Daniel Condren explains the mortgage process and what to expect if you are a First Time Buyers. 

How is the mortgage process different for First Time Buyers?

It’s essentially the same, but the challenge when you’re a First Time Buyer is the unknown – you don’t know the details. You don’t know what information you need and the mortgage market is so vast and varied. How do you know whether you’re getting the right advice?

This is a big deal for any First Time Buyer, so the person you choose to go through that process with is really important. Make sure that you’ve done a little bit of research into your broker or get a referral from a friend or family who had a good experience. Meet two or three advisers and go with the person that makes you feel the most confident and comfortable.

Trust is everything – not just for First Time Buyers, but anyone investing in property or moving home. It’s a stressful process and there are thousands of pounds at stake. This is a big decision, so First Time Buyers will really benefit from having a trusted adviser in their corner.

What should a First Time Buyer expect from an adviser?

Your adviser will act on your behalf to give you advice and point you in the right direction. We’re here to get you the most suitable deal for your circumstances. So a good adviser will ask a lot of questions about you and your situation.

We are also here to walk you through everything. There’s so much jargon and technical terms – you might not know what they mean. You might wonder how the deposit works, what a survey is on the property or what conveyancing is all about – it’s like a different language.

A good adviser will explain the whole process, what you need and why you need it. An example is the deposit. If you’re buying a property, the bigger the deposit that you put down, the better the interest rate you will get. Your interest rate determines how much you pay back on top of the amount you’re borrowing.

The interest rates decrease for every 5% deposit you have. The minimum deposit you can typically have right now is a 5% deposit. But if you can save up 10%, you’ll get a better deal, and again if you reach 15% deposit, interest rates fall again.

Most First Time Buyers don’t have unlimited savings but there are other ways that you may be able to buy, even without a deposit.

What is an Agreement in Principle?

An Agreement in Principle, an AIP, DIP or Decision in Principle are all the same thing. It’s where an adviser has assessed your needs and you apply to the lender for a decision. The lender will look at your credit rating, affordability and circumstances to give you a quick yes or no.

This is a really important step that gives you credibility as a buyer. The estate agent will want to see your certificate, as it proves you’ve spoken to a bank or a broker to check your eligibility. It means you can borrow the money you need to buy the property.

Once your offer is accepted on a property you go forward to a full application. The Agreement in Principle is the easy, fast bit. But if the broker’s done their job correctly, the application shouldn’t be a hassle.

Unfortunately some customers might be declined on application – usually because they haven’t provided the right information. So brokers usually get all the details upfront, including payslips and bank statements, to make sure there are no problems

How much can a First Time Buyer borrow?

The borrowing amount depends on income, just as with any mortgage. We will explore your income, your outgoings, your affordability and whether you’re employed or self-employed.

Making sure that your income and how much you can borrow is calculated correctly is very important. If you’re a couple and you’re buying together for the first time, that will help as it doubles your income.

The first thing to do as a First Time Buyer is understand how much your property budget will be. What’s interesting is that every lender is very different. Some lenders will give you one estimate, but another may be much more generous in how much they will lend to you. This is a big thing, especially for a First Time Buyer because it will dictate what properties you’re going to go for – the difference between a £200,000 and a £250,000 property can really matter.

Lots of things can affect your affordability – your outgoing such as car loans etc, and also if your income is variable. If you receive bonuses or commission it’s very important to see a broker – we can find the most appropriate lenders who will take that into account.

Should I talk to a broker before I view a house?

Our advice is always to speak to a broker before seeing an estate agent or viewing property. It’s awful to get your heart set on a home only to find that you can’t borrow enough to buy it.

We will always think outside the box to help people in this situation, perhaps to see if you could use some income from family members. But it is good to avoid being in a position where you’ve put an offer in, it’s been accepted and you can’t get the mortgage. It means the estate agent’s going to be upset and so is the vendor selling the property. Talking to a broker first will avoid that completely.