Everyone needs a place to live, but not many people know where to start when it comes to buying a property. Who do you get a mortgage from? What do you need to qualify for a mortgage? What types of mortgages are there? All these questions can be answered and you can prepare yourself ahead of time to get the best interest rates and the best type of mortgage for your situation.
Firstly, how do you prepare for getting a mortgage? There are many steps to prepare yourself for this process but here are the basics. As a first-time homebuyer you will need to go over all aspects of your financial situation including: your income, your outstanding debts and your day to day bills. Lenders will need to assess how able your are to make your mortgage payments and in order to do so they will need to ask you questions to determine how reliable you will be. Gone are the days when lenders just determine your mortgage based on annual income.
As a mortgage seeker you have three options on where to get a mortgage: Mortgage Broker, a financial advisor at a bank or a financial team from your building society. Mortgage Brokers have a greater pool of where they can obtain their mortgages from and can usually get better interest rate deals than banks and building societies. Sometimes, however you can obtain a good deal from your bank if you have a long and good relationship with them.
There are also different mortgage types to consider. Tracker mortgages are based on the base rate set by the Bank of England and move as the rate changes, usually a level above. Standard variable rate mortgage rates are set by the lenders but also follow the base rate quite closely. Standard variable rate mortgages and tracker mortgages are mostly taken by second time property sellers because their mortgages are usually smaller and if they are thinking about selling there is usually no early payout fee. Fixed rate mortgages have set payments and are fixed for a period of time, anywhere from 2-5 years. Fixed rate mortgages can help first time homebuyers budget their repayments better than variable rate mortgages and will change to standard variable rate mortgages once their terms are complete.
Here are some things to remember when you are calculating how much you can afford. Buying a house comes with more fees than you might think, you will need to remember to calculate legal fees, stamp duty, moving costs and insurance into affordability. There are tools that can help you calculate these costs and more. Check out Barclays mortgage calculator, comparable mortgage rates, and homebuyers checklists.
The typical turnaround time for mortgage acceptance is 2-4 weeks and will depend on how organized you are as a buyer so make sure you do your research and are prepared with the information. The last thing to remember is to read two important documents supplied by your lender; “Keyfacts about our mortgage services” and “Keyfacts about this mortgage”. These documents will help you understand your terms and conditions set forth by the lenders. A mortgage is a big commitment so make sure you understand it and are prepared.