First time buyer: pitfalls and advantages Part one

Purchasing a property for the first time can be a daunting prospect, which is made even more discouraging by the constant reminder that for the first time buyer the initial step on to the property ladder is not an easy one to make. There is always someone with a horror story regarding his or her property purchase, which can make the whole thing seem like a bad idea.

It is important not to be out off by these tales of despair. Purchasing a property need not always be a scary and trying time. It can be an exciting new chapter in life, once you are well advised and prepared for the mortgage process.

Of course, applying for a mortgage is not something that most of us do regularly. Even the thoughts of how to approach the application process can seem like hard work. There are so many questions, What Lender should I approach? What documents do I need to show them? How much will I qualify for? What is the difference between a Bank and a Broker? How much will this cost me?

Once you have decided to purchase your first home, it is important to really consider what you can afford to pay each month in relation to your mortgage and also, what is the best mortgage package to suit your needs. These days Banks and Building Societies are constantly reminding us that we can now “tailor” our mortgages to suit our own needs, so it is vital to establish these needs and ensure that they are met by the Lender of your choice. Remember, you are going to be their customer for the next 25-30 years and it is important that your relationship with them starts off on the right foot.

The first thing you need to do is gather your documents in order to make your case to the Lender/broker of your choice. In general, these remain standard for all mortgage applications and the following documents must be presented, in order to assess your case. Salary Certificates from your employer (stating Gross Basic Salary, overtime, bonuses etc) must be provided along with P60’s; and payslips, so that the Lender can establish your income patterns and, where overtime is to be considered, how regular it is.

It is also important where possible to provide the Lender with any bank statements showing you have regular savings and are capable of financial commitment. This will put you in a favourable light in the Lender’s eyes, as they will realise that you are capable of financial commitment.

On the other side of the coin, the Lender will be looking for statements in relation to any loans that you may have taken out in the past or indeed may be paying at present.

This is to establish your credit history and to ensure that you have not missed any payments and do not have any arrears on either current or previous loans. Credit checks will also be carried out in relation to all applicants to the loan, in order to ensure that they do not have a bad credit history.

Many first time buyers feel that they are fighting an uphill battle. Property prices continue to rise and yet, qualifying for a mortgage does not get any easier. It can be frustrating to be told that you need to be earning higher incomes to qualify for your mortgage but yet property prices are increasing in line with your wages and so the circle continues.

Of course, there are certain things you can do to help yourself in this situation. For those who do not have loans, it is important to try to remain a “loan free zone”. This will not only free up all of your monthly disposable income; it will also mean that you may increase your chances of qualifying for a slightly higher mortgage amount.

Try to save as much as possible prior to applying for your mortgage. You will need to come up with at least 8% of the purchase price yourself, but in addition to this you are creating good financial habits.

Be honest with your Lender/broker and discuss all aspects of your financial life with them. Do not be afraid of what you tell them and certainly do not be afraid of what you ASK them. They are there to help you and to make the process easier on you.

Be happy that you have had all your queries answered and that you are sure of the package that you are signing for. If you need flexibility in relation to your mortgage, ensure you get it. If making lump sums repayments may be an option in the future, ask what ways it may be possible to do this.

Think long and hard about what the future may hold and how your situation may change. You want the flexibility to change with it and not to be hindered because of it.

Once you have satisfied all of your requirements, you will be able to take that first step on to the property ladder with an easy mind!