Things that first time buyers need to consider

As a first time buyer in the current financial and economic climate there are a number of things that you need to consider before you make a definite decision with regards to whether to take the plunge or not.

Buying a property for the first time can be daunting and confusing at the best of times, but in the current climate when so much has changed in the world of housing and mortgages it can be an even more difficult and stressful experience. Being well prepared and arming yourself with relevant knowledge can therefore go a long way towards making this a smoother and manageable process.

As many people will know getting a mortgage in the current climate is far more difficult than it has been for many years, and therefore you need to consider whether you will be eligible to get a mortgage at all before you start wasting your time looking around for the right mortgage. For example, if you do not have any deposit of if you have damaged credit then there is a good chance that you will not be able to get your hands on an affordable mortgage – or in some cases any mortgage at all.

Affordability is another point that you need to consider, and with so many changes having taken place in the mortgage sector you need to familiarise yourself with what to expect. The mortgage that were once highly popular with first time buyers, such as 125 percent and 100 percent mortgages, have disappeared from the shelves amongst the chaos of the global credit crunch, and the average first time buyer these days is expected to be able to find a sizeable sum of money to meet upfront payments in order to get a mortgage.

In fact, you will be hard pressed in the present climate to find a mortgage that required just a 5 or even 10 percent deposit, as most lenders now are covering their backs and reducing risk by asking for a far larger deposit even from first time buyers, who previously could have got away with paying no deposit at all or even borrowing more than the value of the property they were buying.

In fact, the average first time buyer is likely to have to find thousands of pounds in order to cope with upfront costs, such as paying for legal services, paying mortgage arrangement fees, and paying a hefty deposit on the loan.

This can run in to tens of thousands of pounds depending on the size of the mortgage, so you need to ensure that you are able to get your hands on the necessary funds. If you are only able to get a small deposit together, which is the norm for most first time buyers with little in the way of savings and no previous property from which to take equity, then you will most likely end up with a mortgage that has a high rate of interest attached, which means far higher monthly repayments.

On the subject of monthly repayments, you also need to make sure that the monthly repayment that comes with the mortgage that you want to apply for is comfortably affordable. Repossession levels have soared over recent months, with more and more homeowners struggling to make repayments on their mortgage loan.

In order to minimise the risk of becoming a victim of repossession you should ensure that you can manage the repayments on the mortgage loan comfortably, bearing in mind that you will also need to budget for things like bills, council tax, food, home insurance, and other costs.

You will also need to determine the type of mortgage that you want, and this can prove difficult in the current climate. On the one hand, interest rates have plummeted recently and are set to continue falling according to many industry officials, which means that you could fare better with a variable rate mortgage. However, on the other hand if you want to enjoy the peace of mind and stability of having the same repayments every month without any fluctuation then you may prefer to go for a fixed rate deal.

Before you take the plunge and apply for a mortgage make sure that you do your research thoroughly and compare different deals from a range of lenders. Interest rates have come down considerably over the past couple of months, and whilst some lenders have passed on the full rate cut others have decided not to pass on the full cut, making it even more important to browse and compare mortgages in order to get the most competitive and suitable deal. If necessary, speak to an independent financial advisor in order to get some advice on the type of mortgage that may best suit your needs based on your income and circumstances.