First Time Buyers Information
The First Time Buyers journey is an exciting one! Once you have your deposit, which you may have been saving for years, then comes the time to find out the mortgage you could qualify for.
WPP Financial Services, Rochester, Medway, Kent, could help a First Time Buyer with this.
A mortgage is the loan you took out to buy your home. The repayment of the loan can run for up to 40 years which is known as the ‘term’. Typically the term tends to be much shorter. For more detail on Mortgage terms see our A-Z Mortgage Glossary.
The loan is ‘secured’ against the value of your home until it is paid off. WHat this means is if you default on repayments your home can be at risk of being repossessed so you must ensure you calculate what you can afford carefully.
You will be charged interest on the money you borrow. The higher the mortgage rate, the more you pay in interest. The quicker you pay off your mortgage, the less interest you pay.
Steps for the First Time Buyer.
1 Save for a Deposit
The more money you can save, the less you’ll need to borrow the mortgage lender and the more competitive ‘rates’ you can get. The mortgage ‘rate’ is the mortgage interest rate which is the annual cost to borrow money from the mortgage lender. It is given as a percentage of your total amount of money that you still owe to the lender and is paid on a monthly basis, along with your main repayment amount.
As well as having savings for your deposit, you’ll also need funds for property searches, surveys, mortgage arrangement fees, solicitor’s fees, stamp duty and any removal costs. You will also need to take out insurance for your new building and its contents.
2 Talk to us about the mortgage you could borrow.
This will give you a very approximate idea of the house value you should look at. The amount of mortgage you can borrow will depend on the number of applicants, your income and spending each month and the type of mortgage you are going for.
3 Start househunting and find a property you like
This is the fun bit. Have a thorough look at the different options on the market. Take your time to consider the requirements your property must have for you.
4 Contact us to get an agreement in Principle (PIP)
This checks to see if you would qualify for a mortgage on this property. Depending on the lender applied for this may or may not involve a credit check at this point. Some lenders carry out hard credit checks which appear on your credit file. Some lenders use a soft check that will not affect your credit score. The AIP will last between 30 and 90 days.
5 Complete your full mortgage application.
When your offer on the property has been accepted by the Seller, contact us to complete your full mortgage application. Mortgage lenders usually have a maximum loan-to-value (LTV ) offer. This is the maximum mortgage loan you can take out as a percentage of the property value. You’ll need documents such as pay slips, recent bank statements, details of any financial commitments, and proof of your identity for the mortgage application.
Have details of the property you want to buy. When you have completed the mortgage application, you’ll then need to instruct a solicitor or a licensed conveyancer at this point to complete the conveyancing. Conveyancing is the transfer of legal title of real property from one owner or owners to another. Once you have instructed the solicitor then wait… This part can take what feels like a long time for the legal searches and documents to be completed. Typically it takes from 2-3mpnths
6 Exchange contracts
When the solicitors have completed the conveyancing legal work, you will exchange contracts with the seller which means you sign for the transfer of the legal title and set a completion date.
7 Completion date
On the completion date, your mortgage lender will send the money you want to borrow to your solicitor who will arrange for it to be transferred to the seller.
8 Pick up the keys! Congratulations you own your first home!
On this day your conveyancer will send all the money for the purchase to the seller’s conveyancer and will call you to confirm the legal process is complete, you can pick up the keys and move in.
Make an Appointment
Other financial considerations you’ll need to make:
1. Buildings Insurance
It’s a requirement of your mortgage to have buildings insurance which covers the bricks and mortar, fixtures and fittings.
2. Contents Insurance
You might also want to consider contents insurance as well which will insure all of your possessions in your home, including electrical items and furniture.
You may also want to look into insurance to protect your mortgage payments, for example Life Cover and Critical Illness Cover.
Will I be charged any fees?
Depending on the lender there may be a mortgage arrangement fee to pay. If you are ever in a position to repay early, you may have an early repayment charge.
There are schemes that can help you to buy your first property. These include:
Equity loan scheme – Some builders offer a Shared EQuity Loan Scheme to help first time buyers. The government lends you up to 20% of the cost of your new build (interest free for 5 years). You’ll need to save a minimum deposit of 5% and will need a 75% mortgage (or a 55% mortgage if you’re in London).
Right to buy schemes – This Right to Buy scheme allows tenants renting from the council or a housing association to buy their home at a lower price and can be done without a deposit. The local authority will provide more information on this.
Members of the armed forces may also be able to make use of a government Ministry of Defence (MoD) Forces Help to Buy scheme. This allows you to borrow up to £25,000 interest free to be used as money for a deposit.