First-time buyers have, for some time, been desperately attempting to get their foot onto the property ladder. Wage growth lagging behind increasing house prices and rent inflation has led to affordability issues. However, intense competition between lenders as well as low mortgage rates have created a silver lining of sorts, contributing to a more promising outlook for first time borrowers (in the meantime at least).
As a result, mortgage application completions by first time buyers has seen a greater increase in the past year than any other segment of applicants.
Recent research carried out by the Mortgage Lenders Association (MLA) found that 84% of mortgage applications from first time buyers led to a mortgage offer; an increase of 14% from last year.
Although this rise in mortgage inquiries, applications and completions is a good sign, mortgage affordability tests are still stricter than ever so it’s essential to making sure your mortgage application is as strong as possible…
Check your credit report
When applying for a mortgage, your credit report is vital. Get a copy of your credit report so you can see what your lender is seeing.
Start with the simple stuff by checking your name and address are correct. Then check for any errors, such as any unfamiliar debts, CCJs or IVAs and make sure you’re signed onto the electoral roll.
Remember that if you’re saving with a partner and have any joint accounts, you will be financially linked and this information will also appear, along with some of their basic details.
Work out a budget (and be realistic)
Calculate how much you can afford (and are willing) to borrow…
A good place to start is a mortgage affordability calculator; you can find plenty of them online. Simply enter some basic details and it will give you a breakdown of what you are likely to be able to borrow and how much your repayments will be (bear in mind the results will be computer generated and based on certain assumptions).
Very often, first-time buyers don’t fully understand the extent of the costs involved with buying a house. Research shows the average cost of ‘extras’ when buying a home can now average up to £10,996 (and as high as £31,000 in London).
Familiarise yourself with all hidden costs and fees. These can include removal fees, storage costs, valuation fees, surveyor’s fees, mortgage fees, Stamp Duty Land Tax (if the property you are buying costs over £125,000) etc.
Get your spending under control
Now you’ve got a budget in mind, it’s a good idea to get your spending in check. Your lender may request bank statements as far back as six months, so the earlier you get a grip on your spending, the better.
Stricter affordability checks mean lenders will take into account the amount of outstanding debt you owe as well as your habitual spending and regular monthly outgoings. So in the months leading up to your application, make sure you don’t exceed any overdraft limits, pay back any loans, rein in any frivolous spending and cancel any particularly unnecessary direct debits.
Accept help (if it’s on offer)
Nobody ever wants to be in a position where they are borrowing money from family, but not only has any stigma associated with borrowing from the so-called ‘bank of mum and dad’ gone, it’s currently the 9th biggest lender in the country. So don’t be afraid to seek help to bolster your deposit or strengthen your mortgage application.
Author: Thea Wimpenny
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to Gorvins Solicitors directly.
Published on 18th July 2017
(Last updated 21st March 2018)