But Mr Darling also emphasised, as he had done earlier this year, his intention to encourage more lenders to offer long-term fixed-rate mortgages. Back in July, the chancellor said that such changes would offer more security to those looking for a first time buyer mortgage as well as reducing the arrangement fees imposed when remortgaging. According to the chancellor, next year will see the government provide assistance to lenders to help them offer more long-term deals, but he did not go any further than that in explaining what form this help would take. But the question those looking for a first time buyer mortgage should ask is whether or not such a deal is actually beneficial for them. While these borrowers would be able to avoid the previously mentioned arrangement fees, there are other costs that could offset this advantage, as Michael Coogan from the Council of Mortgage Lenders (CML) recently outlined. "There is a key trade-off for borrowers in choosing a longer-term fix, relating to the potential costs of exiting the deal early, and this is the key feature that needs to be addressed to stimulate mainstream consumer appetite," Mr Coogan cautioned. Industry opinion is mixed, with broker John Charcol sceptical over whether demand will ever exist, but others such as Abbey advising otherwise. "Nearly 40 per cent of homeowners Abbey surveyed recently said they would opt for a fix of five-years or longer if they were remortgaging tomorrow," commented Nici-Audhlam Gardiner "That's almost the same as the number of people who would opt for a two-year fix - previously the most popular type of product," Ms Audhlam Gardiner added. That's not to say two-year fixes aren't popular, and those looking for the best first time buyer mortgage often find themselves turning to such products, especially at a time when firms such as Abbey themselves are cutting rates. The lender announced last week that its two-year and its five-year fix would be reduced by 0.1 per cent and up to 0.15 per cent respectively, indicating that the deals are still there on the market. Alliance & Leicester, for example, has also just cut rates on three and five-year deals. Again though, just as long term deals aren't necessarily the best option, neither are fixed-rates. Katie Tucker from John Charcol put in simple terms, speaking to the Daily Telegraph. "If you think the Bank of England base rate will fall, a tracker or discounted-rate is suitable," Ms Tucker commented. "If you prefer to be protected from any potential increases, a fixed-rate is the answer, she added. But with the choice available and the frequent alterations that take place, turning to a mortgage advisor for help might be wise. The options are now many and varied, ranging from shared ownership to co-buying, and it's worth considering each one on its merits. Something like shared ownership, which allows a borrower to purchase a stake in their home, or co-buying (essentially buying jointly with a friend or relative), will likely become especially popular in the future as the credit crunch hits much of the market. According to the latest figures from Moneyfacts, the number of mortgages available has fallen by 40 per cent in the last three months. MoneyExpert.com, furthermore, has said that there has been a 60 per cent increase in the number of people who have had applications turned down in the past six months. How long the current state of affairs will last is as-yet unknown, but if nothing else such trends emphasise the fundamental necessity of both saving and seeking advice before deciding on exactly what is the best first time buyer mortgage deal for you.
Buying a home can be daunting, especially when you are a first time buyer. Help and guidance is the key to finding the most appropriate mortgage for your individual needs, and ensuring that the mortgage application runs smoothly. The article that follows provides a simple step by stem explanation of the steps involved in applying for your mortgage.
Step 1 - Contact an independent mortgage adviser
Buying a home can be one of the most exciting experiences as well as one of the most daunting. With thousands of fixed, tracker, discount and variable rate mortgage products in the market, and so many different factors to take into consideration, how do you now which is the best mortgage product to meet your needs both now and in the future. Making a mistake can proof to be costly and so seeking professional independent mortgage advice is one of the most important steps you can take.
An independent mortgage adviser will complete a detailed fact find of your current circumstances and future expectations, and will analyse what mortgage products are available based on your income, age, credit history and attitude to risk. This analysis will highlight the most suitable products for which Key Facts illustrations will be provided.
Independent mortgage advice need not cost a fortune either. In most cases a broker fee will be good value for money, and will often be offset by the exclusive rates normally available via brokers. In a growing number of cases, Independent Mortgage Advice is provided free of charge with the mortgage adviser being paid for the introduction by the lender on completion of the mortgage.
Step 2 - Mortgage Promise or Initial Agreement in Principle
Once you have selected the best mortgage deal for your requirements, it is well worth applying for the lenders initial agreement in principle, also known as a mortgage promise. This is something that can be arranged on-line or over the phone by your mortgage adviser, with the lenders acceptance decision being available within minutes of submission. The initial agreement in principle will produce a certificate of confirmation that can be shown to prospective sellers to reassure them that mortgage finance is agreed, and that you are serious about buying.
