First time buyers guide to mortgage success
Getting a mortgage for a first time buyer has become more difficult over the last few years, following on from the banking crisis and credit crunch. However it is possible, but to do this first timers do have to get their finances in order to give themselves a better chance. A lot of this is due to the affordability tests that were introduced a year ago by the City regulator the Financial Conduct Authority.
Many first time buyers who thought that they had saved up a reasonable deposit suddenly found that the latest detailed mortgage application process had become extremely complicated. However it is not all doom and gloom as there are definite signs of a thaw and with mortgage rates falling fast, if first timers follow some simple steps, they could be well on their way to getting a foot on the housing ladder.
Save, save, save
The first and possibly the most obvious thing an applicant should do is to save, it is highly unlikely that any first time buyer with have a 40% deposit, but by putting down 10% instead of 5%, or 15% instead of 10% you will see a marked falling off in the monthly re-payments. Find a mortgage provider who has a regular savings account which will pay a better interest rate, Nationwide is one such provider offering a savings account which will to help first-timers boost the size of their deposit.
Get your finances in order
It is vital that a first time buyer gets their personal finances in order, if you can only put down a small deposit it is certain that the provider will scrutinise your application and they will want to be sure that you will not default on the loan. Check your credit rating; this is easily done through one of the main credit reference agencies, examples of which are Callcredit, Equifax and Experian.
Be honest and don’t overstretch yourself
Be brutally honest with yourself, you must face up to the affordability challenge that lies ahead. When this was introduced a year ago, lenders were so terrified of being accused of ‘irresponsible lending’ that they took a forensic approach to it, looking at bank accounts and taking into account everything from haircuts to gym memberships before deciding whether the applicant could really afford to repay the mortgage.
But it is still important to road-test your bank account in the run up to applying for a mortgage; take a look at your last six months spending and cut out unnecessary items in order that you have plenty of cash at the month end to service the mortgage.
Shop around for the best deals
Finally shop around, it is a myth that lenders do not want to lend to first time buyers, plenty do and a broker is possibly the best route to take as they examine applications on an individual basis. Also they know the types of property different lenders prefer and which will be the most relaxed on affordability scales.
Good luck with your application and if you follow these simple steps, your chances of success will be far higher than just walking in and hoping your smile will do the trick.