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First Time Buyer? The Mortgage Process Explained

These days, First Time Buyers are a lot more aware of what is involved with buying their first property. We can guide you through the whole process, from booking the mortgage that best suits you, to how to deal with the other parties involved right up until completion. We are here to help and answer your questions throughout the whole process.

Our knowledge of the mortgage processes of different Lenders is crucial to finding the right mortgage for you. Especially at the moment, your personal circumstances really dictate which Lender to approach.

How much can I borrow?

So a good point to start and what most First time buyers want to know is ‘How much can I borrow?’. Traditionally you could borrow, before tax, around 3.5 times the main salary plus the second applicants’ income or around 3 times the sum of both incomes. These figures can vary from lender to lender, and with our knowledge of the whole market, we can guide you to who would be your best option.

However, many lenders have chosen to adopt an ‘affordability assessment’ to calculate the amount they will lend to you. This means they will take a deeper analysis of your finances before making a decision. Deposit amount, debts, income and even job type can influence the figure.

The best way to find out how much you can accurately borrow is to get in touch and let us find out for you. We will then search the whole of the market taking into consideration your personal circumstances. Once we have found a product/lender you are happy with, you then require an Agreement in Principal (AIP), preferably prior to making an offer on a property.

Working out the costs involved:

There are many extra costs that will mount up sooner that you would expect when buying a house. Even once you have purchased the house the cost of council tax, utility bills and insurances also make up a considerable amount of your monthly outgoings and then there’s the mortgage!

We have broken down the basic costs of buying a house

Administration/Booking fee to the lender: from £0 – £1,000+
Mortgage valuation survey from £225
Legal fees (typically from the high street): Selling £400+ ;Buying £500+
Land registry: £220
Other searches from £70
Local authority search: approx £140
Stamp duty: 1% house value>£125,000 (maybe different subject to current government policy), 3% house value>£250,000, 4% house value>£500,000
Independent Survey: £300+

There could be extras on top of this list too. Your solicitor will advise you on any covenants you are obligated to before signing contracts.

Start looking for your new Home!

Make sure you get an Agreement in Principle before you start looking so you know how much you can afford to borrow when you find a property you would like to make an offer on.

But remember:

1. Make sure you get your AIP from a whole of the market Mortgage Adviser, avoid mortgage advisers who are tied to a limited panel of lenders.
2. Already having an AIP in place means that you are ‘Financially Qualified’, a term used by Estate Agents so they know you have had the preliminary checks for mortgage affordability. Many will insist you are qualified for this reason, as they don’t want to waste time showing you houses you can’t afford.
3. Estate Agents will normally only put an offer forward to the vendor, the seller of the property, if they know you have access to the mortgage. Again the AIP will confirm this.
4. An AIP will not cost you anything!

Once you have agreed to buy the House

We would check to make sure that your AIP for the chosen product was still the best mortgage deal for you and is still available, as in this economic climate rates can change quite frequently.

From here we would proceed to a full mortgage application and any upfront fees payable to the lender will need to be paid e.g. valuation fees.

You will then need to instruct a solicitor to begin the legal process. If you don’t already have a solicitor, we can instruct one on your behalf at very competitive prices- we are almost certain they will beat any high street solicitor and we can get a quote to confirm this early on.

The Legal Part

After the Solicitor has been instructed to begin the conveyancing. They will carry out all of the legal checks that are needed for the purchase to take place; rights of way, covenants, planning permissions, check local authority searches and environmental searches i.e. are you in a flood plain?

In most cases you will have to pay for the lender to carry out a mortgage valuation to make sure the house is suitable security for the mortgage.

This however doesn’t tell you if the roof needs repairing or if there is subsidence that could cause immediate or future problems. A homebuyer’s survey should find any serious problems and then the full buildings survey, which goes even further, but is normally recommended for older properties.

If there are any major problems that are more than just cosmetic you may wish to alter your offer price or walk away. Unfortunately this will leave you at a loss, but could be saving you an unforeseen fortune!

Once the legal side is completed and any issues have been resolved, you will usually look to exchange. At this point your deposit is put forward and is non-refundable; if you pull out after exchange of contracts you will lose your deposit.

The final stage is completion after which you receive the keys to your new home!

I hope this blog was useful to you. I’d be grateful for your comments.
Jason.

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