How To Prepare As A First-Time Buyer
There is a lot to do while getting your first foot onto the property ladder. Going in head-first without any knowledge of how to navigate the process can lead to a lot of pitfalls. That's why we have compiled some tips together to give you some direction - here are 8 things you should do before buying your first home.
1- Save a deposit
Most lenders will lend a maximum of 95% of the purchase price (known as 95% LTV), therefore your deposit must be a minimum of 5%. As an example, the minimum deposit required to borrow £200,000 would be £10,000.
The lower the mortgage is as a percentage of the purchase price, the better the rates you will be able to achieve.
2- Ensure you have a good credit rating
Lenders will view your credit history when you apply for a mortgage. Having a poor credit rating will instantly rule out a lot of lenders, and those who will accept you will offer higher interest rates to compensate for the increased risk they face from lending to you.
If you have a poor credit score, it is usually worth taking the time to improve your credit rating before applying for a mortgage.
If you wish to proceed despite a poor credit rating, it’s worth speaking to a broker to see exactly what options are available to you.
3- Budget appropriately
Lenders look at how much you spend as well as how much you earn, meaning you can borrow more if you spend a smaller portion of your income.
This would need to be evidenced on your last few months’ bank statements, so it is best to make budgeting a habit
4- Understand how your employment affects lenders’ decisions
If you’re employed permanently, the stable income makes it easier for lenders to understand your affordability. If you earn any bonuses or commission, they will include this, but their methods for calculating your affordability will vary.
If you’re self-employed, lenders have different methods of assessing your income. Find out more about how being self employed affects your affordability.
5- Find out how much you can afford
You don’t want to get too attached to a dream house that you can’t afford- it’s better to understand your affordability now rather than later. For a rough idea of what you can afford as a first-time buyer, you can check out our mortgage finder.
For an accurate idea of what you can afford, you should speak to an expert mortgage adviser who is able to take into account everything relevant to your affordability.
6- Get an Agreement in Principle
An agreement in principle gives estate agents confidence that you can afford the house you’re proposing to buy. This makes you a more attractive buyer and can give you an edge over competing buyers.
If you would like to obtain an AIP, we can provide one for you free of charge.
7- Understand how you want to repay the mortgage
There are several methods of repaying a mortgage. Capital repayment mortgages are the most common, however there are other types such as interest-only you may want to consider.
8- Understand all costs involved
Buying a house as a first-time buyer can involve spending money in a lot of different areas:
- Surveying Costs
- Buildings Insurance
- Valuation fees
- Solicitor fees
- Broker Fees
You should aim to get the best value from what you are willing to spend and should not be surprised by any extra costs you weren’t aware of.
Bennison Brown aim to find the most cost-effective solution for you. This doesn’t always mean the absolute lowest mortgage rate, because we also consider the other costs you will incur during the process.
If you wish to have a free consultation with our first-time buyer mortgage experts, submit your details and we will be in touch. Good luck with the house search!