I want my first home! Where do I start finding out about mortgages and other issues for first time buyers?

Question

My boyfriend and I are thinking of buying our first home, I'm a student, therefore minimal income (until summer 2008), he works, and we know nothing about buying property. We started saving up recently and have a few hundred pounds but from now on we want to start saving more every month until next year, when we want to get a mortgage.

I have seen banks offer mortgages with 0% deposit required, should I be wary of these? How about interest only mortgages? There's so many types of mortgages, it's hard to figure out the advantages and disadvantages of all.

Apart from a deposit, what other kind of money allowances should we make (I know we should put money aside for stamp duty, furniture and repairs/diy for the new house). Is there anything else we should think about?

Any other useful information?

Thanks!

By the way we do live in England. Someone in another board told me about first time buyers classes that are available, I've had a search on the web and haven't been able to find much in my local area (Buckinghamshire) has anyone else heard of these?

Yes, I we fairly young (23 and 24), but my boyfriend and I have been together for 6 years so we have had a while to think about taking this step, it's just the financial side that's the scary bit!

Answer 1

OK.. here's my thoughts.

First: A mortgage is going to be a 30 year commitment. This means that for the next 30 years you will be committed to working for and paying for a home that will be co-owned by your boyfriend. You haven't made the commitment for marriage.. how can you make the type of long term financial commitment that will affect your credit and financial well being with out a strong commitment (ie marriage) to your partner? I would work this out first.

Now.. let's talk about first mortgage. Understand that a 0% down mortgage is financine 100% of the value of your home. This means that from day 1 you will have absolutely no equity in your home. Therefore you will owe more than the home is worth for at least 5 years or more and then after that only have a very small amount of equity. Therefore if you decide to sell the home in less than 10 years you will lose money in the investment unless the real estate market rises a lot in that area. This feeds into the first statement I made above.. let's say you two buy this home (no marriage) then the relationship falls apart and he moves out. If you can't make the mortgage payments and he doesn't provide you with assistance.. you lose the house and both of your credit ratings will be destroyed. Simply because you won't be able to sell the home for what is owed and you won't have the cash to make up the difference.

When it comes to a new home purchase here's my formula for success:

1. Have at least 10% for the downpayment.
2. Have the full amount needed for all closing cost.
3. Have enough money available for any needed repairs that will need to be done prior to move in.
4. Have enough money available for any furniture, appliances, etc that you might need when you move.
5. On top of 1 through 4, have at least a month's and a half mortgage payments in a saving account that you can draw on should a problem arrise that affects the financial stablity.
6. Work out a budget prior to buying the home. Include in this budget the mortgage payments, homeowner association dues, increase in utility payments, repairs etc.
7. Request your credit report and credit rating. Resolve any and all problems there that you can to push your credit rating as high as possible.
8. Shop around for a lender with the best terms.
9. Get a pre-approval letter from the lender with your maximum available loan amount.
10. Use a realator unassociated with the seller of the home you are wanting to buy and unassociated with the lender you have selected.

Hope this helps and good luck!

Answer 2

Speak to an independant financial advisor (not one that is tied to bank or building society) and ask them how much you could afford to borrow. If you are not thinking of buying until 2008, put aside however much you could afford a month and do this each month as if it was a mortgage. This will go towards fees involved in buying a house. Interest rates and best deals change all the time, but a financial advisor would be able to advise on this. When you buy a property, land searches need to be done, solicitors do this but be prepared to spend several thousand on all the different fees involved (this amount can be included in the mortgage. The only thing i would definately advise is to get a repayment mortgage, as opposed to an endowment mortgage.

Answer 3

0% deposit sounds good, but you can get a lot better deal if you put down a deposit, 10% would be good, then i would go for a repayment mortage ,you can get these at a fixed rate for the first 2 or 3 years so you know exactly what you will be paying each month. then if interest rates go up during this period your payments won't. then at the end of the fixed period you can switch to a different mortage with a different lender and benefit from a fixed period all over again. theres no limit to how many times you can do this throughout the life of the mortage, so you could end up saving thousands. initially don't forget solicitors fees and removal costs. as for websites try moneysavingexpert.com full of great tips and hints, good luck p.

Answer 4

Ask friends and family to recommend a good company/real estate agent. They will be working FOR YOU so they are the best at offering you advice about your situation and getting you into a home. They are better than banks or mortgage companies because again, they are working for you, and they are the most knowledgeable in all areas of the business, all aspects. Be wary of anything that banks are offering, there is always a catch. Your best bet is to find a reliable, trustworthy Realtor that will work with your directly and for however long you need.

Answer 5

Okay, it sounds as if you're young so here is something I have to ask. Why are you and your boyfriend buying a home? I mean boyfriend, are you getting married? Do you plan on being together forever? Taking on a mortgage is a big step and lasts 1 to 30 years. Just think it over before taking that large jump!! Now, there are many resoures out there for for first time home buyers. Websites such as Bankrate.com or Quicken. Search and shop around.

Answer 6

I would suggest calling your banker. They can be a great help when you're concerned about what you can or cannot afford and they can even help you find and apply for grants. My husband and I got a "first time homebuyers" grant when we bought our first home. It sounds like you don't live in America though, so I'm not sure what's available to you. It is a good idea to save money for things like closing costs and don't forget to check into the real estate taxes for any property you look at! A real estate agent is a great thing to have also! Hope I've helped and best of luck!!!

Answer 7

I have a friend who works as a mortgage adviser for one of the big Building Society's, so pop into a local shop and make an appointment for a consultation, obviously they are not impartial but you don't have to sign anything and it does not cost you anything. Then go visit as many more Societies as you can stomach. Re no deposit, avoid like the plague. You might like to add moving costs (not cheep) to your list.
P.S. My friend's bonuses, promotion prospects etc are based on feedback from satisfied clients rather than what products she can sell.

Answer 8

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Answer 9

You should be fine. You're basically getting preapproved for your loan amount minus the down payment so you're looking at around $96K loan and with your credentials it looks very good the next important thing to consider is the interest rate. I just bought my first house as well, I have similar credentials as you and got approved with a FHA loan- which requires only a 3.5% down payment versus 5% for about $104K at 4.5% with no co-signers. Keep in mind for the home inspection, earnest deposit on the house, and appraisal if its not included. Good luck!

Answer 10

hey i am doing exactly the same thing as you.

wrkey has given you great advice

i have done the same

try and visit lots of estate agents too and pick up lots of the paperwork they have like newspapers and leaflets that explain the different types of mortgages out there.

i have decided to go for a flexible as i earn bonuses and commission so i am able to pay more if i want to.

try loking on www.rightmove.co.uk

i have found this website great