If you’re considering buying your first home, the most important step is to consider how your finances will be affected and how you can secure the best mortgage deal for your needs.
Here are our top tips for ensuring you are ready to buy before you begin your house hunt:
- The first thing you need to do is work out your budget. You can use an online mortgage calculator for a rough idea of the amount you will be able to borrow and how much it will cost, based on your savings and your income.
- In addition to your deposit, you’ll need to have enough saved to cover the associated costs of buying a home, such as legal fees and a lump-sum Land and Buildings Transaction Tax.
- Get a copy of your credit rating so that you can see what potential lenders will see when considering your application. If it’s not looking great, there are some simple steps you can take to try and improve it. Similarly, if there are any errors, seek to have these corrected before you apply for a mortgage.
- Pay off as much of your existing debt as you can afford before applying – large amounts of unpaid debt can give lenders the impression you are financially irresponsible.
- Gathering all the paperwork you will need for the application process in advance can help prevent potential delays. This should include bank statements and payslips from the past three months, proof of any bonuses or commission and your latest P60 tax form. You may require additional documents depending on your situation.
- In addition to your income, lenders will assess your monthly outgoings to consider whether or not you would still be able to afford your repayments if interest rates were to rise. It is best to cut back on your spending in the months before you apply so that lenders can see your finances will be able to cope with such a rise.
- The bigger the deposit you are able to save, the less interest you will have to pay each month. If you can significantly increase your deposit in the next few months, it may be worth holding off until you become eligible for a deal with a lower interest rate.
- If you are unable to save a substantial enough deposit, look into government initiatives which are aimed at helping first-time buyers get on the property ladder.
- Once you have a rough idea of your monthly repayments, consider all of the additional costs of being a homeowner such as building and home insurance, furnishings, general maintenance, and potential increases in utility bills and council tax.
- Before you begin house hunting, you should seek an Agreement in Principle. This not a binding offer of mortgage but an indication of a lender’s willingness to give you a mortgage and the amount they will allow you to borrow before you begin viewing homes and putting in offers. The agreement is non-binding and you can continue to shop around for a better mortgage deal as you search for your dream property.