Understand how much you can afford
Are you a first-time buyer just stepping onto the property ladder? Getting a mortgage can appear complicated so before you even start house-hunting, it’s important to work out how much you can realistically afford – there’s no point making an application that the lender is just going to reject.
We have outlined some hints and tips for you in this blog.
Check your credit score
Aside from affordability, lenders will also want to know how creditworthy you are, and one of the things they’ll check is your credit score. It’s worth checking your score well in advance of applying for a mortgage. If it’s worse than you thought, you may need to spend some time building up good credit history before buying.
Apply for a mortgage in principle
A mortgage in principle is an agreement from a lender to give you a set amount – in theory. It shows that, based on your current circumstances, you’re able to secure finance. In a competitive market, sellers may be much more willing to accept your offer if you have an agreement in hand.
Work out your eligibility for schemes
There are a number of schemes out there to help first-time buyers purchase a home. While offering a helping hand to aspiring owners, most of them come with exceptions that you should make sure you fully understand.
Stay in your price range
It’s one thing to do your homework before house-hunting. But with your dream home on the line, you may be tempted to make a higher offer just to beat out the competition. Make sure you stay within the range of your mortgage in principle, or the range you’ve previously worked out that you can afford.
Update all your address details
Getting a mortgage involves a mountain of paperwork, and lenders tend to check every last detail.
Have evidence of your deposit
The lender will want you to show evidence of your deposit – and you’ll also need to show where it came from. If you’ve been saving up, lenders will want to see evidence of a savings pattern, including at least three months’ worth of bank statements (and often much more).
Know whether your family can help
If you’re struggling to get approved for a loan, you might want to ask for help from your family. It’s worth investigating your options early, so that you and your family don’t need to scramble to make a decision at the last minute. A few potential options are guarantor mortgages or offset mortgages. Both come with risks, so sit down with your relatives to work out exactly what they are and aren’t comfortable doing.
Budget for solicitor fees and application costs
While the deposit is often the biggest hurdle when buying a house, you’ll also need to budget for all the other expenses of buying. Some mortgages have application fees, which could be as high as £900, while you may need to pay a fee to the broker. Your solicitor fees will also need to be paid, as well as the costs of having a house survey done.
Factor in stamp duty
Always use a reputable stamp-duty calculator on-line to work out how much you’ll pay when buying your property in England or Northern Ireland. Until 30th June 2021, you will not have to pay Stamp Duty on properties costing up to £500,000. This will apply whether you’re a first-time buyer or have previously owned a property
Be prepared to pay your exchange deposit
Your offer has been accepted, your mortgage application has been approved and contracts are being exchanged – you’re almost there! At this point, you’ll often be asked to provide an exchange deposit, usually 10% of the property price. Generally, this will be the deposit you’ve saved up to secure a mortgage. The difficulty comes up when you’ve taken out a 95% mortgage, but the seller expects a 10% deposit. You may need to negotiate for a smaller deposit on exchange. If you pull out after you’ve exchanged contracts, you may forfeit your deposit. So if you make it to exchange, make sure you’re in a position to go through with the sale.
Consider using a mortgage broker
As a first-time buyer, it can be daunting to navigate the mortgage process and find the best deal. A mortgage broker can help you find the right mortgage deal for your circumstances, and help you submit the best possible application. There are many very good brokers around to help. 😊