First Time Buyer looking for advice

Saria

Hi everyone. I am sure this type of thread has popped up before, so I apologise for that!

Me and my fianc! have saved up a deposit of about £35k and are hoping to buy our first house in the near future. However, even though I have been reading up on a lot of things (especially here on MSE), I still feel like I don't really know what to do next...

How do I know what house we can afford? I have tried mortgage calculators and they seem to give us quite varying numbers. So I am not sure what we can afford at the moment and if maybe we need to save up more or not (especially as houses down here seem expensive).

Also, what extra costs are involved with buying a house, other than stamp duty? Again, I seem to find loads of different numbers out there, but I would like an estimate so I know how much of our deposit would go on fees.

What step should we take next? Should we go to our bank/some banks and have a talk about mortgages? Or should we get an independent mortgage adviser? Or before you do all this, do you get an Agreement in Principle?

I'm sorry for all the questions! I don't really know anyone who can answer these questions for me, as my family lives in Belgium (things seem very different there regarding mortgages), and my fianc! only has his grandma, so I have to rely on lovely people on the internet to help me out!

Thanks in advance for any replies!

Scampy

I'm sure you will get lots of advice here but being in a similar situation I will share my recent experience.

I had used the calculators to get an idea of how much my partner and I could borrow. We had already looked at properties on Rightmove to get an idea of what we were looking to buy and how much it would cost.

The calculators do seem to give you quite a range but we found that what we wanted tended to be in the middle so felt safe it was doable.

You can do a "soft" check with some lenders which lets you get an idea of how much they will lend you by using your details, but without leaving a negative mark on your credit file.

Once we felt we were ready we then approached our bank for a decision in principle. I am not sure if everyone would do this (some might go straight to a broker), but I wanted it behind us before we started viewing houses.

We then started viewing and found the one we wanted to buy. After putting in an offer (and a bit of negotiating) it was accepted.

I then rang a mortgage broker (London & Country) to find the best mortgage deal for us. They needed to do their own credit checks which all went through okay, and then a new decision in principle with the lender. That is as far as we have got so far!

With regards to fees, they can mount up so it is important to understand everything you will need to cover. There will be legal fees, surveyors fees, possibly mortgage arrangement fees, among others. Here is a helpful article http://www.moneysavingexpert.com/mortgages/mortgage-fees-stamp-duty

SmlSave

Walk into a few banks, get an appointment and ask how much you can borrow - find out how much a month the mortgage payment is too.

Or you can visit a few mortgage brokers and pick one.

When you work out your monthly outgoings don't forget to factor in bills and money to enjoy yourselves!

Malmo

This would be my approach.

Preparation

Budget
I would start by pulling together an income/expenditure budget and establishing what your approximate maximum monthly mortgage budget could be, as this will be a useful figure when you come to discussing your circumstances and requirements with a mortgage broker (I will come on to the use of a broker in a bit). If you are familiar with spreadsheets, then great. If not, have a look into how to use them - it's not essential, but it makes life a LOT easier for tabulating and calculating numbers and keeping records. Plenty of free options are available, such as Google Sheets.

Review Credit Reports
I'd urge you to take the time to thoroughly review your credit files/reports from all 3 Credit Reference Agencies (Experian, Equifax, Callcredit/Noddle). I've read countless threads here where buyers haven't done this in preparation ahead of time and have had problems either obtaining a mortgage agreement / decision in principle (AIP / DIP - they're the same thing) or have been refused at full application or underwriting. Take a look at this post for what you should do with regards to your credit reports.

Search for an independent Whole of Market mortgage broker
Find a good, independent whole of market mortgage broker who will hand hold you through the process. Avoid brokers based in estate agents. Also, do not place your faith in what estate agents tell you. They do not work in your best interests and they act for the vendor / seller, who pays their fee. Agents are not your friend when you are a buyer. As well as asking friends and family for broker recommendations and using Google, another method is to use the unbiased.co.uk directory. Suggested steps are posted here. Speak to a few and get a feel for whether or not you could work with one of them. Give your chosen broker copies of all the credit reports so that they have visibility of your credit history and can place your case with the right lender.

At the appropriate time, when you are ready to search for a property, what you need to get the process started is an AIP / DIP from a lender. This isn't a mortgage. The purpose of the AIP is to validate your creditworthiness and based on that, indicates your maximum borrowing power taking into account income and commitments, subject to further affordability and other criteria. They generally expire after 90 days but varies by lender. Estate agents generally treat buyers as being serious if they have an AIP ready.

