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Getting a mortgage as a first-time buyer

By David Baker

  • Mortgages

Getting a mortgage as a first-time buyer can be an exciting but also overwhelming process. Doing research and working with a professional is the key to helping this process become more convenient; it can allow you to manage your expectations and understand what steps are involved along the way.

Below are some key steps you should consider:

Determine your budget:

Assess your finances to understand how much you can afford to spend on a property. Consider your income, expenses, savings for the deposit and additional costs. You will need money set aside to cover legal work, home surveys and you will also need money to furnish your house to make it a home. You should also keep back an amount of cash readily available to cover any everyday emergencies that may arise when you move in.

Find a mortgage broker:

A mortgage broker is a financial professional who acts as an intermediary between borrowers (individuals or businesses seeking a mortgage loan) and mortgage lenders (banks, credit unions, or other financial institutions). Their primary role is to help borrowers find suitable mortgage loans that meet the borrowers’ specific needs and financial circumstances. They will let you know your mortgage loan options, help you with the loan application and process, be able to negotiate on your behalf and they are on hand along the way with any questions and concerns you may have.

Our brokers are independent, which means they can source the most suitable product for you from the whole of the mortgage market. They have access to the main mortgage lenders, receive special rates from lenders and recommend the best lender for your needs. Using a broker provides you with the knowledge you need, saves you time and can save you money.

Check your credit score:

Lenders use credit scores to evaluate your creditworthiness. A higher credit score usually leads to better mortgage options and interest rates. Review your credit report for any errors and take steps to improve your credit if needed. It is time to consider paying off debts and cutting back on extravagant spending.

Saving for a deposit:

Start saving for your deposit, which is typically a percentage of the property’s purchase price. Different lenders require different amounts. The minimum in the market currently for a first-time buyer mortgage is 0% of the purchase price; however, this type of mortgage comes with a lot of terms and conditions. Each additional 5% you can put down against the property will help reduce the interest rate to borrow the money.

Research mortgage options:

Work with your broker to discuss the different types of mortgages available to first-time buyers. The two main types are fixed-rate and tracker-rate mortgages. A fixed-rate gives you a fixed payment for a set period of time; whereas a tracker follows a rate (usually, but not always, the Bank of England base rate) so payments can vary. The main fixed-rate lenders are for two, three, five and ten years and the tracker lenders tend to be over two and five years.

Get your Agreement in Principle (AIP):

Get your Agreement in Principle (AIP) approved before you start looking at houses. This way, you know how much you can borrow and the house price you can afford before you start viewing properties. Your mortgage broker will help you get your AIP set up and get you ready for your house hunting.

Start house hunting:

With your AIP in hand, search for properties within your budget. Consider factors; such as location, size, local shops, schools, amenities, and transport links. You may also want to think about the future resale potential.

Make an offer:

Once you find a suitable property, work with the property estate agent to prepare and submit an offer. They will help you determine a fair price and negotiate with the seller. Remember to let your broker know when you have made an offer.

Complete the mortgage application:

Once and if your offer is accepted, you’ll need to complete the full mortgage application. Our dedicated administration team will provide you with all the paperwork that needs to be completed in order to get you moved into your new property as quickly as possible. Lenders require a lot of different information, so a top tip is to have bank statements ready. Proof of address will also be needed and joining the electoral roll at your current address has an impact on your credit score.

After having an offer accepted on a property and applying for a mortgage, it can typically take from two to six weeks to get a mortgage approved. Most mortgage offers are then valid for six months. Everyone’s process differs, but our team will be there to make the process as stress-free and as time efficient as possible.

You will need to insure your home:

You’ll need to secure homeowners insurance to protect your property and meet the lender’s requirements. Shop around for the best rates and coverage. You should also consider getting yourself insured for life cover and critical illness cover – we have teams at LIFT that can help you with both home insurance and personal life cover.

Completion:

This is the stage when you review the documents, sign the necessary paperwork, and pay the completion costs. After that, you’ll receive the keys to your new home, and that is when the fun can start!

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