First home owners: things to remember when buying your first home

Owning a home is embedded in the British psyche as one of our main ambitions. Not for us the bias towards renting held by some of our European counterparts such as Germany; no, we want to possess our own bricks and mortar as security and something to pass on to our offspring. It’s not quite as easy as it once was to get your foot on the ladder, because of the damage of the financial crisis from 2008/09. So, when preparing to buy your first home, remember this:

Be realistic

100% mortgages are like gold dust. In fact, they’re rarer than gold dust. That said, there are a few lenders who will accept a deposit of just 10%, but your choices are extremely limited. The cut-off is generally 85% or 75% for flats. You might think that the more you need to borrow (the higher your LTV), the higher the level of interest you’ll be expected to pay, but according to the Guardian this is not necessarily the case.

Of course, all of these concerns can be alleviated if you have a substantial deposit, built up over months or years. That, and also…

Your credit rating is vital

One of the curious aspects of credit is that you cannot borrow too much, but you have to be able to show that you could cope if you did borrow. The only way to build up credit is to show good borrowing skills, by making regular payments that are not late and not below the minimum amount. Pay your rent and bills, do not take out loans that you cannot fulfil, and make sure that you are on the electoral roll. There are ways to get a mortgage with a poor credit rating, but it will probably just take longer. Try to get credit reports from reference agency such as Callcredit, Equifax and Experian, and assess what you can do to improve it.

You may be able to get help

While the British political system has existed in chaotic state of flux for large parts of the decade, some schemes have persisted and have seemingly reaped dividends. For example, the Help to Buy scheme, to be replaced by the Lifetime ISA, has helped and will help many thousands of buyers to use their money more effectively – although news of the change between the two has not been universally glowing. Other schemes include Right to Buy and Shared Ownership, while a budgeting loan can help with moving house and household equipment (among other things).

You’ll need an interview

Before submitting your application you’ll probably need an interview (or interviews), and you might be surprised by the level of detail regarding your income and outgoings. You’ll need three payslips and three months of bank statements, alongside your P60, and you’ll also need to think about whether you plan to change jobs, or have children, and many other aspects of your affairs.

Achievement

A final aspect to consider is this: you have achieved something! For you to gain a mortgage means, most likely, that your financial affairs are in good shape and you can prove it. You’ve found a home that you like and acquired it, while others who are earning as much as you might be struggling because of their poor discipline. Congratulations!

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