An AIP is then turned into a full mortgage application when you have a property you want to secure the loan against. You can obtain the AIP either yourself direct from a lender assuming you have researched their criteria or via a mortgage broker. Just get one for the maximum amount the lender will allow based on your income/commitments. It doesn't mean you have to borrow that much later on.

General Reading
Have a read of this MSE article which describes a simplified timeline and milestones of the buying process. It doesn't really factor in the complexities of a chain and the impact of that on the end to end process, but it is still useful as a guide.

Here is also a MSE guide that refers to the likely buying fees & costs to factor in and when they may be due.

MortgageMamma

Good post Malmo! Pretty much what I would say but

There is always a choice where fees are concerned and many fees can be added to the mortgage loan if you choose to do so. Some people are more concerned about paying fees upfront to preserve their limited liquidity and some are concerned about the extra interest they will pay on fees added to a mortgage loan over the term.

This is where accurate affordability and careful planning will be your friend. What you can borrow in terms of maximum borrowing is not always best thing to do, especially if you envisage a change in circumstances within 5-10 years (maybe a having a family or a house move or one of you changing career paths etc). A bit of careful planning now can help smooth your life changes as they come along (making overpayments on the mortgage may be helpful if you have plenty of disposable income)

Talk to a professional, go through your income and expenditure with them, and your projected income and expenditure when you have bought the property (for example will you have to travel further to work or incur extra expense due to the location, or a service charge?). Consider the term in years of the mortgage, how that affects monthly payments. You could have a longer term of mortgage for lower minimum payments and then overpay regularly to reduce the term. That way if something happens which means you earn less or have to spend more your mandatory commitments are smaller.

Anyhow I do tend to waffle a bit, but the guides on the website are fantastic as a basic learning tool which will help you understand what your adviser is talking about when the time comes.

With regards to the buying process and getting you from start to finish as unruffled as possible, a broker is your best bet, as good brokers tend to nurse their first time buyers through the process and its a service profession as much as an advice profession. If you go into a bank or estate agency in my opinion the employed advisers are pushed for time and don't always have the resources to provide good customer service. I have worked independently and in agencies so I can see the pros and cons of each kind of adviser.

jackr5

After a bit of reading and researching online you might feel more comfortable with it all. It will be stressful in places but you'll learn a lot from the experience (as I'm sure others will agree!)

Speaking to a broker is a great idea for all those questions, but you don't necessarily have to use one if you don't want to. You might find that the brokers cannot get you as good a deal as you'd be able to find on price comparison websites - this was certainly the case for me, we ended up finding the best deal online.

From my experience, once we got a rough idea of the price range we could look at we then got an AiP for that ballpark figure and went from there.

Happy hunting!

deFoix

I went to see two mortgage brokers at first. The last guy I saw basically admitted that because interest rates are so low these days most mortgages (for a particular term/ratio etc) are basically the same cost overall. Unless you have some special requirements I would just shop around yourself.

Also I went for a 30yr term rather than a 25yr term. The monthly payments were less but most mortgages allow you to overpay (mine by up to 10%) giving you greater flexibility. For this reason I don't know why anyone would go for a shorter term?

[Deleted User]

Pretty much what malmo said and I would definitely recommend doing a budget as your first step. You need to think about absolutely everything you spend money on and put an estimate figure on what it costs you on a monthly basis. I.e. if you have a car, think about how much you spend on petrol, insurance, MOT's and services, maintenance. You will also need a variable figure for what you spend on miscellaneous stuff, like nights outs, new clothes/shoes etc. Some people spend more on that type of stuff than others but no one can say they spend £0! Also think about what you may be spending on bills when you do buy a house - gas, electric, council tax, water, TV license, buildings insurance. Once you deduct everything from your monthly income then you will have a rough idea of what can afford for monthly mortgage payments.

In terms of fees etc:

Solicitors fee for conveyancing (varies but your looking at £500-£1000)

Stamp Duty - no one can give you an accurate figure unless we know roughly what sort of house prices you are looking at, but its 2% of the property purchase price, so if you buy a house for 200k you will be paying £1500 in SD.

