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Everything you need to know as a first-time buyer
7 February 2022

Checklist for first time buyers

Buying your first home is a huge milestone in anyone’s life and it can be a little daunting, especially if you’re not sure what to expect. Here’s a guide to everything you need to know as a first time buyer-from the mortgage process to closing costs and everything in between. So whether you’re ready to take the plunge or are just starting to explore your options, read on for all the information you need!

The Mortgage Depot has provided mortgage advice in Bristol for several years; during this time, we have developed a reputation of being professional and friendly, helping first-time buyers get on the property ladder. Read our latest blog post to find out more. 

The Mortgage Process

One of the most important things you’ll need to do when buying a home is getting a mortgage. Your mortgage is a long-term loan you take out to buy your home, and there are many different options available. So what do you need to know about mortgages?

  • The interest rate: This is the percentage of the loan that you’re charged each year, and it can affect how much your monthly payments will be.
  • The loan term: This is the length of time over which you’ll repay your loan. It can affect what your monthly payment will be.
  • Down payment/closing costs: This is the amount of money that you have to pay upfront to secure the funds, in addition to any fees associated with the closing process itself.
Illustration of houses on a graph.

Types of Mortgages

When you’re looking at mortgages, there are several different types that you can choose from. Here’s what you need to know about your options:

  • Fixed-Rate Mortgage (FRM): With this type, the interest rate on your loan remains constant throughout the life of the loan. However, the downside is that your monthly payments will likely be higher.
  • Adjustable-Rate Mortgage (ARM): With this type, your interest rate can change over time but typically stays within a specific range that you’ll be able to anticipate. For example, some ARMs may have an initial fixed period between 1 and 5 years during which the interest rate will remain at a set amount, after which it can rise or fall. You’ll have to make sure you can afford the monthly payments if the interest rate rises.
  • Balloon Mortgage: With this type, you’ll make smaller monthly payments for a set amount of time, after which you’ll have one large payment to pay the loan off in Full. This is helpful when you’re on a tight budget, but you may end up paying more in interest over the life of the loan.
  • Negative Amortization: With this type, your monthly payments will be lower than what is required to pay off your loan, which can result in negative amortisation if not appropriately managed. This could also lead to a balloon payment if you’re not careful.
  • Interest Only: With this type, your monthly payments will be lower than what is required to pay off your loan each month but still higher than the interest charged on the loan. This means that it’ll take a longer time to pay off your entire loan, and you may have to pay the additional money at closing to pay off the principal.
first-time-buyers-moving-into-new-home

How to find the right home for you

When looking for your first home, it’s crucial to find the right one for you. There are a few things to consider when making your decision:

  • Location: Consider what kind of neighbourhood you want to live in and what’s important to you. Do you need easy access to public transportation? Are you looking for a quiet suburban area or something more urban?
  • Size: How much space do you need? For example, do you want a one-bedroom condo or a four-bedroom house?
  • Style: What type of home do you prefer-a traditional colonial or a contemporary loft?
  • Price: How much can you afford to spend? You don’t want to be house poor and unable to enjoy your home because you’re constantly worried about the monthly payments.

The closing process

Closing costs are the fees and expenses associated with buying a home that you have to pay to finalise the purchase. These costs can vary a lot depending on where you live, but they typically include the title search cost, the appraisal, taxes, and closing agent fees.

One important thing to note is that you should always budget for closing costs, even if you’re using a lender who offers to pay them for you. This is because there are sometimes additional fees that the lender doesn’t cover, and you don’t want to be caught off guard when it’s time to close on your new home.

It’s also essential to know precisely when closing costs are due, which is generally at the time when you sign all of your loan documents and pay any remaining balance on your mortgage. Some lenders may allow you to pay them in instalments, but this usually means you’ll end up paying more interest over the life of the loan.

Piggy bank sat on a dining room table.

Top tips for first-time buyers

  1. Don’t be afraid to ask for help if you need it – There are a lot of resources out there for first-time buyers, so don’t be scared to ask for help from friends, family, or your real estate agent. They’ll be able to guide you through the process and answer any questions you may have. 
  2. Be prepared to compromise – When you’re looking for your first home, you may not be able to find everything on your list. So be ready to compromise on location, size, or style to find the right home for you.
  3. Get pre-approved for a mortgage – This will show sellers that you’re serious about buying a home and have the financial means to do so. It also makes the home buying process easier because you can act quickly when you see a property that’s right for you.
  4. Save up for your down payment – It costs money to buy a home, so make sure you save enough for your down payment and closing costs before looking at homes.
  5. Get a real estate agent – Having an experienced real estate agent on your side will make the home buying process easier and more enjoyable. They can help guide you through the complicated steps of finding, financing, and purchasing a home, and they’ll also know about homes that may be coming on the market before they go public.
  6. Establish good credit – You don’t need perfect credit, but you need a credit score of at least 680 or higher. This will help lenders determine whether you can afford the home you want and whether they’ll be able to approve your loan.
  7. Choose the right lender – Not all lenders are created equal, so it’s essential to do some research before choosing one that’s right for you. Shop around and compare rates, fees, and other details before deciding to find the one that offers you the best deal.
Woman thinking if she can get a mortgage

Contact The Mortgage Depot For Guidance Today

Buying a home is one of the most important decisions you’ll ever make, and it’s essential to be prepared for everything that comes along with it. Our team here at The Mortgage Depot hope this guide has helped you understand what to expect as a first-time buyer and given you some tips on making the process smoother.

If you would like more information on first-time buyer mortgages in Bristol, be sure to get in touch with our team today, we are always more than happy to help in any way we can. Or check out our frequently asked questions right here. 

Office: 01172 909 020 | Mobile: 07375 411 532

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