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First-time
buyers |
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Being a first-time homebuyer
can be very stressful for a variety of reasons.
Yahoo! Finance writer, Sarah Modlock, offers advice
and information for first-time homebuyers, in her
March 1, 2006 article, “Help for first-time
buyers.”
The Council of Mortgage Lenders (CML) reports that
up to half of all young first-time homebuyers are
getting financial support in some way, to use towards
a down payment or monthly
loan payments.
“The CML's research
estimates the level of savings that first-time buyers
could reasonably have accumulated, and compares
this with their actual deposits. Over the past decade,
the proportion of first-time buyers whose deposits
were higher than their plausible savings has jumped
from under to 10% to nearly 50%.”
The CML classified first-time buyers into four different
groups; unassisted, assisted, true and returners.
Only returners are classified as individuals who
are over 30 years old.
“Unassisted”
first-time buyers use their own savings for a deposit.
They often have high incomes, but buy relatively
inexpensive properties. These buyers usually make
low deposits with high percent advances and borrow
a “medium-level income multiple.”
“Assisted” first-time buyers tend
to receive additional funds from outside sources
that they use, along with their own savings, for
a deposit. “They tend to have low incomes,
but buy medium-value properties with high deposits
and high income multiples, and low percent advances.”
“True” first-time buyers are
apt to have high incomes, high deposits and buy
more expensive properties. They borrow on medium
percent advances and medium income multiples.
“Returners” aged over 30, “have
previously been home-owners but are classified for
survey purposes as first-time buyers because they
have taken a break from home-ownership. They tend
to have medium-level income, high deposits and low
percent advances. They buy high-value properties
on medium income multiples.”
“While
older generations are able to raise funds from converted
equity and other sources, the assisted route remains
a viable option for many young first-time buyers
with willing families. But if for whatever reason
these sources dry up, the importance of unassisted
first-time buyers is likely to increase, and the
affordability constraints they face will be brought
into sharper focus,” said senior CML statistician,
James Tatch.
These classifications are important because they
are what lenders usually group first-time buyers
into. Even though, “Lenders assess each application
on its own merits, to manage the risk in each case.”
“Home
buying can be quite daunting when doing it for
the first time,” said Duncan Pownall, mortgage
development manager for Bradford and Bingley.
“So it's vital buyers fully research the market,
understand what they can afford and visit a mortgage
adviser as soon as possible to talk through
the different options available to them. Budgeting
and seeking the right advice is key.” |
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