First Time Buyer
The thought of buying a house is an exciting prospect and an important stage of life, but getting on the property ladder isn’t a simple process and more often than not, you will need a mortgage to help you take those first steps. Being a first time buyer can be quite daunting, so we have accumulated all the main points you should consider to help you get your hands on the keys to your first home.
How much can you borrow?
Everyone wants to know how much they can borrow, but, we simply cannot give a definitive answer because like most financial agreements, everyone’s situation is different and there is no typical approach. However, to give you a rough idea, lending rates are usually around 4x your salary, with the option to fluctuate either way depending on your credit history.
The ideal first time buyer
There is no textbook candidate when it comes to first time buyers, because it’s a process that most people will go through, but there are some things to bear in mind that will stand you in good stead. The main thing to focus on is having a good credit history and rating. Being able to display your ability to make payments on time and in full is attractive to lenders, as well as having a record clear of adversities such as County Court Judgements (CCJ’s) and defaults.
Once you have decided to start the process of buying a new house, then you will need to think about a deposit and how much you are able to put towards it. The current minimum is 5% however, it’s not often that you can secure a house at a minimum deposit. Saving as much money as you can for a deposit is recommended, even if it takes you a little longer to gather the funds, it’ll be worth it in the end. 100% mortgages don’t tend to be around anymore, so it’s best if you don’t consider them as an option.
If you can’t raise enough funds for a deposit and you need some help, then consider a government scheme. It has been recognised in recent years that first time buyers are struggling to take their first steps on the property ladder and schemes such as the ‘Help to Buy’ which allows you to buy a house with the minimum amount of deposit (5%.) Depending on your job you could also be entitled to the key government worker mortgage – teachers, doctors and soldiers, all of which play a key role in society, are among the selected few that qualify.
Shared ownership is another helpful process that means you buy a home (using a mortgage) for a certain percentage of its value, and you rent the remaining percentage from the property developer or housing association (depending on your situation). Similar to shared ownership, shared equity mortgages are where the buyer owns a percentage of the property and for the remaining percentage, they take out a 0% or low percentage equity loan with the developer and then repay it over a period of time.
Having a guarantor may be another helpful way to secure your first home. A guarantor is someone who agrees to pay your mortgage repayments if you are unable to. They should be someone who is not financially connected to you, so a marital partner wouldn’t normally be suitable. A reliable family member with good credit history is usually your best bet. However, not all lenders accept guarantors and some have strict terms that need to be followed. As the name suggests, guarantors are there as a comfort to the lender so the repayments are guaranteed. The borrower still has initial responsibility to make the repayments and should not be reliant on a guarantor.