There comes a moment in each person’s life when they must decide whether to rent a property or settle down in their own home. However, many factors influence this decision, such as family, plans for the future, lifestyle, and money. If you dream of purchasing your first property, you should consider the benefits of first time buyer mortgages. Nowadays, most people invest in real estate with the help of a mortgage broker who has access to information regarding every lender on the market. As a result, the broker can obtain exclusive deals to help you climb the property ladder. Whether you want to become a homeowner or learn how a broker can help you, this article will take you through the entire process of getting a mortgage.
What Are the Application Criteria for First Time Buyer Mortgages?
There are only a few documents needed when applying for first time buyer mortgages. For example, your file should contain your identity card, proof of address, bank statements, proof of income, and, most importantly, evidence of your deposit.
Why do you need a deposit to increase your mortgage chances? First, a large deposit indicates excellent financial discipline and shows the lenders you are determined to purchase a property. Furthermore, it can get you exclusive mortgage deals with better interest rates. Lenders calculate the minimum amount of money you need as a percentage of the property’s value. If you can, it is advisable to increase your deposit as much as possible before you access a mortgage. Doing so brings benefits such as a cheaper mortgage with lower monthly repayments.
The Initial Consultation and Affordability Assessment
Before granting first time buyer mortgages, each licensed money lender conducts an initial consultation. Studying the clients is the first step to knowing their circumstances. This way, the mortgage broker collects primary data about their clients to research the most suitable lending solutions. Moreover, this consultation can be conducted over the phone or via video and is usually free of charge.
Next, the financial institutions will use an affordability assessment to decide whether or not to grant you a mortgage. Besides credit checks and a high deposit, affordability also plays a crucial role in establishing the sum you receive. So what is an affordability assessment? Simply put, the lenders calculate the extra cash resulting from the difference between your income and monthly expenses. To simplify things, you should decide on a property before this stage so that they can estimate a maximum borrowing limit. For employees, the income can be their salary plus bonuses, commissions, and overtime, while for those self-employed, the income is their net profit. The expenses include utility bills, rent, food, credit cards, and personal loans.
However, the equation can get more complicated, as different lenders might enforce stricter lending criteria. For example, they might want to know how much credit you have available and how you use it. In addition, they can look into your repayment history and even simulate if you can afford to pay increased mortgage rates. Moreover, some lenders might offer you lower borrowing limits than others. As a result, the affordability assessment can be a double-edged sword and a tool that helps you find the most suitable lender.
What Is an Agreement in Principle, And Why Do You Need It?
Before making a mortgage application, you must find the right property, which will work as security if you fail to make the repayments. That being the case, you might need an estimation before borrowing the money. An Agreement in Principle is an offer stating if you may receive a mortgage and what sum you can access, based on initial analysis. You will acquire this document once a lender finishes the initial assessment and credit checks.
In the case of first time buyer mortgages, the Agreement in Principle is an excellent tool for a client concerned about whether or not he would be accepted. Furthermore, the certificate can help you when buying a property. Without it, a real estate agent might not wait for you and continue to search for another client. But if you show this document that declares you found a lender and are qualified for a mortgage, the agent will see that you are trustworthy and will continue with the procedure.
How Can You Make an Offer on a Property?
As for the legal aspect of purchasing a home, you will need to inform the lender which conveyancer will assist you. Also known as a mortgage solicitor, the conveyancer will help you with the documents once you get the mortgage. He will complete the purchase and explain details regarding the property, such as legal duties, boundaries, and ownership rights. Furthermore, you can pay the solicitor to deal with every legal fee associated with purchasing a property.
After choosing a solicitor and receiving the agreement, you can start looking for properties. Depending on the real estate market, you could be more or less lucky when negotiating the price. Location is a vital aspect of a property, but its size and condition should also suit you. In the worst-case scenario, you will have difficulty finding a property for your budget and should either expand your search area or wait some time for the market to change. However, in most cases, you will be able to make an offer and then proceed with signing the documents.
How Can a Mortgage Broker Make This Process Easier?
A mortgage broker will help you review the available borrowing options and find the best deal. First, he will aid you in the application process by checking your file. Brokers know each lender who operates on the market, so they will significantly increase the chances of getting your application approved. Once the formal application gets submitted to the lender, your deal is locked, and you are one step closer to finishing the process.
Secondly, a mortgage broker can conduct a property survey for you. A survey is optimal if you want to be sure about your purchase. It consists of a more thorough check-up of the house to search for issues such as structural problems or outdated installations, commonly found in older properties. There are more surveys, ranging from a primary assessment to a complete structural valuation. If you choose a more in-depth option, a licensed surveyor will physically inspect each corner of the property. The survey concludes with a report, which will help you decide whether or not the house is right for you.
In the final step of the process, the lender will make a formal mortgage offer valid for six months. You can use this time to finish the purchase with the help of the solicitor. While the conveyancer deals with the legal work, the mortgage broker will be there for you if you need their assistance. The acquisition finishes after you sign and exchange the contracts with the seller. Next, your lender will confirm the first mortgage repayment, and you will receive the keys to the property. Finally, you have fulfilled your dream of becoming a proud property owner.