First Time Buyer Mortgage
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First Time Buyer’s Frequently Asked Questions
Listen below as Hemat Natha talks all about mortgages for First Time Buyers.
In less than 20 minutes, you’ll know a lot more about getting your first mortgage sorted.
How is the mortgage process different for First Time Buyers?
The short answer is that there’s no difference. Getting you a mortgage always involves us being very nosy – getting to know your income, your circumstances and what your aspirations are. We’ll take you through the whole process and give you extra support and advice, but it isn’t any different for First Time Buyers.
What is an Agreement in Principle?
There’s lots of jargon and abbreviations in mortgages. An Agreement in Principle or Decision in Principle is where we apply to a mortgage provider and check you can afford the mortgage.
The lender does a credit search and states they’re happy to lend you the money you’ve applied for, and you get a certificate. That certificate proves you can get mortgage finance to an estate agent. Estate agents will often call us to ask whether you can afford the mortgage, because a Decision in Principle is only with one mortgage provider. It could take you weeks or months to find a property. So in the end you might get a mortgage with a different lender, which has better rates at that point.
How much can a First Time Buyer borrow and what deposit is needed?
The amount you can borrow will depend on your income. Everything is based on affordability. We will ask you about all of the sources of your income – you’ll be surprised at what we can use. In the past we’ve helped people who have Universal Credit supplementing their income. We’ve had someone with fostering income.
We will tell you how we can maximise your affordability to obtain the mortgage that you want. Some lenders have special rules around overtime and bonuses which we can use to best effect. Some will take 60% of your overtime, or take 100% of a Sunday allowance. We’ve worked with agency workers, teachers, doctors, surgeons and people with contracting income.
The deposit also affects the amount you can borrow. We will ask you about the breakdown of your deposit – is it the bank of Mum and Dad, are you getting a gift from a family member, do you have savings etc.? We will also check you have your funds for the stamp duty if it’s applicable, and professional fees you will need to pay.
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It doesn’t cost anything for a chat, it’s free and we never charge a fee until we’ve got a mortgage offer. So pick up the phone and let us take it from there.
How do I know what my credit score is and how do I improve it?
Your credit score is basically a number that an agency or a lender rates you with, depending on your history for borrowing money and paying it back. The scores and the acceptabilities differ with each agency.
Equifax will give you one score but the lender may use a different rating matrix. Your credit file is made up of payment histories with all your credit providers. It also says whether you’re on the electoral roll. Being on the voter’s roll shows the lender you have stability.
The score also states if you have any county court judgments, debt arrangements, insolvencies or missed payments. We generally ask our clients to obtain their credit record from Checkmyfile*. The service is free for the first 30 days and gives you all three of the major credit reference agencies all on one report.
We will look at that report for any surprises that could affect you getting a mortgage. Having a credit blip on your file isn’t the end of the world, especially if the value is low and it was a few years ago. It’s likely there are lenders that will accept you.
*As a referer, we receive commission from Checkmyfile for any signups. Try it FREE for 30 days, then £14.99 a month – cancel online anytime.
What help is available for First Time Buyers?
As of October 2022, new stamp duty changes are pretty helpful for First Time Buyers. The threshold has increased so you can buy a more expensive home without paying stamp duty.
There are a few government schemes as well. These schemes are changing – some are ending, some new ones are being introduced, so give us a shout and we’ll explain all the schemes at that point in time.
The innovation in mortgage products is amazing at the moment and people are surprised to know that we’ve got access to mortgage lenders that provide products with ‘income boosters’ that allow you to borrow up to six times your income.
There are ‘deposit booster’ mortgages as well and a couple of lenders doing ‘dynamic ownership’ which is also called Joint Borrower, Sole Proprietor. Here, a couple could own a property but they can also use mum and dad’s income to boost their borrowing.
All these options will come out of our first strategy call with you. You might want to own your own home, or afford a certain dream home, but can’t quite get there. We’re all about advice, so we want to make sure you explore the options and that everyone understands exactly what it means.
You might have a 5% deposit, but you could access better mortgage rates by topping up your deposit. There are companies that will loan you additional funds for this. It involves specialist advice and it’s not for everyone. Costs can be quite high, but it can be a good way to achieve your goals.
