Buying your first home can be a very exciting time but it can also leave many of us feeling a little lost. This is understandable as there’s a lot to prepare for. Furthermore, buying a home will be the biggest purchase of our lives, so it’s worth spending some time learning how it all works. Our article looks at first time buyers mortgage advice to assist you in your first house purchase.
Budget
As a first-time home buyer, the most important thing to bear in mind is whether you can really afford to take this step. It’s a good idea to put together a budget before you start looking for a property. Think about how much you can afford to pay every month, remembering you’ll still have to cover everyday costs such as gas, electricity and food.
Deposit
One of the biggest hurdles facing first-time buyers is getting a house deposit together. Make sure you’re getting as much from your money as possible with a top-paying savings account and look into boosting your deposit with the government bonus that comes with saving in a lifetime ISA.
Generally speaking, you need to try to save at least 5% of the cost of the home you’d like to buy. For example, if you want to buy a home costing £150,000, you’ll need to save at least £7,500 (5%) for the deposit. Saving more than 5% will give you access to a wider range of cheaper mortgages available on the market and a lower interest rate, but is not always easy to achieve.
There are a range of schemes available to help first-time buyers to help you get on the housing ladder, particularly if you only have a small deposit, including Help to Buy, Right to Buy and Shared Ownership options.
Check and strengthen your credit
Your credit rating not only affects whether your mortgage application is successful – it influences how much your monthly repayments will be, too. That’s why it’s essential to improve your credit score before you apply for a mortgage.
The best way to understand your credit report is to see it for yourself. You can request your report from the three credit referencing agencies (Experian, Equifax and TransUnion). Making sure your information is correct is the first thing and checking any financial links to other people along with trying to lower your use of unsecured credit to below 50% is a good starting point.
Mortgages
When you’re ready to start viewing properties it’s a good idea to get a mortgage agreement in principle from one or more lenders. An agreement in principle is not a formal mortgage offer. An AIP outlines what a lender is likely to lend you, based on the information you’ve provided. To get a DIP, you’ll undergo a credit check and they’re usually valid for 90 days.
Many mortgage companies have special deals for first time buyers, which are generally aimed at helping people get on the property ladder. These types of mortgages usually accommodate having lower deposits (ie the ratio of the mortgage to the value of the property can be higher) and have lower application fees.
These mortgages are often discounted as well, to make the early years cheaper (but you may pay it back later). In general, first time buyer mortgages can be very helpful at a difficult time.
Here at Purdey’s Financial Services our team of experienced Mortgage Advisers are here to help you make your first move, offering independent advice to consider products from all firms across the market and have to give unbiased and unrestricted advice whilst being regulated by the Financial Conduct Authority (FCA).
For further help with first time buyers mortgage advice, please contact us here.
