Seven Steps to getting your first Mortgage

Step One

Make the personal commitment to live in your own premises. This should be a given but you must be aware of the rights, responsibilities and social change that go with first time house ownership. There will be no parents or landlord to fall back on for repairs. The utility bills and council tax bills will fall on you. You will probably need to save for a deposit. This is usually a minimum of 5%; although failing this there are 100% mortgages on offer.

Step Two

Check out the financial issues. What is the maximum that you and any co-owners are able to pay? Include in your budget the costs of insurance, repayments tax and utilities. From this budget you will be able to assess what you can potentially borrow and how much deposit you may need to get the property of choice. See: how much can I borrow?

Step Three

Discuss the options with your bank or building society. Learn what sort of issues they want to consider such as your current salary, debts and potential problems career prospects. If the results of your discussions show your case to be marginal from the lenders point of view, then you may wish to work through a mortgage broker who can shop around on your behalf to find a willing lender.

Step Four

Be Realistic in Choosing House. Finding a suitable property means finding one that you want, but also one that can be financed. You won’t get a mortgage for more than the value the lender thinks appropriate. Some lenders don’t like problem properties e.g. those built on mine shafts or erected by notorious builders. Some companies don’t like thatched roofs or flats so check for general restrictions when talking to your preferred lender. The more marginal a property the more expensive the loan is likely to be.

Step Five

Getting a mortgage takes time. Allow time for the lender to do the work they need to do. Surveying the property and checking out your credit worthiness can take some weeks. Get an offer in writing and keep the vendors agent and your solicitor informed.

Step Six

Get a Good solicitor. Ensure your solicitor works to your needs. Get them on your side from the outset. Normally you pay a deposit, conduct due diligence with searches then complete the purchase transferring ownership to you with a registered mortgage or charge over the property.

Step Seven

Look around for most helpful mortgage adviser. Don't be put off if your own bank refuses to give sufficient mortgage. There are an increasing number of mortgages on offer which may help you get your first mortgage.

See also:

• Guide for First Time Buyers
  
• Types of Mortgages in the UK

First Time Mortgages - Staircasing and Joint Mortgages

WIth the increasing affordability gap between the cost of buying a house and average incomes many first time buyers are taking desperate measures to try an get on the property ladder. Popular options include:

Borrowing from parents,
Self certification mortages
Interest Only Mortgages

One of the best schemes is to try and get some kind of "staircase" arrangement this allows you to buy a % of the house say 60%, the remaining 40% is bought by a housing association you then can increase your ownership of the house over a period of time. This is why it is known as staircasing.

Staircase Mortgages for first time buyersf

Increased Mortgage Costs for First Time Buyers in 2007

First time buyers are finding it increasingly expensive to get their first mortgage. Evidence from the UK Council of mortgage lenders suggests that the average cost of a mortgage for first time buyers is now £115,499. This is over 3.3 times the income of the first time buyer and this income multiple is at an all time high. The increased income multiple reflects the increased willingness of banks to lend a mortgages up to 5 times a persons incomes. (e.g. Abbey National)

The % of income spent on paying mortgage interest payments has increased to 17.9%. It used to be 15.9%. First time mortgage buyers are facing higher costs from

1. Increased interest rates (base rates now at 5.25%) Each quarter point typically adds £16 to a £100,000 mortgage

2. More people are due to pay stamp duty this year than last (due to rising house prices)

3. Increases in utility bills and council tax add to the monthly expenditure

4. Rising house prices increase the amount of deposit needed. A deposit usually needs to be 5% of the house price.

Although house prices have continued to grow; to own a house remains a significant desire for many first time buyers. In order to be able to get on the ladder first time buyers are increasingly looking at unconventional mortgages and getting help from parents e.g. borrowing money for a deposit. Despite the financial difficulties first time buyers still account for 36% of the mortgage market. This is higher than the previous year.

Bradford and Bingley Building society said that the beginning of 2007 had seen a strong performance from the housing market. The rise in interest rates had not deterred many from getting a loan. They suggest the effect of the recent rise in interest rates may be overstated. For example, real interest rates are still low (Interest rate – inflation rate. Fixed rate mortgages had already built in the expected rises, and finally people are simply willing to borrow more. The strongest growth in mortgages has come from non-conventional mortgages such as self –certification mortgages. This suggests people are wishing to borrow more than conventional income multiples. However, overall the resilience of the mortgage lending market, supports evidence that UK house prices will not fall in 2007.



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Mortgages for First Time Buyers

Rising house prices in the UK have made it very difficult for first time buyers in the UK. The ratio of house price to earnings has risen significantly. With average house prices rising to over £100,000 many feel it is hopeless to even try and be able to buy. However despite the inflated house prices it still makes economic sense to try and buy a house if at all possible. The good news is that in recent years the deregulated mortgage industry has become increasingly competitive and flexible in offering different types of mortgages which may enable first time buyers to get onto the property ladder.

Ideas for: first time buyers getting their mortgage

The good news: Banks are lending higher amounts

On a personal note I was very fortunate to have a generous loan from my parent. This enabled me to be able to get a self certification mortgage. The Mortgage payments on a £138,500 mortgage are about £850 a month. In Oxford to rent is about £750 a month so its not much more. I'm hoping in the future inflation and real wages will make this more manageable, but soon I will be looking to find a better mortgage deal.

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