Updated: Oct 20, 2022
As a first-time buyer it’s unlikely you will know anything of the mortgage process with buying your first home. If you do, fantastic! You are ahead of 95% of individuals who start off this process. However, you can know how to help yourself look more favourable as a property owner if you have a good understanding of these three topics.
1. Credit Reports
As with any mortgage, the bank who is looking to lend you the money for your 1st property are looking to ensure their investment in you is as risk free as possible. Therefore, the first thing the banks will do is check your credit file to see how you have dealt with borrowing money in the past.
“But I have never borrowed money! Will I get a Mortgage?”
It's unlikely as Banks want certainty that you can handle the responsibility of using borrowed money before and you must be able to demonstrate this. Paying back within the lenders timeframe and keeping up with repayments will show the bank that you are a low-risk borrower as they have a track record of your commitments and can trust that you will pay your monthly repayments on time.
“How do I show the bank I can borrow money responsibly?”
The best way to go about this is to take out a low limit credit card. Start with a maximum spend of £200 - £500 depending on what the lowest banks will offer you. You must remember this is not your money and will need to pay this back.
How do I spend? Take your casual expenses from your current bank onto your credit card as you know you can pay this off already. Some people tend to put their now very expensive petrol costs onto their credit card and pay it off within 7 days or by the end of the month. This shows the mortgage providers your ability to handle someone else’s money and pay it back in a timely manner.
“Things to AVOID”
Taking out payday loans
Missing payments on your current credit commitments
Having too many credit searches being completed before you look to apply
‘’I want to check my Credit Report but don’t know where to go?’’
Follow the link below to sign up to CheckMyFile. You can try it FREE for 30 days, then £14.99 a month & cancel online anytime.
CheckMyFile produces a detailed credit report that checks data from Equifax, Experian, TransUnion and Crediva.
To purchase a property in the UK you must place a down payment on the property also known as a deposit. This is your own cash sum that the mortgage providers can then use as a security if you default on your mortgage payments. The minimum amount you need in the UK as of today is 5% of the total house price that you are looking to purchase. However, this can fluctuate depending on each individual and their lender. The higher the percentage, meaning the more deposit money you place into the house, the better interest rates you will receive in the return of products offered by the mortgage providers.
3. Knowing Affordability
The next part of the process is knowing roughly how much the mortgage providers are going to allow you to borrow. This is based on your household income, outstanding debts and any relatives or children who depend on the income of those to be named on the mortgage application. For example, if the total combined income is £50,000 the maximum affordability will be around £210,000. This in addition with your deposit amount, as discussed above, gives you your total maximum house price that you can start to go view and make formal offers on to buy.
Be sure to book an appointment with one of our advisors today to have a free consultation to go through your options and understand any of the above in more detail.
29th June 2022