1st Time Buyers Guide

Getting onto the property ladder
A rough guide for the FTB

Getting your first mortgage can be a daunting experience for many first time buyers so we've compiled a short list of good practive steps for you to follow in order to help minimise the stress involved.

Spend some time researching
Information is King!

Ok, so you finally decided to take the plunge and get yourself onto the property ladder. But you don't know where to start. We always recommend a visit to a good consultancy (such as us!) who can help offer information and advice. But do also be proactive. You can buy publications in High Street newsagents which can provide useful information and the Internet is a useful resource.

Be sure to plan ahead
Accurate planning is important

Be sure to know all the different costs that will be applicable to your purchase, and know when they are due to be paid. An adviser should explain all of these costs in detail and also make recommendations to you to ensure that the property that you buy is suitable for you.

Order your credit report
Check your profile

Now that you have decided to buy a property you should order a copy of your credit report as this will give you an insight into what a Mortgage Lender is looking for and how they are likely to assess your financial status. Experian offer a free service. Your James Raynor consultant will be able to offer you valuable advice.

Get suitable advice
Have a list of questions ready!

Visit an independent Mortgage adviser to discuss the different mortgage products available and the repayment methods. You must fully understand the different options available to you, and your Consultant will usually offer advice once he has assessed information about your needs, circumstances and requirements. Remember that if you are looking at properties offered by Estate Agents, then as a first time buyer you'll get presured to se the 'in-house' Agency broker. Be careful here. There's an all to obvious opportunity for the Broker to tell the Agent personal information about your income and affordability that could lead to the Agent trying to upthe ante during your negotiations!

Arrange an 'in principle' decision
Now you know you can get the loan

Obtain a lenders agreement in principle in order to confirm that the lender of choice will agree an a Mortgage at the required amount before you have found the property that you wish to purchase. The approval certificate can help establish your financial status to Agents when looking to make an offer for purchase on a property.

Can your Parents help
Gettiing on the ladder in 2009

Nearly half of all first-time house buyers under the age of 30 now receive financial help from relatives to get a mortgage, a lenders' body has said. The Council of Mortgage Lenders (CML) said this proportion was higher than the 38% of first-timers who received such financial help in 2006. The CML said this was a knock-on effect of lenders demanding higher deposits. As a result, despite house prices falling, first-time buyers have found it harder to buy a home, not easier. "In the current market environment, 100% mortgages are not so widely available," the CML said. "Many lenders typically require a higher deposit from borrowers than before. "So even though the total needed to buy a house is declining, first-time buyers are facing a new affordability challenge in the shape of a higher deposit required by lenders." Shock With the credit crunch and the slump in house prices in full swing since last year, much larger deposits are now required, even though prices are now about 12-15% cheaper than they were a year ago. The average first-time buyer had to put down a deposit of 19,000 during the second quarter of this year, according to the CML's figures, up from 14,500 the year before. The lenders' organisation said this would be "quite a shock for the would-be buyer who has been saving for a deposit since 2007 and now discovers he needs to find an extra 4,000." The CML found previously that in 2006, 80,000 buyers - 20% of all first timers - were putting down deposits that they could not obviously afford from their own likely savings. The lenders estimated that the extra money came most probably from their parents or grandparents. These "assisted" first timers in turn made up 38% of all buyers under the age of 30. The CML's latest calculations now suggest that this proportion has reached nearly 50%. Warning London, the South East of England, and Northern Ireland are the regions where first-timers have to rely more than ever on their parents or other relatives for help. "In London, the typical assisted first-time buyer had a 67,000 deposit and an average income of 42,000," said the CML. "In very stark contrast, unassisted buyers in the capital had a typical deposit less than a third of this size (just £19,000) but typically need a much higher income of £57,000." The lenders warned that parents might not be able to continue helping their children get on the property ladder. The impending recession may hit family finances and falling house prices may inhibit parents taking out new mortgages against the recently inflated value of their own homes to pass on the cash to their children. "If this flow of help for young buyers dries up, then opportunities for young would-be buyers to enter the market could be severely limited, and we may see their numbers decrease significantly beyond what are already record low points," the CML said.

You can save up to £1750
The temporary Stamp Duty threshold

Prime Minister Gordon Brown has attempted to stamp his authority on the housing market with a range of measures to help first-time buyers and people struggling to keep up with their mortgage. The main move is to offer a stamp duty holiday until September next year but its only for homes up to £175,000. Hes raised the stamp duty threshold from £125,000 to£175,000 and not exactly received a chorus of approval. Some have welcomed the change as a much needed boost to the housing market, others have criticised it for not going far enough, and view its 12 month shelf life as not much help. Some had hoped for a stamp duty threshold of £250,000. Sadly for home buyers any such scheme, whether in the pipeline or not, never saw the light of day, and those looking to get on the housing ladder will have to target properties below the £175,000 barrier if they want to avoid the 1% tax. Though £1,750 may seem insignificant when stacked up against the entire cost of a property it still represents a major saving for struggling borrowers, so our advice is to try to find a property that is priced under the new threshold!

Shared Ownership
A helping hand onto the ladder

Shared Ownership is sometimes called 'part buy - part rent'. Namely, you generally buy a percentage share of a property owned by a housing association and then pay rent on the remaining share that you do not own, hence: 'part buy - part rent'. It is possible to buy a small share initially, such as 25%, and gradually buy the remaining shares in the property in a process known as 'staircasing'. Not all schemes work on this basis and there are a number of variations on the shared ownership theme, such as Open Market home buy (see below), and other shared equity schemes where no rent is payable. Applying for a Shared Ownership mortgage: There are three key points any lender would want to know for a Shared Ownership application, in addition to the usual, that is: What share you are looking to buy in the property (e.g. 25%, 40%), the size of deposit, if any, you are putting down - it is possible to buy 100% of a share and we have lenders on our panel who will consider this (but the lender will normally require your lease to have a special 'mortgage protection clause'; the housing association would be able to confirm if this was present). Finally, the rent you will be paying on the share you do not own, as this will be treated as a commitment to be deducted from your income when working out how much you can borrow. Different types of shared ownership One point you may find confusing as you begin your research into shared ownership is that there are a number of different shared ownership schemes under the same umbrella term of affordable housing. These include: New build home buy: a new term for what is essentially traditional shared ownership where you part-buy part-rent a property from a housing association and can staircase (i.e. increase your ownership) up to 100%. Download the housing corporation's leaflet to find out more. Open market home buy: this is a new scheme from the Government whereby you buy 75% of a property and receive two equity loans of 12.5% from the mortgage lender and Government/homebuy agent respectively for the remaining 25%. Shared equity: the main feature of traditional shared ownership/new build home buy is that you can buy a percentage of the property ranging from 25% to 75% and staircase up to 100% ownership, usually paying rent on the remaining share that you don't own. In contrast, some schemes are offered on the basis of shared equity where the purchased share is usually 60-70% with no rent payable on the remainder, and there are strict rules about when the remaining share can be bought (potentially ruling out staircasing). First time buyers' initiative: this is a shared equity scheme that aims to help eligible first time buyers to buy a share in a new home. They must buy at least half of the property, and a Government agency called English Partnerships will retain the rest. Click here for further information from English Partnerships about the First-Time Buyers' Initiative.

Disclaimer

James Raynor is Authorised and Reulated by the FSA (463141). You may be charged a fee for the processing of your application and this fee and we estimate that this fee will be £195. Your Home is at risk if you do not keep up the repayments of a Mortgage or any other loan secured against it.