When it comes to becoming a first-time buyer you may find your self asking many different questions and wanting to know if in your current situation you are in are you able to realistically afford a mortgage, or whether you may have to wait a few more years or have to consider having a lower mortgage to pay back.

Here are just some of the many questions you will find first-time buyers will be asking:

1) How much of a deposit do I need to save?

The very minimum deposit that lenders will accept is 5% of the property value, but even if you manage to save this much, your options are likely to be pretty limited. Most lenders only offer mortgages to those with a minimum of 10% deposit, which means if you want to buy a home costing £200,000 for example, you’ll need to save a total amount of £20,000 deposit.Its important to know that the more you can afford to put down as a deposit, the wider the choice of mortgages you will have access to and the cheaper they will be. Many people when they have got a deposit will consider seeking independent financial advice so they are able to discuss options with their financial adviser and see which places will offer them a mortgage and which ones at a good rate.

2) How much can I borrow?

The amount you can borrow to buy your first home will depend on how much you earn and how much of a deposit you have to put down. Lenders won’t want to lend more than they think you can afford, so as a general rule, they’ll restrict the amount you can borrow if you’re buying on your own to around four times’ your income, or if you are buying with someone, about three times your combined income. This can vary from lender to lender and will also depend on outstanding debts and other outgoings, so it’s worth asking before you apply.This is often another reason as to why people are told to seek independent financial advice as the financial adviser will be able to explain to them how much they can borrow and that reason being why.

3) Which type mortgage should I go for?

The type of mortgage in which you should get all depends on whether or not you want to be certain that your mortgage payments won’t change over time. Financial adviser will often tell first-time buyers to go for a fixed rate mortgage because this will allow them to have peace of mind that the amount they shall be paying each month will remain the same for however long the term they have gone for, an example being a two year fixed rate. If for any reason you feel as though you may not want to go for a fixed rate mortgage you could possible look at having a variable mortgage, however if your considering this or unsure on which one will suit you best then its important to seek some independent financial advice.

4) What else will lenders want to know?

As well as the lenders looking at your income they will also like to check your credit history so they are able to see how you’ve managed when borrowing in the past. This will mean you would have to let them know about any credit cards or loans you’ve had and whether you have missed any repayments. They will usually ask to see six months worth of bank statements or three years of accounts if you are someone who is self-employed.

5) How long should my mortgage run for?

Most borrowers will go for a mortgage that is repayable over 25 years however you can sometimes choose a longer term than this. Its important to remember if your considering a longer term that the longer it is the more interest you will end up paying overall. That is why many people will consider seeking independent financial advice as they will then have a financial adviser who would be able to tell them how long of a term should they have due to their own personal circumstances.

6) How much stamp duty do I have to pay?

Its important to know as well as saving for your deposit you will have to pay stamp duty when you are buying your property. There would be nothing to pay if you’re buying a property that is worth less than £125,000 however you will have to pay 1% of the property price if it costs between 3125,001 and £250,000.Its also important to know that stamp duty rises to 3% on properties that cost between £250,001 and £500,000 and even higher rates are payable on properties costing more than that.

If you are thinking of becoming a first-time buyer and would like to seek independent financial advice, we at Hutt Professional have financial adviser with many years of experience and are highly qualified who would be more than happy to offer you independent financial advice.


source : http://www.moneysupermarket.com/mortgages/hubs/first-time-buyers/q-and-a/#Question_2 03/02/2015