What fees are there for a First Time Buyer?
First is stamp duty – everyone knows that this is a massive cost and it’s good that there is now a bit more relief for First Time Buyers. Then you have mortgage fees – arrangement fees and mortgage product fees. An arrangement fee can be added to the loan.
You may have a valuation fee as well. You may opt to do a specialist survey on the property or a structural report, which could be an additional amount, depending on the lender. Then you’ve got all the legal fees. You need a solicitor or a conveyancer to do the legal part of the transaction for you. They give you a quote which details their fees, the searches and enquiries that they have to make. You may also have a broker fee as well payable on mortgage offer or completion.
Finally, you also need to be aware of the ongoing costs. You’re going to have to pay the mortgage each month, and get buildings insurance. You may want to protect your contents. We can arrange that. You should also look at protecting yourself from the unexpected, with life insurance, critical illness and income protection. We’ll advise on that as well.
How can a mortgage advisor help?
Just pick up the phone – literally everything we do for you is bespoke. We will take the time to understand your circumstances and take you through the process. Our technology will give you reports on potential properties or areas.
We just want to make sure that we do what’s right for you with good advice throughout the process. We can refer you to solicitors or conveyancers, and we’ll help you on property negotiations. We’re here to hold your hand and support you every step of the way to buying your first home.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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Right to Buy is for tenants in England, Wales and Northern Ireland who rent their home from their local council.
It allows tenants who qualify, to buy their home at a discount.
The size of the discount varies depending on where you live and the type of property you want to buy.
Tenants who were living in a council home before it transferred to another landlord such as a housing association, might be eligible to buy their home under the ‘Preserved’ Right to Buy or Right to Acquire schemes.
Usually, tenants must have rented from the public sector (i.e., local council, housing association, armed services, NHS or foundation trust) for three years before they can buy under these schemes.
The three years can be non-consecutive. So, you could still qualify if you rented from the private sector between times when you rented from the public sector.
A concessionary purchase is a term for a property that is bought for less than its market value and, as you can probably guess, concessionary mortgages can be used to buy a property that’s sold at a discount.
Some concessionary mortgages are easier to get than others. Mortgages involving family members are much easier to get than if a buyer was purchasing from a private seller.
Here’s an example of how concessionary mortgages work. Imagine your parents want to help you onto the property ladder. To do so, they offer to sell you a property they own at a discounted price.
With the increase in property prices. The bank of mum, dad or even grandparents could come to the rescue.
With this type of mortgage, a parent or close family member takes on some of the risk of the mortgage by acting as guarantor. If the homeowner misses a payment, this person is responsible for covering the missed payment.
The main benefit of this type of mortgage is that you can sometimes borrow up to 100% of the property’s value as the guarantor’s collateral is used in place of a deposit. This can make them an attractive option for young people or lower earners.
On the negative side, your guarantor could be liable for any shortfall if your property has to be repossessed and sold.
The guarantor can’t be just anyone. Most lenders will require this person to be a close family member – usually a parent.
Becoming a guarantor is a big commitment. The lender will either hold some of the guarantor’s savings in a locked account or take legal charge over a portion of their property to secure the mortgage.
Joint Borrower, Sole Proprietor (JBSP) JBSP mortgages are a type of mortgage where not all parties to the mortgage are the legal owners of the property. For instance, if there are two borrowers in this scenario, both will be liable for the mortgage but only one will be named on the title of the property.
These mortgages allow parents, guardians, friends or family to support would-be first time buyers with the affordability challenge of getting on the housing ladder.
Shared ownership is where you buy a share of a home from the landlord, who is usually the council or a housing association, and rent the remaining share.
You need a mortgage to pay for your share, which can be between a quarter and three-quarters of the home’s full value.
You then pay a reduced rent on the share you don’t own.
Later you can choose to buy a bigger share in the property up to 100% of its value.
Eligibility restrictions on the shared ownership have lifted. You could buy a home through Help to Buy: Shared Ownership in England if:
• you have a household income of less than £80,000 (outside London) or £90,000 (inside London)
• you are a first-time buyer, you used to own a home but can’t afford to buy one now or own an existing shared ownership property but are looking to move.
Only military personnel get priority over other groups. The scheme will apply across England.
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