Last month saw the lowest mortgage approvals since this recession started back in 2007. First time buyers are still struggling to get on the property ladder and some of the latest information suggests that the average age of a first time buyer is 37, this is frightening.
With first time buyers’ stamp duty holiday on property costing less than £250,000 set to become permanent, more homes coming onto the market in the wake of the abolition of Home Information Packs and a few green shoots of economic recovery poking through, now could be the ideal time to take your first step onto the property ladder.
The biggest problem is getting a mortgage – and being able to afford the repayments. This quick guide highlights some dos and don’ts on your journey to your very own front door.
1. Work out what you can afford
Don’t overstretch yourself – work out what you can afford in mortgage repayments, then add a margin to take account of probable interest rate rises in the near future. Don’t bank on getting a decent pay rise, a major inheritance or a win on the lottery. Work with the money you have, not what you want.
2. Remember the extras
The cost of your property doesn’t stop at the purchase price. Remember to include surveyor’s, solicitor’s, land registry and mortgage arrangement fees. You’ll also need money for any building work, fixtures, furnishings, decorating, buildings and contents insurance – even setting up new utility accounts.
3. Take a reality check
Start by studying your credit report, which lists your credit accounts and repayment history. Lenders look at it when they decide whether to make you an offer and it can influence how much interest they charge, so if it’s littered with missed repayments or shows that you’re already stretched, you need to do some work before you apply for a mortgage. It’s free to see your Experian credit report with a 30-day trial of CreditExpert.
4. Save, save, save
You’ll need at least 15 per cent of your new home’s purchase price in cash if you want any choice of mortgages – and 30 per cent will give you a much better chance of a good deal. So save every penny until you’ve got a decent deposit.
5. Swallow your pride
Around 80 per cent of first-timers under 30 get financial help from their parents or other relatives, according to the Council of Mortgage Lenders*, so don’t be too proud to ask. Even if they can’t afford to contribute to the price of your home, they may be happy for you to move back into the family home for a while, so you can bank the money you were spending on rent.
6. Consider your options
If you can’t afford to go it alone, you might want to consider buying with friends or joining a shared equity scheme, in which an organisation such as a housing association retains a proportion of the value of the property you buy – you may need to pay some rent as well as your mortgage if you take this route. The Government offers similar schemes for key workers. Your local council or housing association can tell you what’s available in your area.
7. Make yourself attractive
Lenders want to see that you’re a reliable borrower who makes repayments on time and in full and can comfortably afford a mortgage. So correct or challenge any errors on your credit report, make sure you never miss a repayment, try to reduce your debts and close accounts that you don’t use – they could be a target for an identity fraudster. Lenders also like stability, so it’s a good idea to register to vote, especially as they use the electoral roll to check that you live where you say you do.
8. Do your research
Spend time on Internet personal finance sites and reading newspaper supplements or specialist magazines until you have a good idea of what’s available. You should also visit price comparison sites s for an idea of the kind of offer you might get.
Finally, it’s worth talking to an independent broker who has access to the entire mortgage market and can give professional advice on what might suit you best.
9. Be decisive
Only apply when you’re clear which mortgage you want – taking the scatter-gun approach in the hope that someone will say yes could actually damage your credit rating and your chances. Every application triggers a search of your credit report that leaves a record. If other lenders see a lot of these, they may assume you’re desperate or even suspect a fraud. If you want a clear indication of the type of deal you might get and you know the interest rate will be liked to your credit score, ask for a quotation search instead.
10. Manage your credit status
Before you make that crucial mortgage application, check your credit report again. It changes over time, as your circumstances change, so you need to be sure that it reflects all your hard work and shows you’re a desirable borrower. Then go ahead – and good luck!
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