Home Loans for First Time Buyers: Ways of Finding the Best Online Mortgage Quote

Buying a house for the first time can be a daunting prospect. There are hundreds of mortgage providers from online mortgage lenders to specialist providers to smaller brokers, all actively searching for business from first time buyers. A mortgage search can be confusing but a good start is to know what competition is out there, what costs are involved and how to get the best deal.

Getting a Quick On Line Mortgage Quote

These days, most mortgage lenders provide a mortgage calculator online which is quick and simple to use. The information is generally for illustration purposes only and does not contain all the details necessary to make a full application, but this initial quote will give a prospective first time buyer an idea of costs, repayment terms and interest rates.

Once the prospective home owner has a mortgage quote best suited to his or her needs, the quote can be saved and a Key Facts Illustration obtained. A mortgage company is obliged to provide an applicant with a KFI before proceeding with the mortgage application. A KFI is a full quote and contains details of all costs, fees and charges involved and will allow the potential buyer to compare the costs and features of different mortgage lenders easily.

As a First Time Buyer, How Much Deposit Will Have to be Paid?

The amount of money needed for a deposit will depend on factors such as the buyer’s credit history, type of mortgage and the value of the property. Typically, first time buyers need 5% of the property value, although a deposit of less than 10% may mean higher lending charges.

If a first time buyer is unable to come up with a deposit, he or she may want to consider Guarantor Mortgage, which enables the first time buyer to appoint a guarantor (typically a parent or guardian) to the mortgage application.

What Other Costs are Involved?

In the UK, first time buyers can expect to factor in costs such stamp duty, legal fees, a mortgage indemnity guarantee, lender’s valuation fee, survey fee and insurance. These fees can come to a total of approximately £4000 on a £100 000 property.

What is the Best Mortgage for a First Time Buyer?

There is a huge variety of mortgage loans on the market. The majority of first time buyers choose a fixed rate mortgage or tracker mortgage. A mortgage website or finding specific online mortgage lenders is the best place to start researching all the possible options.

The potential buyer should compare at least three results. If the process seems overwhelming to a first time buyer, it may be a good idea to involve a mortgage broker, who will shop around on behalf of a client to find the best mortgage lender and negotiate the best rates and terms.

What are the Alternatives to a Bank Loan? Money Problems? Zopa Loans, Payday Loans & Debt Solutions

The majority of people seeking to borrow money turn to a bank loan. However, numerous individuals have a bad credit rating or don’t wish to borrow from a financial institution for ethical reasons. Alternatives to unsecured bank loans include: secured loans, payday loans, family loans and Zopa loans.

Is Bad Credit the Reason for Loan Rejections?

Whilst a bad credit rating has always been an obstacle to getting a bank loan approved, millions more loan applications are being rejected for a different reason. Bankers have grave concerns regarding whether bank loans will be repaid by those seeking to borrow money. They are worried by the state of the economy and the number of people that are going to be made redundant.

Zopa Loans Vs Bank Loans

Zopa loans offer a service that is similar to a bank loan, but people lend to people instead. Although Zopa loans specialise in customers that have good credit, they offer a lower rate of APR than is normally available via a bank loan.

Family Loans and Money Problems

Choosing to borrow money via a family loan is an ideal solution to money problems. Not only will a family loan ensure that a borrower gets a low APR relative to a bank loan, it also means that those with a bad credit history won’t need a credit check to get approval.

Secured Loans and Bad Credit

Whilst those with bad credit won’t normally be able to get an unsecured bank loan at a low APR, a secured loan may provide the answer. Whilst a secured loan can help with immediate money problems, it also gives creditors more rights in the event of loan default.

High APR Payday Loans for Bad Credit Customers

Whilst payday loans help those struggling with money problems, like paying the rent or mortgage, they charge a high APR. Given that almost all customers have bad credit, expect the rate of APR on payday loans to be upwards of 1000%. Payday loans are a no credit check loan and the rate of interest reflects the risk that the lenders are taking on.

Clear Money Problems with a Debt Solution

Taking out a bank loan when someone has bad credit can prove to be a costly exercise. Unsecured bank loans are available for bad credit customers, but they charge 50-60% APR. It may be more sensible to pursue a debt solution, such as a debt management plan or Individual Voluntary Arrangement. A debt solution may resolve money problems quicker than a bank loan.

Those struggling with money problems and bad credit may discover that a debt solution is a more sensible option to a further bank loan. Before proceeding with any debt solution, it is advisable to seek debt counselling to ensure that the correct choice is made.

Bad Credit Car Loans Guide: Which Source of Adverse Car Credit is Preferable?

Adverse credit can occur as a result of something as trivial as a single, missed payment to something more serious, such as being declared bankrupt. Bad credit entries are registered with all three credit reference agencies – Experian, Equifax and Call Credit – and stay on personal credit reports for 6 years.

Is a Bad Credit Car Loan Possible?

A bad credit car loan is definitely possible, but this variety of car finance will attract a higher rate of APR. It also means that certain sources of borrowing are not available. Bad credit isn’t a problem if sufficient disposable income is available, but it is important not to avoid a high debt to income ratio.

Car Finance Companies

There are a number of car finance companies that specialise in bad credit car loans. They make buying a car possible, but they charge a higher rate of APR. The loan is secured on the car meaning that it doesn’t belong to the borrower until the last bad credit car loan payment has been made.

The main thing a bad credit car finance company will be checking for when lending money is affordability. Adverse credit is expected as it’s the foundation of their business, but being on the borders of affordability isn’t. A high debt ratio increases the risk of default.

