Mortgages for First Time Buyers
In today’s very competitive mortgage market place we are seeing real positive moves by lenders and the Government to try and help the first-time buyer get their foot on the property ladder, despite in some cases the clients having a less than perfect credit profile.
Most first-time buyers have a limited budget and their savings reflect this, a 5-10% deposit is what most first-time buyer clients have to offer. Until quite recently lenders who would accept a bad credit profile were demanding a 15% deposit as a minimum.
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Mortgages for First Time Buyers
Since 2007 when the down turn in the property markets first started to bite and we saw the usual flood of repossessions and clients getting in financial difficulties, first time buyer schemes became a product that very few lenders wanted to offer. We had become used to mortgages being available up to 125% of the purchase price, which the lenders could market with some degree of safety in a rising market, because within the first year of the mortgage term most of these products were back into positive equity.
When the market changed to being flat and then negative, many of the lenders who had been pushing the boundaries with product innovation started to catch a very bad cold and the rest as they say is history.
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Getting a Mortgage as a First Time Buyer
Some of our specialist lenders have now taken a very positive decision to offer mortgages at 90% and 95% LTV, which opens the doors to many clients who could not find the 15% deposit, which is great news for first-time buyers.
What all clients must be aware of, is that mortgage products at 90%-95% LTV require the client to have saved the deposit and some lenders will accept gifted deposits from immediate family members. Many lenders will accept a 5% builder gifted deposit.
The other very positive news for first time buyers and home movers is the Government Help To Buy Equity Loan Scheme for New Build Property Only where you, the client, put in a minimum deposit of 5% and the other 20% is paid by the Government. The beauty of this scheme is that we have lenders who will accept a bad/poor credit profile and you get the terms that relate to a 75% LTV mortgage product.
Who is eligible?
Equity loans are available to first time buyers as well as homeowners looking to move. The home you want to buy must be newly built with a price tag of up to £600,000.
You won’t be able to sublet this home or enter a part exchange deal on your old home. You must not own any other property at the time you buy your new home with a Help to Buy: Equity Loan.
How to apply
The Help to Buy: Equity Loan scheme is run by Government-appointed Help to Buy agents. They can guide you through your purchase, from providing general information about the scheme to dealing with your application.
Or look out for the Help to Buy logo on new-build developments and ask about the scheme there.
Find your local Help to Buy agent
Your local Help to Buy agent can guide you through the options available and explain the eligibility and affordability criteria. Help to Buy agents are appointed by Homes England.
Help to Buy agents administer the Help to Buy: Equity Loan scheme but not the mortgage guarantee scheme. They have the authority to give the go-ahead for you to purchase a home with help from the equity loan scheme. The agents make other key decisions during the purchase process. For the Help to Buy: Mortgage Guarantee, please contact the participating lenders directly.
Buying your home can be an exciting time. It can also be a daunting process during which you will need expert help and advice.
There are a number of organisations who provide free and impartial advice and can help point you in the right direction. Below you will find information about where to get the advice you’ll need.
The Money Advice Service is an independent organisation set up by the Government. It has a range of free and unbiased tools and advice for first time buyers, including how much you can afford to borrow, taking out a mortgage, and a money timeline.
Tel: 0300 500 5000
Buying a leasehold property
The Leasehold Advisory Service (LEASE) is funded by Government to provide free advice on the law affecting residential leasehold property.
Tel: 020 7832 2500
For information on Stamp Duty and the latest rates look at: www.gov.uk/stamp-duty-land-tax-rates
Arranging a survey
Visit the Royal Institution of Chartered Surveyors (RICS) website:
To find a surveyor in your area visit www.ricsfirms.com
For guides visit www.rics.org/usefulguides
For your local Citizens Advice Bureau visit www.citizensadvice.org.uk
For help in finding a solicitor, contact The Law Society
Tel: 020 7320 5650
Help to Buy