First time buyers should know that obtaining a mortgage is a challenge but there is no reason to think this is an impossible task. If you’re looking to get on to the property ladder, this is a mortgage guide for first time buyers.



The Importance of the deposit

The deposit is hugely important when it comes to buying a home and the more money you can save in advance, the better your chances of getting a good mortgage will be. The bigger the deposit you have, the smaller the mortgage you need to have. This means a lender will be more likely to provide you with a mortgage and that the mortgage will be at a more attractive rate of APR.

The importance of the deposit cannot be overstated and it is vital that you do whatever you can to improve the size of your deposit. There is assistance available with the Government’s Help To Buy ISA scheme where you can receive up to £3,000 (per person) from the Government to add to your deposit.

Improve your credit score as best as you can

Another factor that is vital in obtaining the best possible mortgage is your credit score. Lenders will review your financial history and your credit rating, and they will offer you an APR that is based on your credit score. Therefore, it makes sense to ensure your credit score is as appealing as possible.

There are steps you can take to improve your credit score, and this is something you need to do before you look for a mortgage. Steps like paying off debt, making sure your current home address is on the electoral register and not applying for credit just prior to applying for a mortgage will all be of benefit to you when applying for a mortgage.

Shop around for the best mortgage and seek advice or guidance

You need to be aware that there are many different mortgages to choose from, so don’t accept the first option or only listen to one person. Different lenders have different rates for different applicants and it may be that one lender or one style of mortgage may fit your needs perfectly. If this is the case, you need to speak to as many people as possible to enhance your chances of finding the ideal mortgage.

Mortgage Types

When it comes to finding the mortgage that is right for you, you need to consider a fixed rate mortgage, a tracker rate mortgage and a variable rate mortgage.

Fixed rate mortgage

As the name suggests, this style of mortgage has a fixed rate of interest for a set period of time (which could be anything between two and five years). This is good for people who want to know what they will pay each month or who have no leeway when it comes to their finances.

Be aware that the starting rate for a fixed rate mortgage is likely to be slightly higher than with other mortgage types and there is the fact that when the fixed rate mortgage period ends, the mortgage will change to a higher rate. Your own financial circumstances and opinion on what interest rates are likely to do in the next few years will impact on whether you think a fixed rate mortgage is best for you, but it is a popular type of mortgage.

Tracker rate mortgage

This is a mortgage where you are provided with a starting rate of interest and this will change in line with the base rate of the Bank of England. If the base rate rises, so does your mortgage and if the base rate falls, so will your mortgage. If you believe that base rates will fall, this is a mortgage that could be the best for you as it would save you money in the longer term.

Variable rate mortgage

While variable rate mortgages are commonly the cheapest mortgage, the level of uncertainty with these mortgages is the highest. This is because in addition to fluctuating with respect to the interest rate, these mortgages can vary depending on the discretion of the lender, which means that they can rise or fall more than a tracker rate. As the lending company is likely to make a commercial decision, it is not always likely they will move the rate in your favour, hence why this can be a more expensive option than a variable rate mortgage.

Know that there are other costs involved with buying a home

If you think that the cost of your mortgage and then the size of your monthly payments is all you have to worry about with respect to obtaining a mortgage, think again. This is because there are a lot of costs involved with buying a home and then there are a lot of costs that have to be met on a monthly basis.

You should consider aspects like stamp duty, solicitor fees, survey costs when looking at how much money you need to have spare when you conclude a property deal. You also need to think about costs like rates, heating bills, food, phone and broadband and other expenses you have to deal with on a monthly basis. Buying a home is expensive and then living in the home while meeting your mortgage payments is expensive, so make sure you know how much money you need to have.

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