Anyone who’s looking to get their foot on the first rung of the housing ladder or has just managed to find their way onto it will know that being a first-time-buyer can be an extremely challenging and stressful time.
You’d almost have had to have been living under a rock to have missed the fact that the turbulence of the last post-financial crisis decade has made the lending environment a darned sight tougher than it was for the previous two or three generations.
But it’s not just the rigour of affordability tests that you’ll have to contend with as a first-time-buyer. You’re also going to feel hamstrung by your lack of experience in the market, and that’s something that many people underestimate when they set out to buy their first house.
But first things first. Let’s deal with the first obstacle.
Deposit & Affordability
The simple fact is that whether this is the first house you’ve bought or the fiftieth, you’re going to have to prove to prospective lenders that you can pay back the money you want to borrow.
This is the first and most important hurdle you’ll need to clear – if your lender decides you can’t afford the repayments, then everything else is immaterial.
And if you can’t buy the house on your own? Well, there are still options available to you. Some lenders now offer products that allow a family member to guarantee or underwrite the repayments.
Or, it could be that you know other people who might be prepared to buy the property jointly with you and view their share of the ownership as a long-term investment.
In both cases, though, it’s wise to get professional advice to make sure you don’t find yourself under pressure to sell quickly and unexpectedly in the future.
There are now more mortgage products on the market that will allow you to borrow the entire cost of a property – these are known as 100% mortgages. But attractive as these may be, consider them carefully because there are downsides (e.g. it’s easier to fall into negative equity if you have no capital tied up in your home).
In any event, the more attractive mortgage products that will be available to you are likely to require you to put up some of the cost yourself in the form of a deposit – and having something to put down also reassures the lender that you recognise scale of the financial commitment you’re making.
Making a mortgage application
You could apply for your mortgage online or in a lender’s branch. But it would probably serve your best interests to talk to an independent mortgage broker to get access to products you won’t be able to find yourself.
There are very clear benefits to working with a professional mortgage broker.
At Oportfolio, for example, we’ll advise you on affordability, the best way to structure your loan and the benefits of each product you might want to consider – but we’ll also look after your application from the point you start to the point you receive your mortgage offer and beyond.
You’ll need to have quite a bit of personal information to hand to complete your application, but your broker will walk you through that, too.
If you’ve already found a property you love, the estate agent you’re dealing with may push you to make an appointment with their in-house or preferred mortgage adviser. The only thing to know here is that there’s no obligation for you to do that unless you want to.
It’s a good idea to get a mortgage offer in principle before you start house hunting. Most agreements in principle are valid for between 60 and 90 days, giving you a good amount of time to find a property and make an offer.
Making an offer
So, you’ve got a mortgage agreed in principle and you’ve found your dream home. How do you work out what to offer?
To some extent, of course, you’re going to be constrained by the amount you’ve been told you can borrow. If you’re like most of us, you’ll probably have been including in your search properties that are slightly out of your budget in the hope you might be able to get a lower offer accepted.
This is where your agreement in principle comes in handy, because as a first-time-buyer with no chain and a mortgage already approved, you’re going to be more attractive to a seller who needs to shift their property to get the upper chain moving.
To get a real sense of how much the house you want is worth, do some research. Find out what similar properties in the area have sold for in the recent past.
What motivates a homeowner to sell is hard to guess. They may need to sell their property at the very top of its value to make their own step up the ladder. They may have priced their home to sell quickly because they’ve seen something they like and want to move fast. Or they may just be testing the market and are prepared to wait for the right offer.
In the end, though, a house is only ever worth what someone’s prepared to pay for it – so knowing your own limit will allow you to make a confident offer.
Oh no – my offer has been rejected!
You really want the house, but the current owner has said no to your offer. Although this is disappointing, it’s not the end of the world. You have two options – either increase your offer if you can afford to (but it’s good practice to know the price beyond which you will not go) or walk away and find something else you love.
The survey suggests there’s a problem
This can be a minefield. If the problem is serious, it may prevent you from securing your mortgage (which will have been offered in principle on the basis the property you want to buy is sound).
If it’s not a problem so serious as to be a dealbreaker, then can you afford to make the necessary repairs?
Alternatively, can you use the problem to renegotiate your offer and then talk to your mortgage lender to see if you can use part of the loan agreed in principle to carry out the repairs. Again, a professional mortgage broker can help you here.
There are few problems which are insurmountable in a property deal, but knowing how to circumnavigate the bumps in the road is easier when you have sound advice to work with.
Remember, too, that you will need to appoint a solicitor or specialist conveyancer to take care of the legal stuff related to your purchase. Your mortgage broker will probably know someone they’re happy to recommend – but also ask for recommendations from friends and family.
Above all, enjoy yourself – finding and buying your dream home should be an adventure, not a chore!
Watch our video for first-time buyers and get a headstart on the things you need to consider when you start looking for your first home.
To find out more about our friendly and professional mortgage service, fees and what we can do to help make sure you’re not paying over the odds for your mortgage, why not visit www.oportfolio.co.uk or give us a call on 020 7371 5063.
Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.