First Time Buyers: Your Questions Answered

Is 2019 the year for you to buy a new home? As a first time buyer, you probably have a lot of questions about the home buying process. Do you know how to secure a mortgage? And do you understand your credit score? Most inexperienced buyers don’t, which is why we’ve pulled together five top questions that first time buyers frequently ask…

1 – How much deposit is needed for a first time buyer mortgage?
Some mortgage providers now offer first time buyers 5% deposit deals. Plus, the Help to Buy scheme comes with a 20% Government loan, meaning you only need to secure a 75% mortgage. It’s important to note that a 5% deposit without Help to Buy (a 95% mortgage) would
restrict the rates available for first time buyers. Also, don’t forget that you’ll need to set money aside for additional fees and, if the property is over £125,000, stamp duty.

2 – How do lenders decide mortgage eligibility?
Lenders will only lend to those who can reasonably afford to pay it back. This involves not only checking your income and if you’ve experienced financial difficulties in the past, they will also look at your other spending habits such as loans, childcare and entertainment-based direct debits. First time buyers that have a limited credit history may experience some difficulty in proving they are a safe borrower. Remember, even when you secure a mortgage offer, you have to ensure you continue to meet all your usual payments and don’t incur any defaults. Also, don’t take any additional finance out for furniture as the lender can check your credit file again for affordability criteria before the loan is finalised.

3 – Should I use a mortgage broker?
Mortgage brokers are able to access deals from multiple lenders, including some that are not available to the public. If you do decide to use a mortgage broker, check if they have any fees of their own and that they’ve been authorised by the Financial Conduct Authority (FCA), which is the UK’s regulator to ensure companies are selling their services responsibly.

4 – Will an Agreement in Principle affect my credit score?
A credit score is a tool used by lenders to help determine whether you qualify for a mortgage. If you have multiple credit checks carried out over a short period of time, it can affect your credit score rating. Your Mortgage Adviser should carry out an affordability assessment before carrying out an Agreement in Principle, which will ensure that you do not have multiple checks against your credit score.

5 – What if I have a poor credit score?
Even with a poor credit score, it is possible to find a lender who will consider lending. However, the rates available to you will be limited. Remember, a bad credit score can be repaired over time by making better financial decisions and taking steps towards managing your money better.