First Time Buyer in Essex

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Help For First Time Buyers in Essex

What Is A First Time Buyer?

If you are looking to purchase your first home and that home will be your main residence, you are classed as a first time buyer (FTB).

Below is some helpful advice, particularly for first time buyers living in or looking to move to the Essex area.

What Is An Agreement in Principle?

An Agreement in Principle (AIP), also known as a Decision in Principle (DIP) is a conditional mortgage offer given to you by your chosen lender, prior to agreeing on a mortgage or property. The conditional part owes to you needing to prove your income and your chosen property being acceptable to the lender on application.

Securing an Agreement in Principle or Decision in Principle prior to approaching a vendor with your offer can improve your chances that the offer will be accepted, however, it is not always essential.

How Much Can A First Time Buyer Borrow?

The amount you are able to borrow is based on your personal financial circumstances, such as household income, expenditure and any other financial responsibilities. Your credit score can also influence the amount a lender is willing to lend.

There are other things to consider, such as buying with a partner will ordinarily increase your borrowing potential.

You also need to consider your deposit and the subsequent loan to value (LTV) of the mortgage. The loan to value is the proportion of the property value that is purchased with the mortgage.

Currently, lenders are not offering many mortgage products with an LTV higher than 85% – this means you would need a 15% mortgage. However it could be possible to secure a new build property with a 5% deposit from the help to buy scheme.

So for example, a £200,000 property would need you to have a £30,000 deposit to secure a £170,000 mortgage.

How To Improve Your Credit Score

Your credit score can impact your mortgage application, both in terms of how much you can borrow and in some cases, whether you’re accepted. A number of websites offer you free access to your credit report, so it’s easy to check your rating in advance of your application.
If your score is low, then it’s possible, with some forward planning to increase your score. These tips will help you to improve the score are best applied at least twelve months ahead of your application:

  • Ensure you’re on the electoral roll at your current address
  • Check your current address is on all your financial accounts
  • Stay within 50% of all available credit limits
  • Make bill payments on time and in full where possible
  • If a lack of credit is your problem, special credit builder credit cards can help you to show yourself as a responsible borrower.

How Much Deposit Do I Need?

As lenders see first time buyers as slightly higher risk, they typically require a higher deposit, typically between 15% and 20% of the property’s value.

Some government schemes help first time buyers obtain a mortgage with a lower deposit, sometimes as low as 5%. These are worth looking at if you have a low deposit available or lower income.

What Help Is Available For First Time Buyers

Both the NewBuy and Help to Buy schemes help first time buyers find a starter home. An interest free government loan is taken in both cases, meaning you only need to find a 5% deposit for your first home.The loan is interest free for five years and allows you to pay off the mortgage more quickly.

The shared ownership scheme is another option if you’re looking to buy a property as your first home. It allows you to buy a share of the property you want, rather than the whole property. Sharetobuy.com offers a range of shared ownership properties available throughout Essex.

As you only purchase a portion of the property with shared ownership, the deposit and monthly repayments could be far more affordable. In addition you have to pay rent on the property, usually to the local authority or housing association, who owns the remaining share.

What Fees Are Involved When Buying A Home?

There are a number of costs involved in a mortgage application, in addition to the deposit and repayments:

  • Arrangement fees are charged by the lender for organising the mortgage and vary between lenders
  • Valuation fees are due for the evaluation of your chosen home, usually arranged by your solicitor
  • Stamp duty is ordinarily charged on the sale of all homes. If, however, you purchase a property below £500,000 by 31 March 2021, you won’t be liable for stamp duty, due to the current holiday
  • Legal Fees, such as conveyancing and local authority searches are arranged by your solicitor and payable by you.

How can a Essex Based Mortgage Broker Help First Time Buyers in Essex?

Choosing your first mortgage is a big responsibility and having advice and guidance throughout the application process is invaluable. Moreover, a local Mortgage Broker will be able to help you with local knowledge. If you’re looking for your first property in the Essex area, a broker who knows the local market, as well as estate agents and solicitors, is going to be a bonus.

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