Buying a new home can be a daunting process, especially when you’re a first-time buyer. You’ve probably spent the last few years of our life saving to move up the property ladder. Now, what you need to do is figure out exactly how much money you can afford to spend on your new home. This includes two very important things; one, how much money you can put aside every month to save up for your new home, and two, how much you can borrow from a bank or a commercial lender so that you can kick start the process of buying your new home. To put your mind at ease, and help you through the process of purchasing a new home, here is a thorough guide for first-time buyer mortgages in the UK.
Firstly, what are the different types of mortgages?
There are two types of mortgages, a fixed mortgage, and a variable mortgage. In a fixed mortgage, the rate of interest remains fixed throughout the length of your mortgage deal, no matter how the interest rates fluctuate over time. When you have a fixed mortgage, you will be paying the same amount of money every month to your lender. This is usually the best kind of it as it allows you to budget accordingly and manage your finances for the long-term. With a variable mortgage, the interest rates can change at any time. While this might be beneficial when the interest rates fall, this could also lead to an increase in interest rates in the future. Usually, the rate of interest is decided by market forces and lies at the discretion of the lender.
How do I find the best mortgage for me?
This requires research, a whole lot of research. You and your estate agent can speak to various banks and commercial lenders to find out exactly how much mortgage they are willing to offer you. Depending on your budget and your finances, as well as the rate of interest that the lender is offering, you should choose a mortgage that meets your requirements. What you need to consider is a straightforward thing, “Can I afford the mortgage?” It is better to look at homes that are within your price range so that you can pay your monthly installments without burning a hole in your pocket. Keep in mind, if you cannot pay the mortgage, your new home might get repossessed. So, it is essential to find a mortgage that is right for you and one that suits your current financial situation.
How do I get the best mortgage?
Lenders look at various documents and paperwork before approving it. Usually, this includes your monthly salary, your disposable income, your savings, your credit card bills, and so on. Lenders will also look at your credit score; the better your credit score, the higher your chances of getting a mortgage at a low rate of interest. If your credit score is not too great, your mortgage application will get rejected, or you will be charged a very high rate of interest. To improve your credit score, you need to make sure that all your bills are paid on time. Start working on improving your credit score at least 8 to 12 months before applying for a mortgage. Make sure that you pay all your bills on time, ensure you have no pending credit card bills and work towards reducing any outstanding debt. As long as your credit score is high and your finances are in order, you’ll be able to secure a mortgage with a reasonable rate of interest.
What is a mortgage in principle?
A mortgage in principle is a statement given by your lender which says that you have been pre-approved for a mortgage. It is highly recommended to get pre-approved because a real estate agent or broker will take you seriously only when you have a pre-approved mortgage. Your broker wants to know that you are going to make an offer on a property that you like, and securing a pre-approved mortgage shows that you are pretty serious about this investment.
How to apply for a mortgage?
To apply for it, you need to start collecting various documents. These include utility bills, credit card statements, your payslip from the last three months, bank statements from your current account from the previous six months, tax return forms, a passport or driving license as identity proof, and bank statements ranging back to two to three years. Make sure that all the information provided in these documents is accurate because lenders will do a thorough check before even considering your mortgage. You can also give the address of your real estate agent, broker, or solicitor if required.
When should I apply for a mortgage?
You should apply for a mortgage before you even start viewing properties. When you have a pre-approved mortgage in hand, you will know exactly how much you can spend on your new home. This will help you plan a budget for this new investment, and your broker or real estate agent will take you seriously. It is essential that you stick to your budget and look at houses only within your price range; in fact, you should ask your real estate agent only to show you places that will fit your pre-approval criteria so that you do not end up burning a hole in your pocket by falling in love with a property that is way over your budget!
Don’t forget to read the fine print
It is vital to read the fine print! Read the terms and conditions, the payment terms, the expected deposit as well as any extra fees or charges that might be included. If there is something that you don’t understand, ask lots of questions until you are satisfied.
First-time buyers should consider opting for government schemes such as the Help To Buy scheme or the Shared Ownership scheme, which allows first-time buyers to buy their new home with a lot of financial incentives! Make sure to do your search before you decide on your mortgage and mortgage terms because you will have a wide variety of options to choose from. If you need any help for the same, get in touch with the best online mortgage brokers in the UK.