Today, it’s more difficult than ever for younger people to get their first mortgage. This issue tends to be due to the huge deposit that is required to put down on a property, even with the help of the government’s help-to-buy scheme. However, if you do have the money for a deposit, that’s still only the first step. When it comes to buying your first property, there are several different things you’ll need to consider when pursuing this monumental purchase.
Understand Your Own Finances
Deciding on the value of a property you can afford will be based on how much money you have for a deposit. Usually, this is around 10% of the value of the property, as well as how much you’ll be able to afford to pay monthly based on your salary and other regular income.
While you can pay more than 10% to reduce those monthly payments, scraping together that money can be a challenge for most. Do some research to identify what you can afford to borrow for your mortgage, and you can progress from there. Remember that you could be entitled to government help as a first-time buyer too.
Avoid Switching Jobs If Possible
When you’re applying for a mortgage, you’ll quickly learn that this process is incredibly strict and is full of hurdles and challenges. The checks that a bank will make on your finances can feel very invasive, but really the aim here is for banks to understand whether they can safely trust you to keep up with your mortgage repayments. There have been many occasions where individuals have been in the process of buying a house only to change jobs, causing the bank to rescind their mortgage offer.
This may be quite unfair, and it can be seen as a knee-jerk reaction from the bank. However, it’s their prerogative to do so. A bank is searching for stability when it comes to giving you a mortgage, and switching jobs, even if it’s a higher salary, can make lenders nervous. Stick with your current job during this process if possible, or you could increase the risk of your lender changing their mind.
Work On Your Credit Score
As a mortgage is a loan, banks will also base their decision to lend to you on your credit score. If you have a bad credit score, for whatever reason, the chances of you getting a mortgage via normal means will be slim to non-existent. However, there are some mortgage experts like those at Money Nest who specialise in finding mortgage brokers for those with poor credit scores.
Bad credit is caused by failing to repay loans and debts, which demonstrates to other lenders that they should think twice before lending to that person. It’s worth also looking at ways in which you can boost your credit score before you apply for a mortgage. Check your score using free services like Experian, and then start finding ways to improve it.
Pay Off Your Debts
This is one way in which you can guarantee a good credit score. Paying off your debts on time is an essential part of maintaining a good credit score, but it’s good to get as many of those debts paid off in their entirety where possible before you start your mortgage application.
Large loans and debts can seriously impact your chances of being accepted for a mortgage as a lender may worry that it will be difficult for you to juggle multiple large repayments. Applying for a mortgage can be somewhat of a balancing act but try to get yourself into the best position possible as this will show responsible management of finances.
Buy With A Partner
While this might seem obvious, buying a property with someone else, such as a partner or family member, will theoretically increase the amount you’ll be able to borrow, as the mortgage will take into account both of your incomes. Of course, this also increases your ability to save up a deposit too. Their credit score will be considered as well, and if they have a better salary combined with a great score, it’ll increase your chances of having your mortgage application accepted.
Proof Of Income And Finances
When you apply for a mortgage, a lender will want to have official proof of what you earn. This will come in the form of a P60 from your place of work, showing your monthly income, including tax deductions. It’s also possible to get a mortgage if you’re self-employed, and you’ll need to prove your income in other ways. It’s not only income that they’re concerned with here, and there is another reason why this can feel like an invasive process.
A lender will usually ask for bank statements as well to see what you spend your money on and whether or not you are sensible with your money. Try to be smart with your spending as early as possible before applying for your mortgage to show how well you can manage your finances. In general, a lender will ask for three months of prior bank statements so getting started early really is a good idea.