A Few Basics for First-time Homebuyers Seeking a Mortgage Loan
Being a first-time homebuyer can be a nerve-wracking experience. In most cases, you would need a mortgage but don’t know where to look, which mortgage loan option to choose, and so on. It’s even difficult to estimate how much you are eligible to borrow.
Anyways, before all of that though, you must familiarise yourself with a few different terms. While money saving expert Martin Lewis recommends diving even deeper, let’s start with learning the usual financial terms associated with mortgage loans and what it means for first-time homebuyers.
Homebuyer’s Deposit
Depending on the rules and regulations put in place, you would have to put up some of your own money ( minimum percentage of the home’s price) toward buying your first home. Based on the deposits, you would be able to calculate how much money you would need to borrow by obtaining a mortgage loan.
Of course, the more money you can deposit, the less you have to borrow and vice versa. Depositing a good percentage of your home’s total price also allows you to obtain a more competitive interest rate.
Homebuyer’s Mortgage
The paperwork needed for a first-time homebuyer mortgage may vary depending on the lender, but it always requires a bit more work than on any future occasions. The lender must assess your affordability, and to do so, they would want to look into your credit rating, annual salary, annual expenditure, household bills, general living costs, and so on.
Once analysed, the lenders would usually come up with a maximum LTV (loan to value) they can offer. It’s the maximum you can borrow in your first-time home buying mortgage loan from that particular lender.
Finally, you should get a mortgage loan agreement in principle with several lenders before starting viewing homes. This way, you can be sure about what you can afford to look for as a first-time homebuyer. You shouldn’t go too overboard though, as lenders are more likely to run a hard check on your credit score.