A mortgage agreement in principle can always be arranged prior to knowing what property you will be purchasing or even before you have decided on the best type of mortgage product. The certificate will normally remain valid for 3 months, and speed up the process later when you make a formal application.
Applying for a mortgage promise from more than one lender is perfectly fine, however, unless you anticipate problems with a lender agreeing to the amount you want to borrow, there's no real reason to do this, and if each lender you go to carries out a credit check, it could eventually harm your credit rating.
What if your initial application is refused?
Agreements in principle are often declined and in most cases for one of the following reasons.
- An adverse credit history has been picked up when the lender has undertaken their credit checks and credit scoring.
- Lending criteria has rejected the application on the basis of insufficient time in employment or being too old.
When these circumstances arise your mortgage adviser is ideally placed to discuss matters with the lender, and where no resolution can be found, to advise you of other lenders and their products where the criteria does fit.
Step 3 - Complete the mortgage application
Once you have received notification that your mortgage is agreed in principle, the full application can then be submitted. To submit the full application, full details about your circumstances will be required by the lender. These details will include a requirement to provide proof of deposit funds, and details of the mortgage amount required. It is important to be as open and honest as possible when completing this form as this will help to avoid delays with your application later on.
There are many benefits of using a mortgage advisers services when submitting the full mortgage application, with the main benefit being that the adviser will have years of experience of the individual lenders underwriting practices, and can advise you of the best way to package and submit the application.
Bear in mind that exclusive mortgage rates, which can not be obtained direct from the lender are often available through an Independent Mortgage Adviser.
In addition to the completion of the lenders application form, a number of different documents are likely to be required to confirm the information provided. Exactly what, will depend on the type of mortgage applied for and the lender involved. In the case of a self certification mortgage, the documents required can be as little as proof of your identity and proof of residence.
Typically when borrowing 75% - 90% of the property value, the lender will require the following:
- Pay slips (often for the last three months)
- P60
- Copies of accounts for the last 2 or 3 years if self employed.
- Bank details for the Direct Debit mandate.
- Proof of identity such as a passport.
- Proof of address such as a recent utilities bill. or bank statement.
- Proof of the last 12 months mortgage payments or a tenancy reference if renting.
Where documentation is required in support of the application, any delay in providing it will delay the lender issuing the mortgage offer. Dealing with an independent mortgage adviser ensures that you will be informed about any documentary requirements quicker than if dealing direct with the lenders.
Step 4 - Instruction of the property valuation
Once the mortgage application is submitted and agreed, the lender will instruct a valuer to inspect the property. The cost of the valuation is born by you unless the mortgage you are applying for includes an incentive such as a free valuation fee.
The mortgage valuation allows the lender to confirm the value of the property and agree to the lending required. In addition to the basic valuation for mortgage purposes, you can ask the lender to carry out a more detailed survey of the property (which is advisable) such as a homebuyer's report.
The homebuyer report is in a standard format and is designed specifically as an economical survey and an effective way to minimize risk. The homebuyer report focuses on essentials such as defects and problems which are urgent or significant and thus have an effect on the value of the property. As part of the Homebuyer's report an integrated valuation for mortgage purposes is included, unlike a structural survey.
Step 5 - Instruct a Solicitor
It's the solicitor's job to review the Home Information Pack (HIP) which includes an Energy Performance Certificate, an index of contents, a sale statement, evidence of title, searches and leasehold documents, when you are buying.It's also the solicitor's job to negotiate the contract, exchange the contracts and transfer title deeds and funds from the lender. Once contracts have been signed and returned the solicitor will agree a date for completion. On the day of completion, funds will be exchanged between solicitors at which point keys can be collected to your new home.
If using an independent mortgage adviser, check to see if a fixed legal fee package is available, as this can often save time and money, and can result in using a solicitor where the adviser has some leverage to make things happen quickly.
Both Erin Ryan & Jerry Figueroa Lee are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Erin Ryan has sinced written about articles on various topics from Cars, Watches Reviews and Install Flooring. Erin Ryan is a consultant of first time buyer mortgage advice site First Rung Now.. Erin Ryan's top article generates over 301000 views. to your Favourites.