Buying a property is probably the biggest purchase you’ll ever make. There are a number of stages to go through well before you become the proud owner of a home though and, if you’re a first time buyer, it can be incredibly overwhelming, but our guide is here to help.
In order to be considered for a mortgage, you will generally need to be in some form of either full or part time employment. Mortgage lenders will also consider self-employed applicants, provided you have already submitted a few years of tax returns at the time of your application, however the number of years of filings required may vary depending on the lender.
You scour the credit reference agency’s website, sign up to a free trial - telling yourself it can’t be that bad - and you keep your eyes closed until the page loads. Checking your credit score can be a pretty daunting task. That’s because many people don’t bother checking their credit score until an application is rejected or until they’re planning The Big House Purchase. Lenders will need to check that you’ll be able to keep up with mortgage repayments so your repayment history, amongst other factors such as payday loans and credit card repayments, will all be taken into consideration. It’s ideal to have a high credit score, as you’ll have greater access to better mortgage deals, however your credit score doesn’t need to be perfect either.
If you’re worried about the state of your credit file – don’t be. Worrying won’t change anything but taking real action will. It may take some time to increase your credit rating, depending on the factors that are affecting your score, however there are a number of ways you can improve your credit file, some of which are as simple as enrolling on your local electoral register for instance.
There are different government schemes available to first time buyers, for example the Help to Buy scheme which requires just a 5% deposit, however most lenders will want to see that you have a deposit of at least 10% or more before you start the process of looking for a home. Make a list of key features you’re looking for, such as location, parking, and number of bedrooms, as this usually determines the cost of the home and therefore the amount of deposit you’ll need to save. This way, you’ll have a clear goal in mind and can put together a more realistic and tailored plan to get there.
The government funded Lifetime ISA is a fantastic way to save money towards your first home purchase. You can save up to a maximum of £4,000 per tax year, and the government will add a 25% bonus on top of whatever you save. Comparatively, standard savings accounts don’t offer a huge amount of interest on your savings but it’s also a sensible way to keep your deposit funds separate from your daily spending.
In order to benefit from a LISA in this way, you must be a first time buyer as the funds can only be used towards your deposit or towards retirement, and you must be aged between 18 and 40.
Lenders are human too and they understand that we all should be able to spend money on the things that we enjoy, whether it’s clothes, coffees, or Netflix. And no – we’re not about to tell you that cancelling your subscriptions and not getting a daily coffee is going to get you your dream house because given the madness that is today’s housing market, that’s just categorically untrue. If, however, you’re regularly spending much more than you can afford, going into your overdraft or you’re just a little careless with your spending, it’s worth taking some time out to address the issues. Lenders can excuse coffees and the occasional shopping trip, but that’s only as long as it’s not leaving you short of money at the end of every month.
Mortgage calculators are free to use and can be found via a quick Google search. You’ll need to state your deposit total as well as your income and expenditure, to get a rough estimate of the amount a bank may lend you. Though it’s only an estimate, it’s a great way to find out how much you can afford to borrow for a mortgage before you go for the real thing!
If you’re not sure where to start – your bank could be a wise place to go. You’ll already have built up a bit of a relationship with them and some banks even offer special mortgage deals for their existing customers to reflect this. It might not be the best deal you can get but it’s worth opening up the discussion anyway.
With access to a wide range of lenders and extensive experience in the industry, mortgage lenders will usually be best placed to find you a great mortgage deal that fits your criteria. They also have a broader understanding of the industry and so can explain things to you in a much clearer way. Getting a mortgage can be all-consuming and if you’ve got a busy schedule and not much time to spare, having a mortgage broker on board can take much of the hard-work and stress out of the process. This may come at a small cost though, but prices do vary depending on the broker you choose to go with, and some recoup their costs from the mortgage provider so you pay nothing!
Buying a home is a big deal so it’s okay to be a little nervous! Provided you are staying on top of your savings and keeping your expenditure as sensible as you can - without missing out on living your life completely – that’s all that matters. There are many steps involved in the house buying process but as long as you keep working diligently towards your goal, you’ll have your keys in no time!
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