First Time Buyer
Buying your first home and making that first move on to the property ladder is both daunting and exciting! We have put together some tips to give first time buyers the confidence and starting points to make the journey smoother and to help you avoid some of the potential pit falls.
-
-
- Get your credit score in order and ensure you are on the electoral roll.
It helps to be prepared and put yourself in the strongest possible position before applying for a mortgage. Ensuring that you are on the electoral roll is a great start but be aware that having no debt isn’t necessarily a good thing, as lenders like to see that you can manage your finances. Make your payments on time, get them setup on direct debit and clear your credit card balance monthly.
- Prepare for the affordability testing.
Go through your bank statements and cancel the gym membership you don’t use as well as any other unnecessary commitments. Avoid pay day loans and never withdraw cash on your credit card. Be aware of deductions that show on your payslips, such as pension payments, students’ loans, childcare vouchers and season ticket loans as some lenders can take these items into account.
- Be aware of government schemes such as help to buy.
Help to buy involves the government providing an equity loan of 20% of the purchase price on new build properties, interest free for the first five years, to those with a 5% deposit. This increases to a 40% equity loan in London and currently the purchase price must be no more than £600,000. The government has confirmed it will extend the scheme from 2021 to 2023, but only for first time buyers.
- Prepare your documentation.
The process is as smooth as you make it! Three months bank statements, three months’ payslips and your latest P60 for the employed, last two years SA302 tax returns and corresponding tax year overview for the self-employed, evidence of your deposit, proof of identity (passport, driving licence) and proof of address (utility bill, council tax statement, bank statement) are essential.
- Do your research.
Check the recent sold prices of local comparable properties, in the area in which you are buying, to ensure you do not overpay. You can use websites like Rightmove and Zoopla for this and ideally you want the comparables to have been sold within the last six months. The lender will instruct an independent surveyor during the course of the application to survey the property and this forms part of what they look for. If the value does come back lower, you could look to discuss and negotiate with vendor.
- Get in contact with local agents as the best properties don’t always make it on to Rightmove.
Meeting estate agents face to face in their office can help you to stand out from the crowd, so make yourself memorable, keen and available for viewings. Take along your proof of deposit to show that you have funds available. Note if this is being gifted from a family member aka The Bank of Mum and Dad, lenders will typically ask for a gifted deposit letter confirming their name, relationship to you, the amount they are gifting, that it is non-repayable and that they will have no interest in the property.
- Speak to a whole of market broker.
It’s very important to find out what you can afford, as your bank won’t always offer the best deals or borrowing amounts. This could make all the difference when trying to buy that dream home on your favourite street or in the best school catchment area. Always seek expert advice that is independent, whole of market and bespoke to you as expert advice is invaluable and could save you thousands in the long term.
- Get an agreement in principle with your broker.
You don’t want to be the one offering without one in a competitive bidding war. It will also show vendors that you are serious and ready to proceed as it is not always about price, it can often come down to the speed of the transaction. Especially if the seller is buying a new property themselves and they need to move quickly. At the very least ask your mortgage adviser if they could provide a letter confirming your ability to borrow the funds required.
- Protect yourself should the unthinkable happen.
It is not nice to think about but don’t neglect the possibility of long-term sickness or death during the term of the mortgage, you don’t want to be left with a mortgage to pay if tragedy does strike. A broker can help you arrange life protection, critical illness cover or income protection. You might be better off extending a mortgage term by a year, to allow you to budget for suitable protection insurances within you monthly outgoings. Having a 26-year mortgage that is protected, could be far safer than a 25-year loan that isn’t.
- Freehold and leasehold.
If you are buying a house, you are typically purchasing the freehold. This means you are buying both the property and the land it sits on. For flats however you are generally buying leasehold, although on occasion this can come with a share of the freehold. This means you own the property for the length of the agreement, after which it returns to the freeholder, unless you extend the lease. Once you have owned your home for at least two years, you have the right to extend the lease by 90 years, as long as you are a qualifying tenant. Make sure you find out how many years remain on a leasehold property and budget for any ground rent or service charges.If you’re a first-time property buyer and you need help understanding or obtaining a mortgage, we are here to help you succeed with your first property purchase. It doesn’t need to be complicated, by seeking expert advice from our friendly team we can help you on your way to securing your first home in 2020. Get in touch today by clicking the contact button above!
- Get your credit score in order and ensure you are on the electoral roll.
-
Call us on 0203 633 4940 if would like to discuss your options