Top Tips for First-Time Buyers
Keep your address history in check
One of the key things that lenders will look for when assessing your mortgage application will be your address history.
Generally, lenders are looking to see evidence of your address over the last 3 years. For younger first-time buyers, this can be an issue if it isn't dealt with early, many people after going off to university or moving out of the family home into rented accommodation fail to update their address with their bank, their driving licence and other important organisations, making it harder to prove where you have lived.
Be sure to check if you have documentation that proves where you have been living for the past 3 years, ready to present to your lender when it's asked for.
Your credit report and the electoral roll
If you haven't already, it's best to familiarise yourself with your credit report before starting to apply for any credit, particularly a mortgage.
Be sure to check the accuracy of your report, check for any defaults, missed or late payments and make sure they haven't been made in error.
If you have old credit accounts with a former partner, check these are closed to avoid any nasty surprises.
Another factor that affects your credit score is your electoral roll status, it's always good to be registered to vote at your current address. This is also something lenders will be interested in seeing.
Your deposit
The minimum deposit amount is 5% of the purchase price of your chosen property, at the time of writing this is only for help to buy purchases, which are going to be available for new build properties only.
If you are not buying new, then you are going to need at least a 10% deposit, remember though that the larger your deposit, the better interest rate you are likely to get on your mortgage.
For a lot of people trying to save the deposit is very difficult and the cost of renting alone makes it hard. Here are a couple of things to think about to ensure you're getting the most of your savings.
Where are you saving?
If you're keeping your deposit in a low-interest, instant-access savings account, it might be worth looking for a better option, with rates so low at the moment you'll likely be earning next to nothing in interest, a quick look around the market could make a difference in the long run.
Help from family
The Bank of Mum and Dad, and even the bank of Gran and Grandad, are now regular contributors to the deposit funds of would-be first-time buyers. There are many ways family can give you a boost up onto the property ladder, including increasingly popular schemes that unlock the equity in parents' or grandparents' homes to pass on to the younger generations. A quick chat with an adviser can help you understand your options.
Remember, if you are receiving a gift towards your deposit, it will need to be from close relatives and must be a true gift, not a loan or a gift with strings attached.
Dealing with estate agents & solicitors
The prospect of going through the homebuying journey for the first time can be daunting without considering having to deal with third parties such as estate agents and solicitors, here are some tips and things to look out for to put your mind at ease and ensure you're not falling foul of common mistakes.
Estate agents
When dealing with estate agents, it's important to remember they work for the seller, not for you, so whether you're taking their advice on a potential offer, trying to arrange a viewing, or being asked to speak to their in-house Mortgage Advisor, don't be afraid to follow your instincts and seek a second opinion elsewhere.
A common issue we see with estate agents is they will tell potential homebuyers they have to use their in-house Mortgage Advisor to be able to put an offer in, this is problematic for buyers because some of these in-house advisers won't be able to access all lenders on the market and may charge a higher fee.
The use of this sales tactic is actually a breach of The Property Ombudsman Code of Practice, it might be worth keeping this up your sleeve in case you encounter this trap:
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9d. By law you cannot make it a condition of passing on offers to the seller that the buyer must use services offered by you or another party. You must not discriminate, or threaten to discriminate, against a buyer because that person declines to accept that you will (directly or indirectly) provide related services to them. Discrimination includes but is not limited to the following:
• Failing to tell the seller of an offer to buy the property.
• Telling the seller of an offer less quickly than other offers you have received.
• Misrepresenting the nature of the offer or that of rival offers.
• Giving details of properties for sale first to buyers who have indicated they are prepared to let you provide services to them
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Of course, that's not to say estate agents don't play a positive and crucial role in the homebuying journey, it's just best to be prepared and know where you stand before you start the process.
Solicitors
Pick a good one.
Generally, you'll be in touch with your Mortgage Advisor before your solicitor, so you can always ask your adviser whether they have a relationship with a quality solicitor they can refer you to.
The legal work that takes place between the production of a mortgage offer and completion can be a sticking point in the overall process, things can move slowly and communication may be an issue if you don't pick your solicitor carefully.
Remember, if you feel things aren't progressing at a comfortable speed, you can always ask your Mortgage Advisor to help with chasing your solicitor.
Make sure the solicitor you have chosen is on the list approved by your lender, if they are not on the list your lender will appoint a solicitor to act for them and that is going to cost you more.
If your solicitor isn't on the lender's list at first, you can apply to have them added, but if a bank doesn't want to deal with a solicitor, you should take that as a good pointer on what to do.
Whoever you choose, make sure they have a clear picture of your situation up front. If you have a Help to Buy ISA or similar, the solicitor is going to have to apply for the funds in time, this is not something that should be sprung upon them at the last moment.
What can you afford?
Lenders all have slightly different ways of deciding how much they will lend you, to get a true idea of what you could borrow based on your specific circumstances, the best thing to do is to contact a Mortgage Advisor, they should be able to tell you after a fairly short fact-finding chat.
If you want a rough idea of how much you might be able to borrow or what value property you could buy, we have a few handy mortgage calculators you can try here.
Remember to factor in your insurance costs. You will need home insurance because the lender insists upon it and it otherwise makes sense to have, but you also need to consider how you will afford the mortgage if you cannot work because of long-term illness or the death of a borrower. The lender does not insist upon these because they can't by law, but it makes sense to have a Plan B if the worst happens, the lender will always want the mortgage to be paid on time and you need to make sure you're protected against nasty surprises.
Even if you are renting and planning to buy, it would be a good thing to consider what would happen if you couldn't work due to illness or an accident. It happens and too few people have a plan B! don’t be one of them.
Check out our page on First Time Buyer mortgages for more information, or click here to begin your mortgage journey if you're ready!
