Securing a mortgage is an increasingly challenging task for first-time buyers, with soaring house prices and rising interest rates in the wake of the pandemic. However, there are many schemes in place to help new buyers get onto the property ladder.
Here’s five top tips to help first-time buyers secure a mortgage.
Save a deposit
Perhaps the most challenging – but also important – step in buying your first home is saving a deposit. You should aim to save around ten per cent of the property value, although the higher your deposit, the better your mortgage will be.
There are plenty of ways to save your deposit faster. Taking out a government-backed bank account, such as a Lifetime ISA, means the state will top up your savings by 25 per cent to help you purchase your first home. Loans or gifts of money from family members is also a common way to boost your deposit, and cutting back on unnecessary outgoings like meals out, gym memberships and holidays in the short term can help you save faster, too.
If you’re struggling to save, the government has launched a 95 per cent mortgage scheme to help first-time buyers get on the property ladder.
Audit your total income
It’s essential to know exactly how much money you’ll have coming in to calculate what mortgage you could secure. You should work out your net income (total income after tax) for your household. It’s then important to work out your essential monthly outgoings, such as food, travel costs, insurance, bills, phone contracts and healthcare to see an accurate picture of how much you have to spend each month.
Mortgage lenders will need to see this when reviewing your mortgage application.
Hold off changing jobs
If you’re thinking of changing jobs, it might be best to wait until after you’ve secured your mortgage. Many lenders like to see a history of secure employment, such as a minimum of three-six months in your current job or multiple years of financial history for self-employed people.
Improve your credit score
Mortgage lenders take your credit score into account when you apply. Remember that if you are purchasing your property with others, all of your individual credit scores will be assessed. There are several steps you can take to improve your score and get a better mortgage deal.
- Join the electoral register if you haven’t already
- Pay off outstanding debts
- Take out a credit card and make payments on time
- Separate finances from poor scoring partners, family or friends
You should start working on your credit score as soon as possible before buying your home. If you have a poor score, you’ll struggle to find a willing mortgage lender.
Speak to a mortgage adviser
Speaking to a mortgage adviser will help you understand exactly what mortgage deals you’ll be eligible for. Mortgage advisers are independent experts with access to deals that aren’t on the high street, so utilising their professional knowledge will give a clear idea of what you can and can’t afford based on your circumstances.
Many advisers provide fee-free advice, so it doesn’t need to cost you anything, either.
For professional advice on securing your first mortgage, get in touch with our in-house mortgage adviser at Graham & Co today.