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How To Apply For Mortgage As First-Time Buyer In The Uk?

Buying the first home is a vital milestone in the home buyer’s journey. It could be the initial step to get on the property ladder. It could potentially lead the applicants to be owners of a portfolio of residential and buy to let (BTL) properties.

In this guide, you would understand the steps, the first-time home buyers need to follow.

  1. Meet an experienced mortgage adviser

There are two main options available for homebuyers when applying for a mortgage. Homebuyers could either go to the bank directly or submit a mortgage application via a mortgage adviser. The advantage of meeting a mortgage adviser would be, they assess the applicants’ circumstances and suggest a suitable lender. Further, independent mortgage advisers have access to the whole of market mortgage deals in the UK.

Applicants could speak to an independent mortgage adviser as they advise on how to get ready for the mortgage application. A first-time buyer specialist mortgage adviser would provide tips on how to boost the credit score in quick time and submit a successful mortgage application.  

Mortgage industry research has revealed that monthly direct debit payments would boost the credit score. A credit score is essential to apply for a mortgage in the UK. A good credit score would open up many opportunities for applicants with low-interest rates and product fees on the fixed deals.

  • Select the suitable mortgage provider

It is critical to select a suitable mortgage. In case the mortgage application is declined, it would reduce applicants’ credit score. Lenders have a network to maintain internal communication and records. A mortgage decline by one lender would be a negative signal to a new lender.  

The cost of the mortgage is important as applicants want to maintain low monthly mortgage payments. There are other charges in addition to the interest cost. A mortgage adviser would help the applicants to run an effective cost comparison considering all costs such as interest cost, product fees, admin fees, and completion fees. It would give a better picture to the applicants to find a suitable deal.

Applicants would have more options in terms of the availability of lenders and cheaper rates if they have a higher deposit. When the applicants are contributing a large deposit, there is minimum risk available to the lender. On the other hand, if an applicant has a smaller deposit along with a CCJ, lenders would perceive him as high risk and the options could be limited.  

  • Apply for decision in principle (DIP)

It is important to secure a decision in principle (DIP) with a lender. It explains the borrowing capacity of the home buyer. It could work in favor of the buyer when negotiating the purchase price with the seller. The estate agents and sellers would be confident to accept an offer from a buyer who has a DIP letter in hand. It gives them some assurance that the buyer has the potential to apply for a mortgage to buy the property.  

  • Finalize a suitable property

After figuring out the maximum loan amount affordability, the home buyers could look for a suitable purchase price depending on their deposit. It makes the property search more convenient and meaningful. Once the applicants have found their dream home, they could place an offer on the property.

  • Submit the Full Mortgage Application

Once the applicants’ offer has been accepted, they could submit a full mortgage application to the lender along with supplementary documents such as pay-slips, personal bank statements, proof of address documents, and proof of deposit.

Further, the underwriter would request additional information depending on the nature of the assessment. The lender might ask for further verification on income and ID if required.

  • Mortgage Property Valuation

The lender would appoint a surveyor to conduct a physical valuation on the subject property. Surveyors conducted online and drive-by valuations due to the Covid-19 pandemic social distancing regulations. It depends on the underwriter and the surveyor to decide whether to run a physical valuation or online. Overall, this valuation is for mortgage purposes only. If the applicants wish to conduct a full buildings valuation or a home buyer survey, it would require an additional charge.

  • Appoint a suitable solicitor

Solicitor is a crucial part of the home buyer journey. It is important to obtain the services of an experienced solicitor to handle all the paperwork related to titles, searches, ID checks, contracts, and arrangement of the final transactions. Sometimes, property purchases collapse due to significant delays caused by the buyer’s solicitor.

Solicitor would also handle stamp duty implications. First-time buyers need to research in advance stamp duty payable amounts and exemptions. Some applicants struggle to find the funds for stamp duty as they use the whole of savings as a deposit. It is important to budget for all other expenses such as valuation fee, product fee, legal fees, and stamp duty when planning your home purchase.

  • Contract Exchange and Completion

Once the buyer’s solicitor has completed all legal work and fulfilled the conditions of the lender, they would set a date for the contract exchange. It usually takes three to four weeks for the solicitor to complete their work before contract exchange. The main dependency would be how long the seller’s solicitor is going to take to return the inquiries made by the buyer’s solicitor.

Once the contracts are exchanged, it means that buyer and seller have legally agreed to purchase the property on a specified date. Then the home buyer would pay the deposit via the solicitor. On the date specified, money is transferred to the seller’s solicitor and the keys to the property are released to you.

In conclusion, first-time buyers who are trying to get on the property ladder should speak to an experienced mortgage adviser. They would link up the whole process from the first discussion to the contract exchange and completion. It is important to monitor the status of the mortgage application with the lender and solicitor on a regular basis!

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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