First Time Buyers – Getting your Mortgage Application Right
Buying your first home is a really exciting time and a huge milestone in life to achieve, but it can also be an incredibly daunting process – with lots of options to consider and a huge financial commitment in the balance, it might leave you questioning the best route to take in order to secure your first property.
What’s the first thing you should do?
As a first time buyer, knowing where to start can often be the most challenging hurdle to overcome. Speaking to a mortgage adviser is a great way to start your home-buying journey off on the right foot, but there are a few things you can consider before you even pick up the phone to a mortgage broker.
It’s a good idea to think about what you think you can afford to spend each month on a mortgage. Having a realistic budget planner set out which lists your outgoings and income can help you work out how much you would be comfortable setting aside for your mortgage – along with the general costs of the upkeep of a property and the insurance you will need to protect your home and the belongings in it.
We also advise that you make sure all your personal details are in order and by this we mean ensuring you’re registered on the electoral roll and checking your name and address is correct on documentation such as your bank statements and driving license. If you come to apply for a mortgage and your personal details are not correct across the board, this can cause a few issues and delays in the process.
Once all of the above is in order, you can then approach a mortgage adviser to begin the mortgage process.
What can a mortgage adviser do for first time buyers?
As their name would suggest, mortgage advisers are there to help you through the entire process. Once you go to them with your budget sheets and documentation, they can build on this and let you know exactly what you can afford to borrow as a mortgage. It’s at this point you can start to look at houses that cost in the region you can afford.
A mortgage adviser works with a panel of lenders as opposed to a bank which usually only offers you a limited range of mortgage products. The market access brokers have means they can match you with a lender that best suits your personal and financial circumstances
Due to the coronavirus outbreak, the minimum deposit you would need for a first time buyer mortgage is 10%, with 15% being a preferred option with most lenders. Pre Covid, there were options of a 5% deposit but this is currently not being offered by lenders due to the risk level associated with the pandemic.
The money for your deposit can be generated in a number of ways, such as savings or gifted deposits from a family member. If you are going down the gifted deposit route, generally this will need to be from an immediate family member and they would need to sign confirmation that the money was a gift to you.
Once you have approached a mortgage broker and saved your deposit money, they would then work with you and their board of lenders to secure you a decision in principle.
A decision in principle is essentially a lender taking your information and giving you a mortgage offer based on that, as long as everything checks out and remains as it was. A decision in principle is not a guarantee, but it does stand you in good stead when it comes to your full mortgage application.
It’s at this point you can start to look for houses with the confidence that you would be in a good place to proceed with a full mortgage application once you have found the right property for you.
It’s important to note that you will need a decision in principle before you put an offer on a property and currently, some estate agents aren’t actually letting people view houses if they haven’t got a decision in principle due to the risk of coronavirus and limiting the number of people going in to view a property.
How can you increase your chances of mortgage success?
Despite having all the right documentation correct and ready to show to a lender, there are other steps you can take to put you in a strong position when it comes to securing a first time buyer mortgage.
It’s really important you check your credit file and ensure it’s in a good place before you approach a lender, as their decision will be heavily influenced by your credit rating and credit history. Once you have checked your credit file you can then work to improve it if necessary, in order to increase your chances of getting accepted.
Not having any credit at all can also have a negative impact on your mortgage application, as lenders like to see you can manage credit responsibly. Even if you take out one or two credit cards and put a small amount on them monthly, paying them off in full, this can help build your credit rating and increase your options when it comes to the mortgage lenders willing to lend to you.