First Time Buyers
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Am I Treated Differently As A First Time Buyer?
As part of the mortgage process, lenders don’t treat you as a First Time Buyer any differently than someone who has had a mortgage before. The only key difference is that the process is a whole new thing to you so making sure you understand the process and the steps is especially important.
This is where a Mortgage Broker comes in. Our job is to walk you through the process of buying a home from beginning your search for your mortgage options right through until you get the keys to your new home
What Is The Process Of Buying a Home?
We separate the process of buying a home into 9 simple stages;
Fact Find – This is the industry term for Mortgage Appointment. We collect all of information that we need to search through all of the mortgage lenders to find the right one for you. This includes; Personal Details, Three Year Address History, Employment Details, Your Credit Commitments, Your Credit History & What you are looking for from a mortgage
Mortgage Research – Taking all of the information you provided at the fact find we then research the marketplace looking at lenders criteria (effectively their rules for who they will lend to). We complete affordability calculations to work out how much you can borrow and we then talk you through these options explaining the costs and why this is the right lender for you.
Agreement in Principle – Also known as a Decision in Principle, AIP or DIP. An agreement in principle is entering your information onto the chosen lenders system and allowing them to complete a Credit Check on you as well as running your information through their internal criteria checker to make sure everything fits with the lender. Subject to everything being okay you will receive an Accept decision which comes with a Certificate and shows that you could be a good option for a mortgage. Most estate agents will request a copy of your AIP when you submit an offer for a property. Something important to bare in mind is that an AIP is not a mortgage offer and does not guarantee being accepted. It’s only an indicative answer based on the information input and when a mortgage application is submitted they will assess your documents and the property you want to buy
Search for a House – This is where at least some of the fun can start. You get out there viewing properties within your budget and hopefully it doesn’t take too long to find the ideal property for you!
Get an Offer Accepted – Once you find a property that you wish to buy you would then submit an offer to the estate agent advertising the property. At this point they will likely want your Agreement in Principle and Proof of Funds (would normally be your deposit) This is completely normal but just watch out for some naughty tactics that some agents may use! They may say that your offer is more likely to be accepted if you use their broker or their solicitor. Some have even refused to put offers forward without promising to use one of their services. This is actually illegal. You are free to choose your own solicitor and your own mortgage broker and it should not have an impact on whether an offer is submitted or accepted!
Submit Your Mortgage Application – Once your offer is accepted you would provide us with your up to date documents and we would complete your mortgage application and provide the required documents to the mortgage lender. They would assess these documents and arrange a valuation of the property you wish to buy.
Mortgage Offer – As long as your documents confirm the information input at Mortgage Application and the valuation does not raise any concerns with either the valuation of the property or the structure or condition then the mortgage lender would issue the mortgage offer which is them confirming that they will lend you the required amount to buy your home. Important to know that these offers do come with an expiry date which means if you don’t complete before the expiry date it is possible a lenders decision could change
Legals – When you had an offer accepted you would also have instructed a solicitor to complete all of your legal work for you. They would have been doing a few things in the background but once your offer is issued then things start to ramp up. The solicitor will provide you with multiple reports and documents that would require your signatures. Whilst it’s not our area of expertise we will still be on hand to try and help as much as possible if you need us
Completion – Legal completion is when the property is formally signed over into your name and you are given the keys to your new home! Congratulations!
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What Does LTV Mean?
LTV stands for Loan-To-Value. This is how much of your property is a Mortgage. So when you hear 95% LTV. This means 95% of the property has a loan and the remaining 5% is your own deposit.
The lower the loan to value so the smaller the mortgage normally means that you can access cheaper rates, more mortgage lenders and in some cases more flexible criteria as you are less of a risk to a mortgage lender the more money you are putting in yourself.
Is My Credit Score Important as a First Time Buyer?
As a First Time Buyer credit scores can make a difference with some lenders. This is normally due to the deposit being put down. For a lot of First Time Buyers, deposits of 5% or 10% are quite normal and from a lenders perspective a smaller deposit means more risk so those with low credit scores could find it more difficult then someone with a high credit score.
However all of this comes down to circumstance. we have done many mortgages for First Time Buyers that have low credit scores just due to the fact they have what is known as a “thin” credit file. This is where you have a lower score just due to the fact that you don’t really have a credit history.
If your low credit score is due to things such as CCJs or Defaults then it can be a lot more difficult to obtain a mortgage with a smaller deposit but check out our page dedicated to previous bad credit.
Can AIPs/Credit Checks Impact My Credit Score?
When you get an Agreement in Principle as mentioned above, lenders will complete a Credit Check on you. Whether this will impact your credit score depends on the type of credit search the lender does. There are two types; Hard Searches & Soft Searches.
Soft Searches are only visible to you on your credit report and no other companies can see them so they have no impact on your credit score so you could have hundreds of these and it would not have any negative impact on you.
Hard Searches are visible to anyone completing a credit check on you and they are normally associated with applications for credit. Hard searches will impact your credit score so it’s normally recommended not to have too many within a short space of time. After 12 months hard searches will drop off your credit report.
As part of our own due diligence when completing our research we advise not to do anything to impact your credit score so where possible prefer to complete AIPs with lenders that complete soft credit checks.