Introduction

Buying your dream home can be an exciting but nerve-wracking experience as it’s something you’ve never done before. However, if you speak to your local mortgage advisor, we will help you along, every step of the way from the start of the process to the very end when the transaction completes with the solicitors. Read on for our guide to buying your first home.

Agreement in principle

If you speak to a mortgage adviser in your local area if you're a first time buyer, they will be able to ensure you get the best mortgage rates. A mortgage agreement and agreement in principle are the same thing so don't be put off by the different document names. First time buyers buying a house and looking to view properties will need to obtain an agreement in principle to be taken seriously with estate agents and vendor.

At LTC, we will go the extra step by taking a look at the property and advise you on whether the property is worth what you are buying it for and if it is worth the investment you are entering.

The most important part of the mortgage process is seeing if you can afford the loan size you are after, this depends on your income and deposit size, this is also the first step and this is what we will look at before any products or deals are agreed. First time buyers will need to speak to a local expert to discuss the buying process. 

Credit history

We will always request a copy of your credit file here at LTC, we use a company called Check my File. It is important to have good credit because this is something every mortgage lender looks at and sometimes this can be the deciding factor on whether your decision in principle is accepted with them or not. This will increase your chances of getting a mortgage, it will also increase the number of lenders we can look at when choosing the most suitable deal for you.

If you have bad credit this will be seen as a higher risk transaction by the lender because they need to ensure you are able to repay your monthly mortgage payments on time every month. You can improve your credit by satisfying/settling any defaults, making sure you pay all remaining payments on time and in full.

If you have several monthly payments for credit cards or loans you can pay some of the smaller ones off to strengthen your credit or close any unused credit cards. Also, avoiding payday loans is the best thing you can do because this shows the lender you have poor management of your money if you use them and they will reject your mortgage application.

What are the different product/mortgage types?

There are 3 main products which are:

·        Fixed – set monthly payments that stay the same until the fixed term ends

·        Tracker – the interest rate falls in line with the Bank of England base rate

·        Discount – the interest rate follows the lender’s SVR rate

There are 3 main types of mortgages which are:

·        Interest only – Interest only mortgages, you will only pay the interest off the mortgage

·        Repayment – Mortgage repayments will reduce your loan amount over the term of your mortgage.

·        Offset – your savings account is linked to the mortgage which reduces your interest that you pay as you will only pay interest on the difference between your savings amount and your mortgage

What should I be looking out for when buying a property?

The first step is to choose the perfect property for you and begin the property search to get on the property ladder, whether this be a buy to let or a residence for yourself you need to make sure you are happy with the property and the purchase price. Take into consideration the location, the number of bedrooms/living rooms and if you would like a front or rear garden and a driveway, be sure to check these.

Secondly, you would speak to a mortgage advisor in your local area to weigh up your financial options if you are purchasing the property with a mortgage. This is when we will look at deals and lenders that are suitable for you, we will also discuss mortgage terms and interest rates.

Starting the full mortgage process

The third step is when you put your offer in to the estate agent for the property you wish to purchase. There may be a few other potential buyers interested in the same property as you so to secure the property you may need to consider offering an amount over the seller's asking price. Once your offer is accepted by the vendor, come back to us and we will finalise your mortgage with a full application to the lender. This is also when we can appoint you a conveyancing solicitor if you haven’t already done this.

The mortgage lenders will also request documentation from all applicants, this is usually payslips/P60 and bank statements. If you are self-employed then different documents will be requested such as tax calculations and tax year overviews, business accounts for limited companies, personal and business bank statements will need to be provided. Self employed customers are legally obliged to submit tax returns each year.

You will be offered a basic survey which will be carried out by the lender's surveying company or you can upgrade to a more detailed survey which we will be able to advise and help with. Your own survey will come at an extra cost, therefore you will need to factor this in.

What happens at the end of a property purchase?

Once you have received your mortgage offer with the lender the solicitor process and all the legal work will start and this is when the legal aspect of purchasing a property is dealt with, when all legally binding paperwork has been filled in and sent back to the solicitor, ID checks will be carried out then you will pay your mortgage deposit for the property. You will then be given a completion date which will be suitable for you and the vendor to work towards.

Once you exchange contracts, this is when you will take legal ownership of the property. Just before, you will need to place the buildings and contents insurance on risk. Once the seller's solicitor confirms funds have been received, completion will take place. As soon as the transaction has completed you can collect the keys from your estate agent for your new property.

What are the extra costs to consider when buying your first home?

Once you have purchased your property, there are additional costs to take into consideration for when you are budgeting for the purchase. If you speak to an advisor they may charge you a fee for their services in arranging your mortgage, there may also be an arrangement fee with the mortgage lender, solicitor costs for search fees and the overall payment will also need to be paid at the end of the transaction.

Other costs to consider are removal costs for your belongings and for furniture and decorating your new home. If work needs doing to the property then this will need to be budgeted for also.

If you are looking to purchase a property above the stamp duty threshold or are buying a house with someone who isn't a first time buyer they need to pay stamp duty, this is a payment that will be best discussed with us as we can calculate this payment following laws and policies and let you know if you fall into the category for making this payment.

Click here to learn more about stamp duty

If you are interested in buying your first home, we are here to help, contact us via email [email protected] or feel free to give us a call on 0151 662 0188