Valuation fee - depends on the value of the property. Ours was around £250

Homebuyers reports - these are optional but recommended if you are buying an older property. Ours was £504

White goods that you can't live without e.g. a washing machine, fridge. Can be as cheap or as expensive as you want.

littlegreenfrog_2

Some really good advice here.

I've saved up a deposit similar to yours and am looking to buy soon. I spoke to a mortgage broker about six months ago (London & Country) and he gave me a ballpark figure for how much I should be able to borrow on my salary. Add the deposit you have to that figure, take off the amount you need for SDLT and other expenses (as people have outlined above) and that's how much you can afford. At the time, my deposit was around 11-12% of the maximum that I could afford on my salary. The broker told me that if I waited until I have a 15% deposit, I would be able to get a better rate. But of course, if you wait until you have a bigger deposit, house prices might go up and wipe out the difference.

For my own personal reasons I decided it would be better for me to wait until the summer anyway. But if I stick to my savings plan, by the summer I should have enough for a 15% deposit on the maximum I can afford, plus enough to cover all my extra costs. I am keeping an eye on what comes onto the market in the areas I am interested in. Each month I revise the maximum I can afford upwards slightly, to reflect the extra amount I have saved in the mean time.

You've already had a look at some online calculators and seen that they produce varying figures. I would speak to a broker and also speak to a number of lenders and ask them to do a "soft" check on you to see how much you could borrow. You don't want too many "hard" credit checks on your file, so make sure nobody does a "hard" check until you are actually applying for a mortgage. The "soft" checks should be enough to get a realistic idea of how much you can borrow.

Once you've done all that, decide whether you are ready to buy now or you need to wait and save up some more. If you think you're ready now, start looking at properties and speaking to estate agents. If you have time, go and visit lots of properties in the general range of your budget, even if you don't think you're especially interested. The more properties you visit, the better an idea you will have about whether something is fairly priced.

Also, do you both have Help to Buy ISAs? If not, you should each open one immediately. You only need to be paying in for a few months to have the minimum amount you need to claim the government bonus. Free money!

Good luck!

Saria

Thanks everyone for the great advice!

I have listened to all of you and have done a budget sheet for the last year (and the first two months of this year). It was difficult, but I guess it gives me a bit of a clearer idea of what money is coming in and going out. I will try to keep on top of this for the coming months as well.

Though it does make me worried that we just won't be able to afford a house in this area... The prices are about 250k for a 2 or 3 bed house (that doesn't require full updating), but with our salary I think we can only get a maximum mortgage of 209000. Which would give us a very expensive mortgage repayment per month, probably more than we can afford.

No wonder people find it so difficult to get on the property ladder, it is ridiculously expensive!


As for credit reports/scores etc., I looked mine up already, but I got very mixed results. At Experian I got an Excellent score (somewhere in the 900s), but they did say I wasn't on the Electoral roll when I was, so had that fixed. Noddle gave me a pretty bad score, saying it was 'Fair', but I don't know why it isn't great. And then Clearscore couldn't even find me at all. I have been living in the UK for 4 years, but as I don't have any Direct Debits set up (pay my bills manually), I guess I don't really have a credit score?

Will they look at both of our credit reports when we apply for a mortgage, or only for the main applicant? I still have to check if my fianc! has a good report, but other than our car loan (paid off next month), internet and car insurance, he doesn't have any Direct Debits either. :S

Malmo

As for credit reports/scores etc., I looked mine up already, but I got very mixed results. At Experian I got an Excellent score (somewhere in the 900s), but they did say I wasn't on the Electoral roll when I was, so had that fixed. Noddle gave me a pretty bad score, saying it was 'Fair', but I don't know why it isn't great. And then Clearscore couldn't even find me at all. I have been living in the UK for 4 years, but as I don't have any Direct Debits set up (pay my bills manually), I guess I don't really have a credit score?

Will they look at both of our credit reports when we apply for a mortgage, or only for the main applicant? I still have to check if my fianc! has a good report, but other than our car loan (paid off next month), internet and car insurance, he doesn't have any Direct Debits either. :S

The scores are irrelevant, as they are consumer scores for marketing purposes. Commercial and public organisations do not see and use them, instead applying their own criteria and hence their own scores. What's important is the data and ensuring it is accurate and up to date.

Joint applications require credit checks for all applicants. This will also create a financial association between the applicants once the application is completed.