Becoming a first time buyer is an exciting milestone in one’s life. Particularly if you have been saving for years, working hard, and fantasising about your dream home for a while.
Now is the chance to make that dream come true.
There are a few steps you need to follow alongside your trusted adviser.
Here is what we will be covering in the article:
- Suitable deposits
- The right documents
- Costs for buying your home
- How lenders assess self employed mortgages
Where to start and what you need to know
The journey to getting on the property ladder doesn’t begin when you start viewing homes or speaking to a mortgage adviser. It starts when you proactively begin to put a deposit together in order to be able to afford your new home.
This is a big responsible step to take and it is crucial to have the correct deposit in place before starting your property search.
The maximum a lender in the current market can give you is 95% loan to value meaning that you only need a 5% deposit. However not all lenders – most are capped at 90% LTV meaning you will need to increase your deposit to 10% (but remember there are other fees on top of the deposit that you will also need to factor in) – More on this later.
Getting a deposit for a house does not have to be from JUST savings.
There are as many as SIX acceptable deposit sources you could use.
- Gifted Deposit from parents/guardians/family members
- Crypto / bitcoin
- Personal loans*
- Gifted equity/ concessionary purchase
- Builder’s deposit.
*Please note that not ALL lenders will accept a personal loan as a deposit. The personal loan should not be from the same lender as the mortgage.
The golden rule is quite simple. The bigger the deposit, the better the interest rate, the lower your monthly repayments, the cheaper the mortgage.
The difference between a 5% and 10% deposit is huge; the next big jump’s at 20%, then 40%. So if you have any chance of pushing yourself up a band (or perhaps asking parents to help), do it. The market leading rates tend to be cheaper if you have a 20% deposit or above.
If you have already started to accumulate a deposit, speak to a financial adviser about the best rates available to you AND speak with an estate agent to find out what properties are available to you with that deposit size.
“The Bank of Mum and Dad is the UK’s biggest mortgage lender”
Before applying for a mortgage, you’ll need to get a few things sorted:
You need a deposit of a minimum of 5% deposit of the purchase price.
You will also need a prospective property. Before applying for a mortgage, you need to have put down an offer on your desired home. You want to start the mortgage application AFTER the offer has been accepted.
For the mortgage application you will need the following items and they vary slightly depending on whether you’re employed, self employed or a LTD Company Director:
- Proof of ID
- Latest 3 to 6 months bank statements
- Employed: latest 3 months payslips and latest P60
- Self Employed: latest 3 tax calculations and tax year overviewLtd Co Directors: latest 2 company accounts
- -Proof of deposit: latest 3 – 6 months statement
Once you have saved up for a deposit, you will also need to make a budget for other fees and costs involved when buying your home. Here is a list of services and people who will be charging a fee during the home buying journey
- Lender Arrangement Fee
- Booking fee/application fee
- Property Valuation fee
- Additional survey – Homebuyer’s report/Structural survey if required
- mortgage Broker fee
- Solicitor costs
- Estate agent fees
These fees vary depending on each firm. Make sure you get a few quotes for valuations, solicitors, and estate agents to see which works out to be most convenient.
Some of these costs cannot be avoided i.e lender’s arrangement fee, estate agent fees and solicitor costs.
Please do your research well in advance with the services you will be using so that you know how much to save.
If you need more guidance and support regarding your mortgage, please contact Natalie Hines via the website or stay connected via our social media channels. All info is here below: