got the report. Experian, Equifax and Transunion all offer you your full credit report.
Speak To An Expert
- Expert Mortgage Advisers
- Fee-free Initial Consultation
- Access to Competitive Rates
- Access to Dozens Of Lenders
What is a First Time Buyer ISA and are these still available?
It was called the First Time Buyer ISA when it was initially released. It’s now just called a Lifetime ISA or LISA for short. It’s brilliant because it gives you money towards a home.
You can save up to £200 a month into it as a saving scheme for your first property purchase. When you are ready to buy your property, the government will add 25% to whatever’s in the ISA up to a limit of £3,000.
If, for example, you’ve managed to save £12,000 as a deposit, the government will give you a bonus of £3,000 so your deposit becomes £15,000. It’s well worth taking advantage of this if you’re able to.
What government schemes are there to help First Time Buyers?
Shared Ownership:
This is a way of owning a share in a home. It’s great for First Time Buyers as you only need to find a mortgage to buy part of the value of the house. You will own that part of the property and pay rent on the remainder. At set times you can purchase extra shares in the property, which is called staircasing. So eventually you could own the whole property.
Joint Borrower Sole Proprietor Mortgages (JBSP):
This is another avenue for First Time Buyers who may not earn quite enough to qualify for a mortgage on a property. If they can get a joint borrower such as a parent or sibling to come on the mortgage application with them, then we can then use their income as well. The beauty of it is that mum, dad, brother or sister doesn’t have to live in the property or be on the deeds – they’re simply on the mortgage application.
Mortgage Guarantee Scheme:
This scheme was brought in so that lenders reintroduced 95% mortgages. Prior to last year there were plenty of these, but as soon as COVID hit, lenders tightened their criteria and dropped lending down to 90%. In 2021 when things started to relax, the government launched the mortgage guarantee scheme to drive the return of 95% mortgages, so you now only need a 5% deposit.
What sort of fees are involved for a First Time Buyer?
You don’t pay stamp duty as a First Time Buyer on the first £425,000, which is one of the perks as this cost can be quite hefty depending on the purchase price.
With regards to broker fees, we charge a flat fee to find you the mortgage and do all the paperwork involved, submit it to the lender, and liaise with the estate agent and solicitor throughout your property journey. You don’t pay anything up front at all.
Each lender may also charge what’s called a product fee and/or an arrangement fee. These range from fee-frees up to around £2,000, but the arrangement fee can be added to the mortgage. You don’t have to pay upfront if you don’t want to. If you add it to the loan then you’re spreading it over the term of the mortgage and paying interest on it.
You will also need a survey. When we apply for a mortgage the lender may charge a valuation fee, where they instruct a surveyor to visit the property that you’re buying to make sure it’s suitable as security for the loan. This cost might be £200 to £300, but some lenders may not charge..
But if you’ve got any doubts about the property, if it’s very old or you’ve noticed signs of damp etc, you might want to get a more in-depth survey done. There’s the standard basic mortgage valuation which the lender will do, or a homebuyer’s report which you need to fund yourself. Here, the surveyor will go into more detail – they will go into the loft and lift carpets to do a more in-depth inspection. A further option is a full building survey which can be quite costly – from £700 to £1,000. They’ll inspect the property from head to toe and make you aware of any potential problems.
What will mortgage protection cost?
Over the sixteen years that I’ve been doing this job, I’ve seen firsthand what can happen if people don’t suitably protect their mortgage. For First Time Buyers you might be looking at around £20-30 a month to completely protect the mortgage. That means that if anything were to happen to you or your partner, the mortgage would be repaid in full. For me, if you’re spending £250,000 to buy a property, then another £30 a month to adequately protect it is an absolute no brainer.
There are no fees whatsoever to arrange protection – just the premium to the provider.
What else should I consider as a First Time Buyer?
The first thing to do when you’re thinking of buying a property is to get your mortgage sorted. Finding a broker is ideal for a First Time Buyer because you are going to need extra support. We will hold your hand from start to finish and give you advice at every step. It’s a minefield out there, so a good broker will save you time, money and stress.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Why us?
- Expert Mortgage Advisers
- Fee-free Initial Consultation
- Access to Competitive Rates From Dozens Of Lenders
