10 Questions for First Time Buyers
We get a lot of First Time Buyers come to us with similar questions. We decided to put a blog together with some of the more common questions all in one place. If you have any questions that we haven’t covered, do email us at email@example.com.
What is an agreement in principle?
An agreement in principle (sometimes called a decision in principle) is confirmation from a bank of how much you will be able to borrow. Usually, they will provide you with a certificate, but some lenders such as Barclays won’t. We can provide you with screenshots and a covering letter to pass on to your estate agent in such cases.
To produce an agreement in principle, the lenders won’t ask for any documentation or details on the property. They will complete a credit search, but in most cases this only leaves a soft footprint, which won’t affect your credit score, as you aren’t actually completing a full mortgage application.
You will need an agreement in principle to be taken seriously by estate agents. If you have an agreement in principle and another first time buyer looking at the same property doesn’t, you will be more likely to have your offer accepted.
How much can I borrow?
Most lenders will have their own affordability calculators, but in reality, you will be limited to 4.5-5 times your income. Some building societies will lend more than this in certain scenarios.
Do I need a solicitor?
Yes. Regardless of your situation, you will need a property solicitor, known as a conveyancer. We are happy to recommend both local conveyancer’s or national firms, depending on your situation and budget.
How long does it take to buy a house?
Prepare yourself for a purchase to take 3 months from having your offer accepted to getting the keys. The mortgage application can be as quick as one day to as long as a month, but the legal side of buying a house can take 6 to 8 weeks. You’ll then normally have a few weeks at the end for the chain all be able to complete on the same day. Estate agents like selling to first time buyers as you don’t have a house to sell which makes things easier.
How do I prove my income?
If you are employed, you will need to produce your latest 3 months payslips, or 13 weeks of payslips, if you are paid weekly.
Some lenders such as NatWest will need first time buyers to have been employed by the same employer for 6 months before you can apply for a mortgage.
For the self-employed, you will need to produce two years tax calculations and tax year overviews. If you are a limited company director, we’ll also ask for 2 years signed accounts.
We have a great blog for the self-employed here.
How do I check my credit score?
Your credit can have such an impact on your ability to get the best mortgage.
We recommend using Check My File if you don’t already have a copy of your credit report.
Once you have signed up, they will be able to tell you how you can improve your credit rating.
The easiest way for first time buyers to improve their credit is to make sure they are on the electoral roll: https://www.gov.uk/electoral-register
You can also get a credit card, set it to be paid off at the end of every month, and use it to buy day to day things. This will show you are responsible and have the ability to budget.
How much deposit do I need?
The minimum deposit you will need as a first time buyer is 5% of the purchase price. Ideally, you want to put down 10% or more. Every time you put a further 5% down, you will be able to get better interest rates. If you have a 40% deposit or more, you will get the best rates available on the market.
Lots of first time buyers have help from their parents, and if your parents want to loan you a deposit, we have a great blog for you here.
Will I have to pay stamp duty?
Stamp duty is paid within 14 days of completion of a house purchase. The threshold for First time buyers is £300,000. https://www.stampdutycalculator.org.uk/ has a really easy to use calculator to see how much stamp duty will cost.
What is the difference between a fixed rate and a tracker?
Fixed rates stay the same, regardless of what happens to the Bank of England Base Rate for the fixed rate period. This is usually 2, 3 or 5 years, but other variations are available. Most people will want to go for a fixed rate as they allow you to budget, and they remove the exposure to interest rate rises.
Trackers follow the Bank of England Base Rate. They will increase and decrease depending on what the base rate does. If rates drop, then you will save money. If rates rise, it will cost you more. Generally, trackers are cheaper than fixed rates, but they also carry more risk.
How long should I have a mortgage for?
Most people believe that mortgages should be over 25 years, but this isn’t the case. The maximum term for most lender is 35 or 40 years. The longer the mortgage, the lower the monthly payment, but also the more you will pay in interest.
As part of our appointment, we will go through a budget with you and we can tailor the mortgage term to make sure the monthly payments are affordable.