First-Time Buyer's Guide: How to Get Your First Mortgage.
The thought of buying your first home is exciting, if you are living with parents you are led to believe its your opportunity for freedom, or if you are currently renting you are led to believe buying a home will give you the security you need, but no one talks about how difficult it is to actually buy a house. The cost of more than just the purchase of the home, the hoops you need to jump through to simply show you can afford the biggest purchase you will ever do.
As long as you plan, prepare and get the right advice, getting a mortgage to buy your first home can be a simple stress free experience.
Step 1 - Knowing your Budget
I know you want to look at Rightmove and Zoopla!! But before looking at that you need to work out how much of a mortgage you can afford (we all like maxing out the price guide a Rightmove). This step is extremely important and the first dose of realism when buying a house. Everyone has in their head the perfect home but without knowing your budget you could find yourself looking at homes you could never afford and find yourself disappointed by houses in your price range.
There are certain things a lender looks at when assessing how much its willing to lend you.
- Your income
- Your regular monthly payments
- Any outstanding credit commitment such as cars on finance, credit card payments etc.
- Your credit score, showing how responsable you've been with money in the past.
- The size of your deposit. How much you are willing to put up front towards the house.
You need to know all these things to understand your budget.
This is the point to find a mortgage advisor, to help guide you through what's needed to buy a house.
Step 2 - Saving for your deposit.
You can save for a home in many different ways, whether its saving over time, being left money from an inheritance or even being gifted a chunk of money from a family. One thing you need to keep in mind, however you obtain your deposit you will need to prove further down the line to the lender how you raised it.
Many first time buyers believe you need huge amounts of money for a deposit for a house. This is only half true. Some lenders offer mortgages where you only need 5% deposit. So a mortgage for a £250,000 house could be accessible for only £12,500. Lenders have certain criteria to get these rates, but this does allow more people access to the property ladder. One thing to consider is the higher deposit you put down for a house, the wider range of rates will be accessible to you.
Remember when buying a house a deposit isn't the only thing you need money upfront for. There is also;
- Conveyancer and searches fees
- Solicitor fees
- Mortgage advise fees (Not us)
- Stamp duty (if your home is above a certain threshold)
Step 3 - Obtain Agreement in Principle (AIP)
Using all the information you have gathered so far you can go to the lender or have a mortgage advisor do it on your behalf and get an indication roughly how much they are willing to lend you. This is a rough estimate and is subject to a full application but it will show you how much you can borrow as long as the information you've given is correct.
An AIP will give you the confidence you are looking for houses you can afford plus show estate agents that you a serious about purchasing a house. One thing to remember is with most lenders an AIP lasts usually 6 months, that would give you 6 months to find a property under those terms else you'd need to re apply for a new AIP.
Step 4 - House Hunting/ Make an offer
This is the point you get to have fun. Going to see different houses, trying to workout what furniture you'll need. Out of the whole process apart from the day after moving day this period is the most fun.
Already having the AIP in place allows you to move much quicker when you find a property, plus most estate agents wont accept a formal offer without one. Once an offer has been accepted you can move onto a formal mortgage application.
Step 5 - Submit Mortgage Application
This is the tense part. This is when the lender officially reviews your application with a fine tooth comb and approve your mortgage. Lenders will also do a valuation on the property you have put an offer on to make sure it is worth the amount they are lending you.
The job of a mortgage adviser is to make sure you are ready for this full application, this is why before the AIP they will obtain as much information as possible and cross reference to make sure that everything you are telling the lender is correct.
Step 6 - Receive a Mortgage Offer
Once you have receive the mortgage offer the conveyancer you have instructed can carry out the legal work for contracts to be exchanged. Once contracts have been exchanged you are legally bound to purchase the property or could be issued a hefty fine.
Step 7 - Complete your Purchase
This is the time to celebrate. This is the exact date legal ownership belongs to you and the property is officially yours, Once the money has been passed from you to the seller (via the conveyancer) you will be able to pick up the keys.
Step 8 - Paying your Mortgage
This is where you pay off the mortgage each month over the period you set out with the lender. It is really important it is paid on time every month else you could be fined or worse your home could be repossessed. Depending on the type of mortgage you opt for you may need to review your mortgage every few years to make sure you it is being paid off the most cost effective way.
How Can MKS Mortgage & Protection Help?
Buying your first home doesn't have to be stressful.
At MKS Mortgage & Protection, we provide clear, straightforward mortgage advice, helping first-time buyers understand their options from the initial enquiry right through to collecting the keys.
If you're thinking about buying your first home, we'd be delighted to help.
Book your free, no-obligation consultation today and take the first step towards owning your first home.
