Buying your first house is a massive step: from working out what you can afford, to getting your first time buyer deposit together, there’s a lot to think about. There is plenty you can do to help you make the first step of getting your mortgage application accepted successfully. Follow our steps for help in getting your first mortgage.
1. Find out, “What is my Credit Score?”
When you apply for a mortgage, your lender will look at your credit history, so it’s a good idea to find out your credit score. Every credit agency uses a different system, but having the best credit score will mean you are more likely to be offered the best choice of lenders and mortgage rates. How you have managed your money in the past, such as borrowing on a credit card or a car loan, including missed payments, will affect your credit score.
2. What affects your credit score? – Improve Your Credit Score
If you need to improve your credit score, make sure you make regular repayments on time; consider getting a credit builder card and register on the electoral roll. It’s also worth checking to see if your credit report has any errors and then have those corrected.
It is important not to have too many credit searches carried out against you as this will affect the way that your application will be assessed and scored.
3. Work out Your Budget
As a first-time home buyer, the most important thing to consider is how much you can afford to pay each month. There is no point making an application that will be rejected by the lenderor that doesn’t fit within your acceptable budget.
It’s a good idea to put together a budget planner before you start looking for a property, remembering you’ll still have to cover everyday costs, such as gas, electricity and groceries. We have a budget planner on our website (at the bottom of the page) that you could use.
In addition to your monthly costs, there are the costs of actually buying the home – surveyor’s costs, solicitors, moving fees, removal costs and stamp duty, to name just a few.
We can guide you through these if you contact us.
4. First Time Buyer Deposit
The bigger first time buyer deposit you have, the more options you’ll have when it comes to choosing a property. A 5% first time buyer deposit is the minimum required, however, a bigger deposit of 10%, 15% or 20% of the property value would be better and get you lower mortgage rates. There will also be more of a choice of lenders that we can apply to (also, potentially increasing the amount that you can borrow as often lenders will lend more with a bigger deposit).
Some government schemes allow a 5% deposit, such as the Help to Buy First Time Buyer Scheme, where you can get a government loan on top of your mortgage. It is interest free for 5 years, but can only be used on new build properties and the current scheme is due to end later in 2022.
Remember, the bigger the deposit you have, the more competitive the mortgage deals are with lower interest rates. The more money you have to put towards a property, the less of a risk you pose to mortgage lenders. As well as the Help to Buy first time buyer scheme, there are other schemes available. Contact us for further guidance.
5. An ‘Agreement in Principle’ (AIP or DIP) from a lender
When you’re ready to apply for a mortgage, you’ll need an ‘Agreement in Principle’ which is a simple way to find out how much you can borrow. Not only that, it will put you in a good place when you’re making an offer. However, it’s not a commitment to anything and you’re not tied to a particular type of deal, nor is it a guarantee you’ll be able to borrow the money.
We can arrange this for you, advising on the best place to obtain one and minimising the number of credit checks being done in the process (multiple credit checks can lead to issues, so we would usually apply to a single lender initially, later shopping around when you find a property)
6. Stability in Your Job
Most lenders will want to see that you’ve been with your employer for an amount of time before they’ll offer you a mortgage, also that the position is a permanent one. Some will consider lending during probationary periods i.e. if you have just started a new job but it’s advisable to have been in your current job for at least three to six months before applying for a first-time mortgage. This is so that you know you will have a stable income and be able to maintain the future mortgage payments.
7. Proof of Income
Mortgage lenders will require proof of income. You’ll need a P60 which you receive each year from your employer and shows a summary of pay including how much tax has been deducted.
You’ll also need three months’ worth of payslips, plus ID and bank statements. If you’re self-employed, a lender will usually ask to see an SA302 form or your full accounts for the previous two years.
8. Buy a Property with Someone Else
It may be easier to buy a property with someone else. It’s certainly easier to save for a bigger deposit if there are two of you saving. It could also boost your chances of securing a decent mortgage, if they’ve got a better credit history and a higher income than you. Once you’ve discussed buying a house together, it makes sense to have a legally binding document that each party must stick to no matter what the future holds.
9. Remove Any Financial Links You Have With Another Person
If you’re financially linked to someone else, with a joint bank account or loan for example, but you now have nothing to do with them, then remove yourself. You could still be linked to old university flatmates if you had a joint bank account for bills, so it’s worth finding out if their credit history has affected yours.
Any late payments or wrongdoing they’ve committed could reflect badly on you, so get in touch with the credit agencies and ask for a ‘notice of disassociation’.
10. Get Help With Your Mortgage
It can be difficult to know what you’d be eligible for or how much you can borrow, so it’s a good idea to get the help of an Independent mortgage broker.