For first time buyers, navigating the mortgage process might seem as daunting as it is exciting. By understanding the basics, you’ll help make your house purchase journey smoother. Here are some things to consider.
1.Deposit Requirements
You will need to put down a deposit, which is a percentage of the property’s purchase price. The minimum deposit amount for most UK mortgage lenders is 5%, however there are some schemes available only to first time buyers where you can reduce your deposit further, and require as little as £5,000 deposit.
Many first time buyers’ deposits come from their own savings, however it is very typical to see family members help by gifting some or all of their deposit, and this is acceptable to most lenders. The larger the deposit you have, the lower the interest rate will become on your mortgage.
2. Mortgage Affordability and Eligibility
Mortgage lenders will assess your ability to afford the mortgage based on several factors, including:
- Income: Whether you are employed, self employed or work on a contract basis, mortgage lenders will be prepared to lend to you. They will calculate how much of your income they will accept as part of the application, however the more complex your income, the more guidance you will need.
- Outgoings: Lenders will look at your current financial commitments, such as personal or car loans, credit and store cards and living expenses. You will need to know the current balances of any credit commitment, the monthly payment, and how long is remaining
- Credit Scoring: A lender will perform a search of your credit report. They will be looking to see whether you have been able to maintain your credit commitments over time. If you have some blips in your credit history don’t be too disheartened, but the better your credit score, the better the interest rate will be on your mortgage. You can check your credit report at any time by visiting Experian, Equifax, or Checkmyfile.
TOP TIP – if you want to improve your credit score, make sure that all credit commitments, including your bank account and mobile phone, are registered at the same, correct address. Not being registered to vote at the correct address can reduce your credit score too, and some lenders will even decline your mortgage application if you are not on the Electoral Roll at the correct address, so make sure this is up to date.
3. The Mortgage Application Process
The process typically involves the following steps:
- Mortgage Agreement in Principle (AIP): This confirms that, following an initial credit score and assessment of your income and outgoings, a lender is willing to offer you a mortgage.
- Property Search: Once you have an AIP, you can start searching for properties within your budget
- Full Mortgage Application: After your offer on a property is accepted, you’ll submit a full mortgage application, providing detailed financial information and documentation.
- Valuation and Survey: The lender will conduct a valuation to ensure the property is worth the amount you’re borrowing. Depending on the property’s condition, you may also choose to get a more detailed and thorough survey done.
- Mortgage Offer: If everything checks out, the lender will issue a formal mortgage offer.
- Conveyancing and Completion: Your solicitor will handle the legal work, including transferring the funds to the seller. Once completed, you get the keys to your new home
4. Protecting you, your income and your mortgage
It is a condition of your mortgage that you insure the property against damage, so you will need to have a Buildings Insurance policy in place. You may also wish to protect your contents within the property, too.
It’s also important that you review your finances alongside the mortgage, and consider owning insurance policies that will provide a lump sum of money in the event of your death, or a diagnosis of serious or critical illness. This can ensure that you retain an income if you are unable to work due to long-term illness. Insurers will assess your health, lifestyle and potential risk factors associated with your job before providing you with a policy.
Purchasing your first home is a brilliant achievement and one you should be proud of. Understanding how the full process works is crucial for first-time buyers and it’s important to do thorough research and seek advice from mortgage brokers to ensure you find the best option for your circumstances.
At LDN Finance, we have helped a substantial number of first-time buyers get on the property ladder. We are not only experts at navigating any challenges that may arise, but we also have direct access to exclusive deals from our extensive panel of market leading mortgage lenders. To start the process of securing your first mortgage, contact our friendly team on via our online form, or call 020 3903 9875.