With the number of homes on the market at an eight-year high, conditions are ripe for first-time buyers (FTBs) looking to strike a deal.
But before a buyer can get serious about their property search, they need to understand their budget and have a mortgage-in-principle (MIP).
Securing a mortgage for the first time can seem daunting, so here are tips to get you started.
Do your sums
You need a clear understanding of your income and expenditure (lenders will take this into account and ask to see supporting documentation such as payslips and bank statements, along with ID).
Also, think about the size of deposit you can bring to the table. Many buyers aim for a 10% deposit, but 5% and no-deposit mortgages are available (however, the interest rates tend to be less favourable).
If you’ve been thinking about buying a property for some time, you probably already have a savings plan in place. But it’s helpful to regularly review your outgoings as new expenses can easily creep in.
Talk to your family
This avenue won’t be available to everyone, but many FTBs receive financial assistance from the Bank of Mum and Dad or the Bank of Grandma and Grandpa. (Some lucky FTBs enjoy access to both.)
If your family can help, lenders will ask the person providing the money to declare whether it’s a gift or a loan. This will be included in the lender’s calculations.
Shop around
Many buyers secure a mortgage through an independent broker (they often have access to deals that aren’t available on the high street). But it’s useful to understand the mortgage market before you speak to a financial professional.
The good news for FTBs is that fixed rates mortgages are falling at their fastest rate in two years* and product availability is on the rise.
Consider whether a fixed rate or tracker mortgage would best suit your needs. There are also some government schemes available to FTBs, depending on your income and the type of property you’re buying.
Secure a mortgage-in-principle
Once you’ve found the best deal (and the lender has given you the green light), you’ll receive an MIP.
While not legally binding, this indicates how much the financial institution is willing to lend you (and has a shelf life of 60 to 90 days).
As well as clarifying how much you can offer, it tells sellers that you’re serious about buying a property.
Kickstart your search
There is a good array of stock on the market and sellers look favourably on buyers who are chain-free, so you’ll be in a strong negotiating position.
Contact us today for help finding your dream home.
*Source: Moneyfacts, based on data on the average two- and five-year fixed rates on July 1.
This article should only be used as a guide. Always seek advice from a qualified professional.
