So, you are looking to buy a new home – congratulations!
The process can come across as a daunting prospect and it is sometimes hard to know where to begin.
Here are the 7 things to consider when buying a new home and how Firstxtra can help make the experience of buying a home as smooth as possible for you.
The first thing to consider when beginning your property search is “what is my budget?”.
It is important to know exactly what you can afford. Firstxtra Financial Services can work with you and help you understand your budget by completing a financial assessment. We will run through, amongst other things, deposit, any outstanding debts and childcare costs, right through to important additional items you will need to consider when purchasing a home, such as buildings and contents insurance, mortgage debt protection and family protection.
Understanding your budget in advance means there are no difficulties during the mortgage application – you may even be able to borrow more than you initially thought!
Get a Mortgage Agreement in Principle (AIP)
Having reviewed your budget, your mortgage adviser will approach a lender to obtain a provisional agreement. This is a useful tool to show to an agent (typically an estate agent or developer) to confirm your ability to purchase the property.
A credit check is done at this stage, these agreements are normally valid for 90 days.
Finding Your New Home
Once you have an understanding of what you can afford with an agreement in principle in place, you can begin looking for your new home. This is the exciting part, but it can often take a little while.
Knowing exactly what you are looking for will really help you throughout this process. Writing a list of non-negotiables, compromises and nice-to-haves is a good start. Always keep in mind what you can actually afford, it’s a waste of time to look around properties that are out of your budget.
Now you have a firm idea of what you want to be in your future home and how much you can afford to spend, do you know whereabouts you want that home to be?
Do you need a home close to your workplace or with good transport links? What about schools?
The Costs Involved
Having a list of “must-haves” for your new neighbourhood is great, but you mustn’t let it restrict your property search. Research is important but don’t be afraid to expand your search area as you may be pleasantly surprised by what you find.
There are numerous costs associated buying a property – the mortgage isn’t the only thing you need to consider.
Some lenders will typically include an arrangement fee, which varies depending on who you take the loan from. Your Firstxtra mortgage adviser can advise if the fee can be added to the loan if it is beneficial to you in the long term.
You will have to pay stamp duty if your property is worth more than £125,000. First time buyers are currently exempt as long as the property value is less than £300,000.
There are then Solicitors fees and you may well also have to pay for a property survey. When the property is finally yours, you may need to fork out on home improvements and removal fees. We will always try to make you aware of any additional costs that may arise, but make sure you take these into consideration.
Your Mortgage Application
Now you have your agreement in principle (AIP) and your offer on a property has been accepted, you will need to formally apply for your mortgage. Mortgage application processes vary from lender to lender, your Firstxtra mortgage adviser will deal with this process for you, so you can sit back and relax!
We will require you to provide documentation to support your mortgage application. Here is a list of what most mortgage lenders will require you to provide;
Proof of identity
Proof of address
At least three month’s payslips and a P60
Any self-employed applicants will ideally need to prove 2 years of income, this can be done in a variety of different ways – your adviser will liaise with you on the best way forward (however we do have some lenders who will look at 1 years accounts or self-employment)
Three months bank statements
Proof of deposit
Although this may seem like a fair amount of information, one way to get a handle on this is to start collecting all the documents you need as soon as you know you’re serious about buying a property.
Your Protection Insurance
Once the mortgage application has been submitted, we will then need to concentrate on putting the correct insurance policies in place to cover the new mortgage debt that you are just about to take out.
We would normally recommend that you protect the mortgage with a life and critical illness policy (these pay out on diagnosis of Cancer, Heart attack, Stroke and MS to name a few!!). We also normally recommend that you cover some of your income to help pay the bills when you cannot work due to an accident or illness.
This application would be submitted alongside the mortgage and we would get this set up to start at the same time as the mortgage.
Understanding Your Mortgage
Here at Firstxtra, we will make suggestions as to the type of mortgage that is best for your circumstances, however it is important to understand the options available to you;
Fixed rate mortgage is just that, a fixed rate of interest over an agreed period – typically 2, 3, 5 or even 10 years. Whilst this could be beneficial in that it ensures your payments will remain the same for an arranged time frame, you may lose out should interest rates drop.
Tracker rate mortgages are subject to change, normally based on the Bank of England base rate. Should interest rates drop, so will your payments, but equally they could also increase.
Variable rate mortgages track a lenders standard variable interest rate and can be set independently. Once again, this could be beneficial if the interest rates fall, but problematic if there is an increase.
Before recommending a product, your Firstxtra mortgage adviser will complete a full fact find to understand your attitude to risk, your budget and your future plans. These details will determine which type of mortgage is best for your situation and we will advise you accordingly.
It’s always worth speaking to us to make sure you get the best deal you can as many of the lowest rates are via exclusive deals not available on the high street. With access to around 70 lenders, this will always ensure you are matched to the most competitive product for your circumstances.
Next Steps After The Mortgage Application
When you make an offer on a property and is accepted, you’ll be keen to collect the keys as soon as possible. It can, however, take several months for contracts to be exchanged, and for completion to take place. Firstxtra will handle the whole process for you, from application to mortgage offer, right through to exchange and completion, when you will get the keys to your new home.
Consulting with a professional mortgage broker will save you time and a lot of stress.
Firstxtra Financial Services is a professional, independent, mortgage broker providing bespoke mortgage advice to clients looking to purchase residential, buy to let and commercial property. If you’re in need of mortgage advice, contact our dedicated team today. www.firstxtra.co.uk