First Time Buyers
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First Time Buyer Mortgage
What is a First Time Buyer mortgage?
A First Time Buyer mortgage is for somebody who’s never owned a property in the UK or abroad before – or they sold it some time ago.
What are the typical requirements to apply for a mortgage as a First Time Buyer?
For most products aimed just at First Time Buyers, you can’t have owned a property in the last two years.
What is the maximum amount that can be borrowed for a mortgage as a First Time Buyer?
There is no maximum amount that can be borrowed, but some government schemes have a maximum limit. That’s limited by affordability, not the borrower status.
What’s the minimum deposit required for a First Time Buyer?
It’s 5%, and lots of 95% of mortgages are available. Interest rates typically become much cheaper if you’ve got at least a 10% deposit.
Having said that, Skipton Building Society recently launched a zero deposit, 100% mortgage. [podcast recorded in April 2024]
What types of interest rates are available on a mortgage for a First Time Buyer?
You can access all types of interest rates – fixed, variable, tracker, discount or offset products. For First Time Buyers the most common choice is a fixed rate, which allows you to budget monthly and gives you certainty over what you’ll pay.
What are the pros and cons of a fixed rate versus a variable interest rate mortgage for First Time Buyers?
The benefit of variable rates is that if interest rates are cut, your rate will likely drop too. Additionally, there is usually no early repayment charge – meaning the mortgage can be paid in full at any point without penalty.
But the downside is uncertainty. There is no guarantee that you’ll get the full benefit of rate changes, as you’re at the mercy of lenders hiking rates at will. Typically standard variable rates are very expensive.
Fixed rates, on the other hand, are good because they provide certainty about your monthly payments. During a fixed rate you are allowed to overpay up to 10% or 20% of the outstanding amount per year, depending on the lender.
The downside is that if you want to pay back your mortgage partially or in full over that limit during the fixed term, you must pay an early repayment charge. Also if interest rates go down, you won’t benefit from lower payments.
What government schemes are available to help First Time Buyers?
There are few schemes that can help First Time Buyer with low deposits. The first is the shared ownership scheme, called Lift in Scotland. It’s also worth looking at the Lifetime ISA.
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What documents are needed to get a mortgage as a First Time Buyer?
You will need a current passport or driving licence for identification; proof of settled status or a visa; proof of income – usually your last three months’ payslips or two to three years accounts if you’re self-employed – plus proof of deposit.
If your parents are giving you a gift towards that deposit, you need a letter stating that it really is a gift, not a loan. You also need the last three months’ bank statements, proof of bonuses or commission and your latest P60 tax form showing your income and tax paid. If you’re self-employed you will need SA302 tax return forms.
What are the steps to applying for a mortgage as a First Time Buyer?
To find an appropriate mortgage, you should seek advice from qualified advisers like me. The most recognised mortgage advice qualification is called CeMAP. We will assess your needs and eligibility before recommending the most suitable product for you.
Next we will get a Decision in Principle (DiP) which is a conditional offer saying you may be accepted based on a quick check of your income and your credit file. With your DiP in hand you can search the market for the right property.
When you find a property, you place an offer on it, and if it’s accepted you go to the next step – a full mortgage application. Once you’re accepted by the lenders and all the legal work is done you can collect the keys to your new home. Our company takes care of clients from beginning to end – and we can offer you support from our own solicitors.
What are the most common mistakes to avoid when applying for a mortgage as a First Time Buyer?
A common mistake for all borrowers is not preparing themselves for this big step. There are three areas to concentrate on to boost your chances of getting a mortgage.
The first one is getting on the electoral roll, second is checking your credit file and not missing payments and third, keeping other credit applications down.
What happens if I miss a mortgage payment on a mortgage as a First Time Buyer?
Falling a single month behind on your mortgage payments isn’t the end of the world. Although there could be some negative consequences, these can usually be minimised or avoided by communicating with your lender. Lenders are aware of the cost of living crisis and will take steps to help you.
If you’re 90 days late, it’s serious. Your lender may start taking steps to repossess your home – that could mean eviction. So talk to your lender to work out a plan. You may be able to make up missed payments or have a temporary break.
Going to court and losing your home is the last resort – you should have a chance to work things out before it gets that far.
Can people qualify for a mortgage as a First Time Buyer with bad credit?
Credit checks play a crucial part in a lender’s assessment of whether they will give you a mortgage. The lender’s aim is to ensure you are a profitable customer and can make your repayments.
They do this with credit scoring, to try to predict your future behaviour based on your past. Lenders are more selective if your score is poor and many will reject you. That doesn’t mean you can’t have a mortgage, but you will have fewer options. Fortunately we work with subprime lenders who can offer mortgages to people with bad credit.
Can people get a Buy to Let mortgage as a First Time Buyer?
Yes, you can have a Buy to Let mortgage.
How can a mortgage broker like you help others with their First Time Buyer mortgage application?
You’ve got two main options when applying for a mortgage – doing it solo by going directly to the lender, or applying via a broker. Using a broker is often best as we can whittle down the top deals quickly. We often have special deals available, and we will know what type of mortgage would best suit your personal circumstances.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.