Calling all first time home buyers! With the 15% cap on mortgage that came into effect in October 2014 and general tightening on lending rules, you might be feeling somewhat aggrieved because you had your heart set on homeownership long before these steps were taken.
No worries, because despite what many people think about mortgages being scarcer than hen’s teeth, provided you haven’t buried yourself in debt, your right to homeownership is still being taken care of by all the government schemes and programmes that their aim to help aspiring home buyers onto the property ladder.
Before you take the leap, however, there are a few things about mortgages you need to know, especially if you’ve never applied for one before.
• You need to shop around
This is important and, thanks to the internet, it’s also easy. You can do all of your comparison shopping online until you find the right deal for you. There is a plethora of mortgage lenders and products available, so you need do your homework and make sure you understand all the differences between the options.
• Consult an estate agent
Estate agents are fonts of information when it comes to mortgages, and they are generally more than happy to share that information with you. Remember that while high street estates are available, online estate agents are just as knowledgeable and happy to help.
• Low mortgage rates
Despite the caps, mortgage rates are still at record lows historically. It’s true that you will need a sizeable deposit if you want to reduce the loan-to-value ratio, and the more you give as a deposit the better you’re placed for negotiating a favourable deal.
But don’t be dismayed if you don’t have a sizeable deposit, as the help-to-buy and other government schemes are designed with you in mind. There are still mortgages available for 5% - 10% deposits, you just have to find exactly the type of mortgage that suits you and your fiscal health for the next 25-30 years.
Neil Simpson, from This is Money, cites MoneyFacts, a financial information service, which reported that there are currently over 180 five per cent mortgage products available in the UK. The figure nearly tripled in the space of one year, so the future still looks good for first-time buyers. The mortgages are far more affordable than several years ago, and in some cases you’ll even pay less on your mortgage than you’d be spending on rent!
• Paperwork reigns
After you research all the mortgage products available to first-time buyers and have spoken to an estate agent or advisor about what deal is best for you, you will need to get all your documentation in order. The amount of paperwork required is phenomenal, some of it going back three years. For example, you’ll need documentary proof of where you’ve lived and for how long with no unaccounted for gaps. You’ll need three years’ worth of accounts, your last P60 form, bank statements and wage slips dating back three months. You will need to fully disclose all loans and credit card facilities.
Make sure you check your credit history to ensure there’s no blemish or hint of a blemish there. You need to make sure that your chosen lender has the confidence in you to give you the green light on your application so you can finally move towards home ownership. You can check your credit report online. For more tips on how to get a mortgage for the first time, you can visit Mortgage Sorter.
photo credit: What subprime crisis? Affordable houses are everywhere. via photopin (license)