First Time Buyers

First-Time Buyer

How much can I borrow?

The amount you can borrow depends on a combination of factors such as your income, outgoings, credit history, size of deposit and age. As a very rough guide, most First Time Buyers are able to borrow 4.5 times their income, although some may be able to borrow up to 5.5 times.

Every lender has their own affordability calculator to determine how much you can borrow and this can differ hugely from lender to lender, especially if you are self-employed or have complex income. A mortgage adviser understands the different lender criteria and can do a full assessment of your affordability so that you know how much you can borrow and what the monthly payments would be.

What is classed as acceptable income for a mortgage?

Different lenders will treat income differently. If you are employed, they will all accept your basic salary but when it comes to such as overtime, bonuses, overtime and allowances, whilst some lenders are happy to accept 100% of this income, others may only accept 50% and some may not accept it at all. In general lenders will ask for evidence in the way of such as payslips, P60s or a copy of your contract to check that additional income is consistent and sustainable.

If you are self-employed, lenders will typically want to see 2 years worth of income evidence in the form of SA302s (tax calculations) and tax year overviews, although some lenders will request 3 years worth and others are happy with just one, especially if you have previous work experience in your current line of work.

Other income that lenders may consider include such as Child Benefit, Tax Credits, PIP, Disability Living Allowance and Child Maintenance. If you have any other form of income and are unsure as to whether a lender would accept it or not, get in touch and our expert advisers will help clarify.

What outgoings may affect how much I can borrow?

Lenders aren’t generally concerned about your day to day expenditures providing you are not living beyond your means. They are however interested in your Committed Expenditures; these are such as loans, credit cards, car finance packages, student loans, school fees and maintenance payments. Some lenders are very tolerant with Committed Expenditure whilst others will lend you significantly less as a result. A mortgage adviser has the ability to run your figures through the lender’s affordability calculator prior to submitting any mortgage application to ensure that you can borrow the required amount.

What fees are involved in buying a home?

The following fees are there to act as guide to let you know costs which you are likely to incur. All fees should be confirmed by your solicitor:

Stamp Duty Land Tax (SDLT)

You may have to pay stamp duty land tax when purchasing a property. The following websites contain up to date information that may help you to calculate how much you need to pay

https://www.gov.uk/stamp-duty-land-tax

https://www.moneyhelper.org.uk/en/homes/buying-a-home/everything-you-need-to-know-about-stamp-duty

Valuation/survey fees

Whilst some lenders offer a free valuation, often you will incur costs to have the property valued. You may also wish to get a more detailed survey such a Homebuyers Survey to give you peace of mind that that the property you are purchasing has no major issues that could end up being costly to repair. The cost varies depending on factors such as the lender and the location, price and type of property being surveyed.

Arrangement/product fees

Mortgage lenders may charge a fee to secure a given mortgage product. These vary from lender to lender.

Legal Fees

There are a range of legal fees payable during the mortgage process as you will need to appoint a solicitor to support you.

Broker Fees

At The Mortgage Masters, our initial consultation period is completely free. We are always transparent about our fees and these will be confirmed and agreed, prior to us carrying out a Decision in Principle.

How much deposit do I need?

The amount of deposit required for first-time buyer can vary depending on several factors such as the type of mortgage you are seeking, your employment history, any debts you may have and your credit profile.

It’s important to note that a larger deposit often leads to more favourable mortgage terms such as lower interest rates. Here at The Mortgage Masters, we understand specific lender requirements and can therefore advise you on the best options available to you.

What help is available for first-time buyers?

There are various schemes available to help first-time buyers get on the property ladder. These include:

• First Home Schemes

• Mortgage Guarantee Scheme

• Lifetime ISA

• Shared ownership

• Right to Buy

• Right to Acquire

• Guarantor Mortgages

Book in with one of our advisers if you’d like to discuss your eligibility for these schemes in further detail.

What type of mortgages are there?

There are lots of different mortgage products available. Your mortgage adviser can help advise you on which is the best product for you based upon factors such as your monthly budget and attitude to risk.

Fixed rate mortgages

The majority of First Time Buyers opt for a Fixed Rate mortgage. This is where you fix the interest rate for a set amount of time (usually two or five years). During this time, interest rates may go up or down but yours remain fixed. This makes it easy to budget as you have guaranteed, set monthly payments for the time you fix the rate for.

Once have entered into a fixed rate, you are usually subject to an Early Repayment Charge should you wish to leave which means that you may feel tied into paying a higher rate if interest rates drop.

When your fixed rate is coming to an end, you usually have the option of fixing a new product with the same lender (a Product transfer) or remortgaging to a new lender. If you do neither, you would be automatically transferred onto your lenders Standard Variable Rate and may end up paying more than you need for your monthly payment.

Other Mortgage Types

There are alternative mortgages available and these don’t always involve fixing the rate. The interest rates on these products may increase or decrease in line with the Bank of England Base Rate or they may be decided on by the lender. Whilst there are advantages to these products (many don’t have Early Repayment Charges for example), the monthly repayments are not set in stone which can make it difficult to budget.

The Homebuying Process

Step One- Contact a Mortgage Adviser

As a First-Time Buyer, your first step should be to contact a mortgage adviser. They will arrange an initial call where you will discuss what it is that your looking for alongside your current situation and circumstances. They will then request some documents from you in order to research your options and conduct a full affordability assessment. This will let you know how much the lenders are happy to lend you and how much your monthly repayments are likely to be.

Step Two- Get a Decision in Principle

The next step is to apply for a Decision in Principle (DIP). At this stage, you will know what your budget is, both in relation to your monthly payments and the maximum property price that you can afford. This involves giving the lender information about you, to ensure that they feel the mortgage is affordable and that they’d be happy to lend. At this stage, the lender would conduct a soft credit search and providing they were happy with the findings, would issue you with a certificate that you can then show an Estate Agent or potential seller that you are in a position to buy.

Step 3- Find a Property

Once you have a Decision in Principle, it’s time to start searching for your property. Once you’ve taken your time to find the right home, you can make an offer! Once your offer is accepted, your mortgage adviser will complete the full mortgage application. At this point you will need to instruct your solicitor and may also wish to arrange a survey on your property.

You should also look into your protection insurance options to ensure that when you complete on your home, your home, family and income are protected financially in the event of being unable to work due to accident or illness.

Step 4- The Legal Process (Conveyancing)

Once you have instructed your solicitor, they will take care of the legalities. This process normally takes 8-12weeks.  Once you and your solicitor are happy with everything, you will exchange contracts and arrange a completion date. These can be done simultaneously. Exchange of contracts is the point at which you are legally bound to buy the property and completion is the point at which the whole process finishes and you collect the keys!

Step 5 -You are a Homeowner!

Congratulations! You are at the end of your mortgage journey and now own your own home! You can look into your remortgage options six months before your current rates comes to an end.