The traditionally busy spring market doesn't show signs of slowing. For first-time buyers looking to get onto the property ladder, this can be a daunting prospect. They want to make sure they tick all the boxes to secure the right mortgage and be in a strong position to purchase their ideal property.
Property finance specialists, Anderson Harris, have spent many years supporting first-time buyers to achieve just that, here are 6 tips from their team of experts.
Fully understand your mortgage capacity before you look for a property
Speaking to an independent mortgage broker before you start your search will help you establish your mortgage capacity and budget. This is very important at the moment with rising costs and interest rates.
People are paid differently these days with different employment modes – for example, self-employed, contract work, variable income etc. Lenders have different criteria for these. They are also updating their affordability calculators to reflect the higher cost of living.
Having a current and clear view of your mortgage capacity will therefore be important when you start viewing properties.
Improve your credit score
First-time buyers can fall at the first hurdle in securing a mortgage, because they may not have a good credit score. Factors behind this can include:
- They have lived at multiple addresses in a relatively short period of time.
- They don't have any credit history (for example they haven't any credit cards).
- They may not be on the electoral roll or have utility bills in their name.
It's important for any first-time buyer to carry out an Experian or Equifax credit check. These are the two main credit reference agencies and so it's worth checking that there are no negative factors impacting your score.
First-time buyers will most likely have a small deposit and will be applying for a high Loan To Value (LTV) mortgage. As a result, most banks require a higher credit score for a high LTV mortgage and so this is a double negative. It is why it is worth trying to improve your credit score as much as possible before you apply for a mortgage.
Be aware that lenders will look at your outgoings as well as your income. If you have too many outgoings or credit commitments, this may limit your mortgage capacity. With credit cards or other loans you have in place, it is important that the credit reference agencies can see that you are up to date with payments.
Impress estate agents
You need to present yourself as a strong applicant to estate agents. It is likely that they will request a mortgage 'decision or agreement in principle' for first-time buyers. This is something a mortgage broker can advise on. Also, don't forget, that the estate agent is representing the seller, not you (the buyer).
Drawing on family support
If appropriate, speak to family members about a potential gifted deposit to help you achieve the purchase price you seek or access a cheaper mortgage rate.
If you are buying with friends or siblings, do make sure you put an agreement in place with your solicitor. This needs to log who contributed what sums of money and what percentage will be allocated to each when you sell. It's very important to do this at the outset to protect yourself later. It should not cost much time or money to put in place and is certainly an investment well spent.
Think long-term
When considering a mortgage and a property, it helps to think carefully about how long you may own the property or live in it. Long-term fixed rates are currently very attractive and can help with budgeting. They also provide peace of mind against interest rates increasing.
The downside of them though is that they will include early repayment penalties. These will kick in if you choose to move on quickly by repaying the mortgage during the fixed-rate period. When looking at a property, think carefully about the area it's in your circumstances and your plans. Do not commit to a long-term fixed-rate if you think you'll outgrow the property in several years.
Also, think about the re-saleability of the property. This will be your home and a major asset for you. If you see yourself moving at some point in the future, be realistic about the desirability of the property to others. What might you need to do to improve this, and how can you budget for this further down the line?
Do consult your mortgage broker for advice, because it is important you don't get tied to a specific property and mortgage that's no longer suitable in years to come.
Be wary of cheap professional services in the buying process
Buying your first home is expensive however it doesn't pay to cut corners. A sensible investment is to instruct a good solicitor. Also don't just rely on the bank mortgage valuation (survey) of the property. This doesn't always give you the full picture of the property's condition and your potential liabilities going forward.
Do commission your own survey so you are fully aware of what you're buying. To find good professional contacts, reach out to friends or other people you know who may have purchased recently and ask for recommendations.
If you can't access recommendations, look at the experts in your area but make sure they're members of the key professional bodies – for example, The Solicitors Regulation Authority and the Royal Institute of Chartered Surveyors. Look at any ratings online for them and meet several to see who you feel most comfortable with.
Finally, there are several Government schemes to help first-time buyers onto the ladder depending on their eligibility. These include a loan to help with the cost of a new-build home (England and Wales only), financial support towards a home through shared ownership and the Lifetime ISA to save for a first home. Visit https://www.gov.uk/affordable-home-ownership-schemes for more information.
In summary
Buying your first property is both an exhilarating and nerve-racking event. It's a great life moment that you'll never forget. Like anything you do for the first time, it is important to be as informed as possible along the way. The more you know; the fewer hurdles you will stumble at.
Talking to an experienced and independent mortgage broker will give you that objective view. It will also help you to make decisions that will support you both in the purchase, but also longer-term with the other life goals you want to finance.
