First Time Buyer Process Explained

If you have not bought a property before, then the terminology and process can be daunting with conversations about AIPs, LTVs, Fixed Rates, Trackers etc.

Mortgages

Buy To Let

Equity Release

First Time Buyers

So, a few explanations; –

AIP – stands for Agreement in Principle (Sometimes referred to as a DIP – Decision in Principle). This is where after submitting details of your occupation, date of birth, income and size of deposit, the proposed lender then carries out a credit search Experian or Equifax. This will tell them details of ANY finance you have had in the last 6 years. It will show whether you pay your bills on time, or if late, how late. It will show the amount of credit or loans that you have outstanding at the time. This allows them to build a credit profile on you. They use this to decide whether or not, they are prepared to lend you money and if so, how much so it is the most important part of the application process

LTV – stands for Loan to Value. The smaller the deposit that you have, the more the lender feels at risk should you not make the repayments. Consequently, the rate they charge you is dependent on the size of the deposit. The bigger the deposit, the lower the rate charged.

Valuation – there are 3 levels of valuation. Level 1 is Basic Report and Valuation which is purely for the benefit of the lender. You pay for it and the lender can then decide if the property is suitable security for a mortgage. Level 2 is the Homebuyer’s Report. This is a more in-depth investigation into the condition of the property and offers you some protection if the professional valuer makes a mistake. Level 3 is a full structural Survey. With this level, the valuer/surveyor will look at every aspect of the property and is more or less the equivalent of a property MOT. Needless to say, level 3 is the most expensive.

Fixed Rate – lenders will offer you an interest rate on the mortgage fixed for a number of years. The longer the term of the fix, the higher the rate. A fixed rate gives you certainty that if interest rate rise, your payment will not.

Bank of England Base Rate Tracker – this is where the rate at which you pay, is linked to the Bank of England Base Rate. So, if interest rates rise, your monthly payment will rise as well.

Proof of income – if you are employed, you will need to produce for us your last 3 payslips and most recent P60. Is self employed, then we will need to contact your accountant to obtain full income figures for the last 3 years. Frequently lenders will average the most recent 2 years self employed income to use for the affordability check.

Affordability check/calculator – the vast majority of lenders operate an affordability calculator before submission of an AIP. We can check which lender criteria (they are all different!) fits your circumstances best.

Fees – there are a number of fees that apply – valuation, solicitor, Stamp Duty, Land Registry, Local Search, arrangement fee, product fee etc. We will itemise them all to you and explain when they are payable so that you do not have any surprises during the process.

Insurance – there are NO insurances that you HAVE to take out at all. Before we meet, please check and see what insurances you currently have as they can be used as part of your cover. We will explain the various insurances that you should consider, give you details of the benefits and the cost, and then leave you to make the decision as to what insurances, if any, you want to take out.

These explanations do not cover all that we will be discussing but they should assist in the understanding of some of what you will encounter.

Remember a property purchase is likely to be one of your most expensive purchases in your lifetime so if at any time you have any questions, please ask!

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