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First Time Buyers

Welcome to the world of property!

*As a mortgage is secured against your home, it could be repossessed if you do not keep up with the mortgage repayments.

You’re about to embark on an exciting journey that will shape your future and we at Resolute Mortgages have a wealth of experience and knowledge and pride ourselves in making your home ownership journey a positive one from start to finish.

Buying a home is likely to be the largest purchase you will make in your lifetime and there are lots of things to consider.

We will help guide you each step of the way from tips on how to budget to deposits, how much you can borrow, the mortgage process, property valuations, mortgage interest rates, and surveys, right through to you collecting the keys!

We have devised a First Time Buyer step-by-step guide to help break down each stage of the process.

Buying your first home is going to be an exciting yet sometimes daunting experience however, it is important you never feel afraid to ask any questions.

Usually, if something doesn’t feel right, chances are it isn’t.

First Time Buyers - Resolute Mortgages - Claydon, Ipswich

First Time Buyer Information

Taking the plunge and becoming a homeowner can be incredibly rewarding, however, it’s essential to ensure you don’t bite off more than you can chew financially.

During our initial appointment, we will go through a budget planner to give you an idea of the day-to-day living costs on top of the household bills you will be liable for once you have moved into your home.  By completing this method, it allows us to see what you have left over each month so we can tailor your mortgage payment to fit within this budget.

The size of your deposit affects how much of a mortgage loan you will need.  For most First Time Buyer mortgages, you need a deposit of at least 5% of the price of the property you want to buy however, the larger the deposit you put down, the better the mortgage interest rates & products you could be entitled to.

A deposit is typically accumulated through personal savings however, most lenders will also accept a form of deposit through a gift.   The gift usually has to be provided by a close family member but in some circumstances, certain lenders may allow a gift from a friend.

When obtaining deposit assistance through a gift, most lenders accept this based on the giftor having no financial interest in the property and no repayment to be made on the gifted funds.

A mortgage lender whether they be a Bank or Building Society will require proof of deposit which can be evidenced through your bank savings account.

Should you require a gift to top up your deposit, then most lenders require a signature from the giftor confirming this is a gift, and they have no financial interest being taken on the property or ongoing repayment.

A Lifetime ISA is essentially the Government giving you money towards your first home but there are some caveats.
How does a Lifetime ISA work?

You must be between the ages of 18 & 40 to open an account. You can pay up to £4000 per year into your Lifetime ISA account and the Government will top up the account by 25% if the funds are used before you turn 50 to purchase your first home.

You can access and withdraw your savings at any time after 1 year but, you are not entitled to the 25% top-up unless the monies are being used towards purchasing your first home.

The money saved plus the top-up can only be withdrawn when purchasing your first home before the age of 50 however, the only other way to access your savings with the top-up, is if you are 60 years old or diagnosed with a terminal illness with less than 12 months to live.

Now you have established your monthly budget, and have your deposit ready, you can now move on to the next step which is validating how much you can borrow.   Once you have obtained the Agreement in Principle from the lender, this shows the estate agents you are in a ready position to make an offer on a property.

The lenders will not only assess you on your income and outgoings, but they will also complete other checks in the background and this is known as a credit search.  Most lenders will complete a ‘soft footprint’ at the initial stages which means only you and the lender are aware of this search.

We cannot say exactly what the deciding factors are when completing this process, but this step gives us an idea of how much a lender is willing to let you borrow and if there are any discrepancies on your credit file, that need to be addressed.

An Agreement in Principle (A.I.P) or Decision in Principle (D.I.P) are the same thing and they are usually valid for up to 90 days but this is subject to the lender.

Once a purchase price has been agreed, now it is time to choose the right mortgage for you.

Here at Resolute, we want to be sure you fully understand the process and next steps.  When applying for your mortgage we need to be sure it is affordable and you understand the potential risks involved.  We are here to advise and tailor your mortgage to you and your personal circumstances and objectives.  There is no one-size-fits-all when it comes to mortgages.

It is at full mortgage application a further search is conducted on your credit file, this is known as a ‘hard footprint’ and will leave a mark on your credit file indicating the lender has completed this type of search.

The lender’s underwriting team will also review and assess your income and outgoings as well as any further information they may require to process your application.

They will also complete a basic property valuation.  This is only to confirm the value of the property and that the property meets their minimum requirements, as the lender will now have a financial interest in the property, which is known as a first legal charge.

You have the option to have more in-depth surveys conducted on the property such as Rics home survey Level 1,  Rics home survey Level 2, or Rics home survey Level 3.

There are other costs involved in the house-buying process and in setting up your mortgage which would have been mentioned during your first initial meeting however, we have detailed these below for reference.

The Deposit
You are aware that a minimum of 5% of the property purchase price is required to obtain the mortgage. However, the more deposit you can put down may entitle you to better mortgage products.

Stamp Duty
As of October 2022, the Stamp duty land tax rules changed.
First Time buyers can claim discount relief which means they do not pay Stamp Duty on a residential property worth up to £425,000. If the property is over £425,000 but under £625,000 then you will pay 5% on anything above £425,000.
If the property value is above £625,000 then no discount relief can be used and standard Stamp Duty rules apply.

Legal Fees
When buying your property there are lots of legalities involved. These will need to be taken care of by a professional, and they are typically referred to as a conveyancer.

Other Fees
Depending on your situation and the mortgage you have applied for there could be mortgage valuation fees or mortgage adviser fees.

Also depending on the type of home you buy, you may wish to have a more in-depth survey taken out on the property.

Top Tips to increasing your chances of mortgage approval.

Pay your bills.

Late or missed payments can impact your credit rating which will affect your mortgage options.  To ensure you don’t run into any surprises be sure to stay on top of your payments.

Life Admin.

Be sure simple things like your living address and marital names are correct on your Identification and bills. Also being on the electoral role will help the lender identify you. If you have mismatched information, this could impact your mortgage options.

Also, be sure to tie up any loose ends. Any credit or store cards that aren’t used, could be closed down as the lender will see this as available credit and could impact how much they will let you borrow.

Manage your credit.

Credit can be a tricky thing to obtain, often requiring evidence of history such as previous loans or credit cards. However, it’s ironic that the more experience you have with successfully managing your finances through borrowed funds, the easier it is for lenders to trust you.

This does not mean racking up an unmanageable amount of debt but simply using your credit card for fuel or food costs each month and paying the card back in either full or the minimum payment, shows the lenders you are responsible to borrow money and pay it back.

Do not, however, withdraw cash from your credit card. This can be perceived as a red flag by the lenders.

Be mindful when shopping around

Every time you enquire about a mortgage application or sometimes use comparison websites, you may be subject to credit checks, and too many of these could impact your mortgage options.

Payday Loans

Payday loans can appear as a helpful solution in the short term, but when it comes to mortgages they may actually work against you. Even if payments are kept on track, lenders often perceive them as signs of financial strain which could hinder your chances of securing a loan.

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