5 Tips for First-Time Buyers

It can sometimes seem impossible for first-time buyers to get a foot on the property ladder, especially considering property prices in the UK today.

Here are 5 tips for first-time buyers to help them with their search for a new home: -

1. Save as large a deposit as possible.

In the current credit crunch the days of 100% mortgages seem long gone. To give yourselves a fighting change in the current market you need to aim for a good deposit. A minimum 5% is a starting point, 10% is much better.

What is the reason for this? Any lender wants to see that you are willing to share the burden of risk inherent in buying a property. By putting down a deposit you are opening up the market of mortgages available to you. For example, the choice of mortgages available to a first-time buyer with 10% deposit is far wider than for someone with just a 5% deposit.

2. Check your credit record

When you apply for a mortgage the lender will carry out a “credit check” and also possible calculate a credit score for you. A credit check will be carried out with one of the 3 main Credit Reference Agencies in the UK. The lender is looking to see what your credit history has been like in the past. Are you good at meeting your financial commitments? Are you a safe bet?

We recently wrote an article on checking your credit record – How to Check your Credit Record

3. Are you a good bet?

The other area which a lender will want to consider is your ability to repay and service the mortgage going forwards. To this end they will be concerned with your employment position. How long have you had your job?

Are you self-employed (if so, do you have accounts showing the levels of income and profits you have generated?) Are you currently in the probation period with a new employer? Are you on notice of redundancy?

All these are areas and questions which you should ask yourself. For example, if you’re considering moving to a new employer could you wait until AFTER you have obtained your mortgage – you are more likely to receive a mortgage offer today if you have worked for the same employer for say 2-3 years than if you have recently moved to a new job and are within a probationary period.

Likewise, if you’re considering self-employment, can this not wait until you are settled in your new home, having obtained mortgage funding etc?

These are all lifestyle choices you need to consider carefully before taking action.

4. Are you on the Electoral Roll at your current address?

The lender will be interested in ensuring you are a “real person” – therefore when you check your credit records make sure you are currently registered on the Electoral Roll at your present address.

To register on the Electoral Roll you need to register with your Local Authority – more information here.

5. Do you have a credit history?

One problem many first-time buyers face is that they do not have a credit history – making it difficult for a lender to check whether they have been able to manage their finances in the past. Banks and credit card companies report account activity to the Credit Reference Agencies.

One tip I have heard many times is for young people to take out a credit card and use it on a regular basis – ensuring they pay of the balance each month in full to avoid interest charges – the credit card company will then report that this account has been maintained well on your credit record and this may increase your chances of being offered a mortgage.

Warning – you must remember that your home is at risk if you fail to keep up payments on any mortgage or loan secured on it.

Always seek independent financial and legal advice before committing to a mortgage or any secured debt.