First Time Buyers
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First Time Buyer
Kirsty Hill and Lewie Jamieson explain the mortgage process for First Time Buyers.
How is the mortgage process different for First Time Buyers?It’s actually not any different – the process and steps are the same. The key with First Time Buyers or anybody looking to move is getting advice as early as possible. If you’re thinking of buying a property then get in touch with an independent advisor. You could have done a quick check online and a bank says you can borrow £200,000 – but that’s not very specific. Speak to somebody as early as possible because you could be looking at properties outside of your budget – or even below your budget. You want to make sure that you’re getting the best or most suitable property for you. So get advice early.
What is an Agreement in Principle?As we said, going directly to the bank can be quite vague and not specific, but by speaking to an independent adviser we can clarify your affordability. Once we’ve determined what deposit you’re hoping to put down, we assess how much you’re able to borrow based on your incomes and outgoings. We then apply to a lender or a bank for the amount you wish to borrow at that stage, and you will have a soft credit search done on your credit file. That confirms whether you’re eligible to get a mortgage, and if so you’ll receive a certificate you can then present to an estate agent as part of looking at suitable property.
How much can a First Time Buyer borrow? What sort of deposit is needed?It varies from person to person. The affordability process is quite different to how it used to be years ago and different lenders will specialise in certain areas – for example, for customers with children or who are self-employed. All these types of things are taken into account so the amount you can borrow will vary depending on your situation and the lender. We’ve got access to the whole of the mortgage market, to find the most suitable lender for each person and their situation. That’s why it’s so important to speak to somebody early – it can vary massively and people are often surprised when we give them an indication. They can often borrow more than they think, which is great, especially when you’re looking for your first home and prices are so high at the moment. In terms of deposit, the minimum is 5%. At the moment there are plenty of schemes and lenders out there that will accept just a 5% deposit, but obviously you still need enough income to support the loan amount that you’re looking for.
How do I know what my credit score is and how do I improve it?This is important, because First Time Buyers often haven’t had opportunities to build up their credit profile. To check your credit score you can either go on to websites like Experian or Equifax, or one which we recommend called Checkmyfile. All offer free 30-day trials to tell you what your credit score is. To improve your credit score, make sure you are registered on the electoral roll at the address you’re currently living at. Some lenders in the market will decline you as an applicant if you aren’t registered. It also improves your score on the whole as well. When I was first starting to build my credit profile I took out a credit card to put my petrol expenses on each month. Over the course of time that will build up your credit profile rating.
What is a First Time Buyer ISA and are these available any more?This was a really brilliant offer by the government, but unfortunately they’re no longer available. If you’ve got one, don’t worry, you can continue to contribute to them until November 2029 and make use of it by November 2030. It was an excellent scheme where you could add money to a savings account purely for the purpose of buying a property and the government would provide you with a really lovely 25% bonus on top of that. There are some restrictions around it in terms of maximum purchase prices. In London it’s a bit higher at £450,000 and in the country around £250,000 but unfortunately, you can’t take a new one out.
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We’ve got customers all over the country, as we can deal with you over the phone, online on teams. So you don’t have to be based in the Sussex region to use us. We have access to the whole of the market and we’ll happily chat to you wherever you are.
What other schemes and help is available for First Time Buyers?
There’s a scheme called a Joint Borrower Sole Proprietor mortgage – where if an applicant is a bit short on borrowing based on their income, a parent or a brother or sister could go on to the application at the same time. They won’t actually be registered on the title deeds of the property. So there are no stamp duty issues for the supporting borrower. That’s quite a useful tool.
Shared ownership is where an applicant can buy not 100% of the property but a lower percentage, for example 40%. It’s a step up from renting because you’ve got one foot on the ladder, with a view to staircase up to 100% ownership in the future.
Previously Help to Buy was a good scheme but unfortunately that’s finished now and we’re waiting to hear if the government might bring out an alternative scheme. Again, it’s a good reason to keep in touch with an advisor, because we’ll have notifications about any new schemes coming up that might be useful to you.
There could be additional help from your family. If, for example, you haven’t been able to get enough of a deposit together, your family might be able to assist – that could be used in conjunction with the shared ownership scheme or Joint Borrower Sole Proprietor.
If they don’t physically have the cash to give you there are certain lenders that will accept equity in a family member’s home or money in a savings account. So it’s actually quite a good time for First Time Buyers because there are many options.
What fees are involved when buying a house?
Quite a lot of fees are applicable and when you first speak to an adviser we’ll run through these and give you approximate ideas of costs. Then, before you start looking for a house, you can budget what you’re going to need.
The most significant one for anybody looking to buy a home is stamp duty. At the moment there is a holiday on that, so if you’ve never owned a property there’s no stamp duty to pay for First Time Buyers. That applies on any property priced up to £425,000 In London, again, that’s a bit higher at £625,000
In terms of mortgage fees there can be valuation fees from the lender, and there can be product arrangement fees. Some of these are payable upfront, and some can be added to the mortgage. You will also need to contact a solicitor who will give you a quote for your legal fees. Included in that will be search fees and other disbursements.
You may also want a survey. You’ll get a mortgage lender valuation, but depending on the type of property, you may want an independent survey from a RICS registered surveyor. They can advise you if there’s any significant spending on the property that’s urgently required.
The last thing you’ll want to consider is insurance and protection. That’s something that you can speak to us about. We again have access to the whole of the insurance and protection market for life cover, critical illness and policies like that. It’s probably the most important thing to discuss, once the mortgage is agreed and arranged, so we’ll set up a separate appointment to speak to you about protection. Generally, there won’t be any advice costs, but you’ll want to budget for the premiums within your monthly commitments.
How can JXP help me as a First Time Buyer?
People really appreciate the reassurance and support a broker gives to First Time Buyers. It could be quite a daunting process when you’re looking at your first homes. You often just need someone to hold your hand and give you guidance throughout.
You’ll feel confidence that you’re going to be in the most capable hands. By coming to someone like us here at JXP, you’ll be reassured that you’re getting the most suitable advice across every lender out there.
We can support you with estate agents and solicitors too. Often First Time Buyers have questions that they’re not sure who to ask about. We’re here for all those queries.
Your home may be repossessed if you do not keep up with your mortgage repayments.