The First Time Buyer Guide to Getting a Mortgage.
If you’re looking to buy your first house, getting a right mortgage might seem like a daunting and confusing prospect. Have you got enough money saved? How do you find the best rate? How do you boost your chances of getting accepted by a mortgage lender? This easy guide tells you everything you need to know about finding your first mortgage:
“How Much Deposit Do I Need?”
In the current mortgage market, you’ll need a deposit of at least 5% of the property’s value – meaning that to buy a property costing £150,000 you will have access to a minimum of £7,500. The size of your deposit will have a big impact on the mortgage products and rates that are available to you. The difference in rates between a 5% and 10% deposit can be considerable, and they fall even further if you have 20% or 40% available to you. This is because if your loan-to-value (LTV) is low, your lender will be loaning you less money and taking a smaller risk – and will offer you better mortgage rates in return. Luckily, interest rates are currently at a record low – meaning there are some great mortgage products available at the moment whatever the size of your deposit.
“How Much Can I Afford to Spend on a Mortgage?”
It’s probably the first thing First Time Buyers want to find out, and it’s something you definitely need to know before you start looking for a new house. The important thing to note is that each mortgage lender has their own process for calculating how much they are willing to lend you, based on your income, expenditure, credit score, and any debts you have. This means some lenders may be willing to loan you more than others – but choosing the one offering you the highest amount may not necessarily be the best option. Online affordability calculators will be able to give you a rough estimate of how much you can borrow but to get an exact figure you must speak to a mortgage advisor.
“Who Do I Speak To?”
Just as you would when shopping around for a car or house insurance, comparing prices and offers is the key to finding the best mortgage to suit your needs. This is where an intermediary mortgage advisor comes in! Unlike your bank or building society, Edward Mellor’s mortgage experts will compare the mortgage deals of more than 25 high street and niche lenders, and give you independent advice on choosing the right product. Let our team take the hard work out of finding your mortgage. Find out more about the benefits of using an Intermediary Mortgage Advisor.
“Is There Any Help Available To Me?”
To help buyers with smaller deposits to take their next step on the market, the Government rolled out the Help to Buy scheme last year. Help to Buy is split into two parts:
If you are looking to buy with a 5% deposit using a participating lender, the Government will “guarantee” a percentage of the loan, which intends to drive down mortgage rates by reducing the risk they are taking on the loan.
Buying a new-build house from a participating builder using a 5% deposit? The Government will loan you up to 20% of the purchase price, so you can access 75% LTV mortgage deal. You won’t be charged any fees on the Government loan for the first five years, and then repay it with a low rate of interest. To find out more about the Help to Buy, click here.
Know Your Finances
Before your mortgage appointment, make sure you get to grips with your income and expenditure. The introduction of the Mortgage Market Review (MMR) in 2014 means advisors must do extra checks and analysis of your accounts to ensure you are issued with a mortgage that you can comfortably afford now and in the future. Expect to answer questions regarding your spending habits – from the cost of your gym membership to how much you spend each month on food. Be sure to take recent bank statements with you to your appointment to refer to.
“What Do I Need To Take To A Mortgage Appointment?”
Your mortgage advisor will need information about your income and outgoings in order to find the best mortgage deals available to you. For your first appointment, you will need to take:
- Photographic ID (Passport or Driving Licence)
- Proof of income – three months of wage slips or three years of accounts if self-employed
- Three months of personal bank statements
- Proof of your address, such as a utility bill, dated within the last three months
“Are There Any Other Expenses That I Need To Consider?”
It’s important to plan and create a budget before you begin looking for a new house which factors in any additional expenses you may have to pay. If you’re buying a property for more than £125,000, you’ll need to set funds aside for Stamp Duty (calculate how much Stamp Duty you will have to pay here). You will also need to pay for your conveyancing, survey (if required), and any removal costs.
Boost Your Chances
Ahead of your appointment, making sure your credit score is in great shape maximises your chances of getting your mortgage application approved. To take a look at your credit score and any issues which may be affecting it, use a reputable company such as Experian. There are a number of easy steps you can take. Read our free guide to find out more.