For most of us, buying a house is the most significant financial transaction that we will ever make.
Before you can start thinking about what the right purchase is though, you will need to have a mortgage in place. Unless you are a property speculator the process of buying a house is an unfamiliar one and it is easy to become confused by technical jargon. First time buyers are particularly vulnerable, in their excitement to get that foot on the ladder they are suggestible and overly dependent on the advice of others. Fortunately, there is now more secure legislation in place to ensure that the mis-selling is no longer possible.
The process of taking out a mortgage is still one that is challenging and emotionally exhausting and once the mortgage is in place there are many obstacles to overcome before you can take possession of those front door keys. A third of all first-time buyers had a property sale fall through, costing on average £1,545.
Check your eligibility
However much you want it, can you really afford to take on a mortgage? If you’re buying your first home, moving home or wanting to re-mortgage, you can use a mortgage eligibility checker without impacting your credit score. This service is only available for UK purchases and not for those intending to buy to let or for commercial properties. It is also not appropriate if you are using a government help to purchase scheme. An eligibility check is a ‘soft search’ on the factors which mortgage providers use to determine what they are prepared to loan you and at what rate of interest. Among these factors are, the amount you wish to borrow, the size of your deposit, your credit history, employment status, income, expenses and dependents.
Check your credit rating
Mortgage providers will check your credit rating with one of three providers: Experian, Equifax and Callcredit. You are entitled to one free credit report from each of these credit reference agencies. If you find inaccuracies in your credit report it is important that you contact the credit agency immediately. These credit agencies use the electoral roll as a key source for confirmation of identity and therefore if you have not registered to vote you may have difficulty in obtaining a mortgage. If your credit rating is poor you should try and improve it before applying for a mortgage because otherwise you will face high interest rates or even refusal. Pay all bills and credit card repayments on time and demonstrate to a potential lender that you can manage your credit responsibly.
Save as much deposit as you can
Saving a deposit demonstrates that you have a disciplined attitude toward money. Although you may feel that with the continual rise in house prices you can’t afford to wait, the bigger the deposit you can make, the better the rate of interest that you will be able to secure.
Ensure that you are aware of the range of help to buy schemes
There are new initiates in the pipe-line and they are not all aimed at first time buyers. A ‘Help to buy ISA’ is a tax-free savings account to which the government will add 25% when you buy your first home. A ‘Lifetime ISA’ is open to anyone between the ages of 18-39 and will also provide a 25% government bonus on the purchase of your first home. By joining a shared ownership scheme with a housing association, you can reduce the cost of your house purchase by buying a share of your home of between 25% and 75%.