The price range of available cars is diverse so buying a car is a straight-forward process for virtually all income groups. Repayments can be spread over several years, but the high interest payments mean that it is sensible to minimise the term of the bad credit car loan to reduce the interest burden.

Buying a Car with an Unsecured Loan

Regular unsecured loans will be available at slightly higher rates of interest to those with minor adverse credit, such as missed payments. If a missed payment was the reason for the bad credit, it will still be possible to get a car loan.

Those with multiple missed payments, defaults and CCJ’s may be able to get an unsecured loan, but the rate of APR will be a usury rate of about 60%. It simply isn’t advisable to get a bad credit car loan at these rates as the interest payments will test the boundaries of affordability.

Buying a Car with a Secured Loan

Those who can’t get an unsecured bad credit car loan may wish to consider taking out a secured loan. The fact that the car loan is secured on a person’s home results in a lower rate of APR. Always remember that the family home can be repossessed if repayments aren’t maintained.

Adverse credit will mean that a bad credit car loan will be more expensive. If in desperate need of a car loan, it is strongly advised that a car finance company is approached. This is vastly preferable to a secured loan due to the risk of default and resultant repossession.

How is a Credit Score Calculated?: The Factors that the Credit Powers-that-be Really Care About

Credit scores have become increasingly important in the last few decades. A mysterious number that somehow represents an individual’s trustworthiness is now virtually the sole factor behind whether or not a loan for a car, house, or big screen TV will be issued, and at what interest rate. Once realized, this fact suddenly leads consumers to consider a three-digit number to be of extreme importance, and questions arise.

How are these numbers calculated? Which factors make the biggest negative impact on a score? Should a credit card be canceled once it is paid off? Should credit of all kinds be avoided at all costs?

Answers to these questions can be difficult to find, and there may not be a clear answer to all of them. The exact formulas used to calculate credit scores are closely guarded, and every bureau and organization that deals with credit uses its own equation, though a company called FICO is generally considered to use the most standard and correct calculation method. However, knowing what makes up a credit score and how much a credit mistake affects that score goes a long way to helping everyone better control the future of their credit purchases.

Credit Vocabulary

Before reading further, it is important to be familiar with two basic credit terms and their meanings.

  • Credit Bureau – a company (not a government entity, but a for-profit business) that collects credit information about consumers and calculates credit scores. The three best-known and most often used bureaus, commonly referred to as “the big three,” are Equifax, Experian, and Trans Union. Credit bureaus make a large portion of their profit from creditors that pay for credit information on potential customers that need loans.
  • Creditor – a company or entity that loans money to consumers. Creditors are usually banks, but they can also be retail stores, automobile manufacturers, or anyone that loans money. Creditors provide information about those they loan money to to the credit bureaus so that records can be kept and scores calculated. Not all creditors, however, report to credit bureaus.

Payment History

The factor that tends to make the biggest difference in a credit score is payment history. This is basically a record of every payment made to a creditor or other bill-issuing company that reports to a credit bureau. When a payment is late, a negative mark is added to the responsible party’s credit report, and the credit score is affected. Late payments are usually not reported until they are 30 days or more overdue, though this is not always the case. Payment history makes up about 35% of a credit score.

Credit Utilization Ratio

Credit utilization is the percentage of available credit that is being used, and it’s the second most important credit factor. If a credit card offers a $1,000 line of credit, and an item that costs $500 is charged to the card, the utilization ratio is 50% because half, or 50%, of the total available credit is being used. This gets a little more complicated when there are multiple credit cards involved. Basically, in this case, the total available credit on each card and the total used credit on each card are added together, and a total utilization percentage is calculated. The lower the ratio percentage is, the better.

For example, if three credit cards are listed on a credit report, and they all have $1000 credit limits, the total credit limit for all three cards would be added together, making $3000. If one of these cards is maxed out at $1000 but the other two have $0 balances, the total utilization ratio would be 1000/3000, or 33.3%. If one of the $0 balance credit cards is canceled, the new ratio would jump up to 1000/2000, or 50%, because $1000 dollars of available credit was lost when the card was canceled.

This is why it is not always a good idea to cancel a credit card that has been paid off, especially when other cards that still have balances are still in existence. A good utilization ratio is believed by some to be anything less than 15%, but the lower the ratio, the better. The credit utilization ratio makes up about 30% of a credit score.

Length of Credit History

Length of credit history is how long an individual has been using credit. This usually starts on or near the date that a person opens their first credit card, loan, or other credit account. The longer a person has been using credit, the better. Length of credit history makes up about 15% of a credit score.

New Credit

New credit is how many new credit accounts have been opened recently, generally within the last six months to a year. When a number of credit accounts are opened at once, creditors worry that this could be because a person is having financial difficulties and may have trouble paying off all of the recently opened accounts. Any more than one or two credit accounts opened within 6 months could send a red flag to the credit bureaus and cause a lower credit score. New credit makes up about 10% of a credit score.

Types of Credit Used

Types of credit used refers to the mix of credit card, auto loan, mortgage, and other loan accounts opened. If only one type of account has been opened, credit bureaus don’t think this accurately represents a person’s ability to promptly pay all types of loans.

For example, even though a person has proved that he or she can pay a $150-a-month auto loan promptly each month, it doesn’t mean the person will do just as well with a $700-a-month mortgage. Therefore, a good mix of credit accounts that are payed on time will help this section a credit score, while simply a credit card or auto loan may not. Types of credit used makes up about 10% of a credit score.

Check credit reports from each bureau yearly to keep tabs on performance in each of the credit areas. A free credit report can be obtained from each of the big three credit bureaus on a yearly basis by heading to annualcreditreport.com.