Want to buy your first home this year, but don’t know where to start? These insider tips from digital broker, Mojo Mortgages, will help you start the process.
Getting on the property ladder as a first-time buyer is notoriously difficult, unless you happen to have a few grand stashed away in your savings account or can ask the Bank of Mum and Dad to help with the deposit.
Recent research has revealed that just one in four young people under the age of 34 will be in a position to buy their first home by 2026 – which isn’t comforting news.
What’s more, according to the digital broker, a first time buyer in 1970 would have only had needed four times the average salary of £1,204 to purchase a house then, but in 2019, this had increased to nearly 10 times the average salary of £29,400, with average house prices in the UK at approximately £234,370.
So how do you get mortgage ready if you’re looking to buy your first home with all these obstacles in the way?
When you apply for a mortgage, the lender looks at all aspects of your circumstances before making a decision – and there are things you can do to swing it in your favour. Here are five tips for what potential first time buyers should be doing to get mortgage ready:
1. Rein in your outgoings
Subscriptions and other regular payments suck up your buying power. Before you apply, try to cut down on as many debts as possible, leaving only the most essential behind. Try to minimise things like magazines subscriptions, streaming services and mobile phone contracts. Outstanding credit cards and other loans should also be paid off in full, if possible.
2. Go beyond the bare minimum
The smallest deposit you’re likely to get a mortgage with is 5% of the property’s value. So, if the house is selling for £207,000, you’d need to contribute £10,350 and borrow the remaining £196,650. This would give you a Loan to Value (LTV) ratio of 95%, which makes you a high-risk borrower than someone with a 90% LTV, or an 80% LTV, and so on. The larger a deposit you can fork out, the lower your LTV ratio will be and the less risk you’ll pose as a borrower.
3. Get to grips with your credit score
Everyone with a bank account has a credit score. Your score represents how responsible a borrower you are, and so lenders check it whenever you apply for credit – including a mortgage. Your credit score grows when you consistently pay back your credit on time and suffers when you miss payments. You can use a credit reference agency like Experian or Equifax to check your credit score and history. If you find errors, you can file a notice of correction to get it fixed and boost your score.
4. Use a broker who knows their stuff
A mortgage broker will ask you questions about your circumstances and recommend a mortgage that would best suit you. They’ll then do the lion’s share of the mortgage application for you. Since they’re regulated, you can be rest assured that the advice and recommendations you get from a broker is sound. Brokers that are whole of market also have unique services on offer for their customers to use. Mojo Mortgages has recently launched MortgageScore™ which is aimed at first time buyers. The service is free to use and helps customers to understand how a lender sees them, and what they need to do to get the best possible mortgage.
5. Register on the electoral roll
As a final tip a simple but effective thing to do is to register on the electoral roll. Also, make sure any bills you have are registered to your current address, so everything is easy to trace. Being registered on the electoral roll may also help improve your credit score is because it allows any interested party to confirm that you are who you say you are and that the details you have provided are accurate. It is very important that lenders are able to confirm your identity to avoid problems with fraud and identity theft – the more security that lenders have in terms of information, the more confident they are in lending money.
If these 5 tips have helped you gain a bit more understanding of mortgages and how to prepare for your first home, then check out the Mojo Mortgages website and get started!