Two weeks ago my partner and I bought our first house together. It’s been a very exciting time, but also quite stressful. As a first time buyer I didn’t realise how much more there is to getting a mortgage than just saving a deposit.
The last 2 years have been hard work and at times pretty stressful. We’ve scrimped and saved for our deposit, paid off debt and improved our credit ratings, I even had to give up being a stay at home Mum in order to get a mortgage. We’ve had a lot of obstacles to overcome but we finally got there! There’s a lot of things I learned along the way and a lot of things I wish we’d known sooner.
So, based on our experience, these are the things I personally think every first time buyer needs to do:
Check Your Credit File
Your credit file has a MASSIVE impact on your ability to obtain a mortgage. Before you can even think about applying for one, you need to make sure your credit file is in good condition. The earlier you do this the better as you’ll have time to fix any potential issues. The better your rating, the more likely you are to be approved, but it also means you’re more likely to get a better interest rate on your mortgage.
By checking your file you can see any issues and work on fixing them. It also means you can see if there are any errors on there. While errors are rare, they do happen. My partner found he had an default incorrectly registered against him which pretty much meant we had no chance of getting a mortgage. It took 4 months of constant phone calls and complaints to the company before they admitted their mistake and removed the default – making his credit rating jump straight back up. During this time the house we had found had been sold to someone else, so it’s definitely worth checking your file as early as possible!
Improve Your Credit Rating
If your credit rating isn’t great, you’re going to need to work hard to improve it. This can take time so it’s best to start as early as possible. Check out these 10 ways to improve your rating.
Speak To A Broker
One of the best things I did as a first time buyer was get advice from a mortgage broker. A broker will give you personalised advice based on your circumstances and let you know if there’s anything you need to do or change before you apply.
Work Out How Much Deposit You Need
As a first time buyer, one of your biggest challenges will probably be saving your deposit. Have a look at houses in your area and see what you like and what you think you could afford. Speak to a broker and see if they’re within your budget and how much deposit you’ll need. You could also check with a few mortgage lenders to see what they require. Some will want a bigger deposit if you’ve been in your job for a short amount of one, or even if you’re buying a new build. It’s well worth looking into early so you can save enough.
Set A Budget
I found the best way to save a deposit was to set a monthly budget and stick to it. I wrote down our income and all our outgoings and looked at where I could make savings. I then set a strict budget that included how much we spent on essentials such as bills, food, paying off debt and travel costs. I also put a little bit in the budget for treats each month so we didn’t go totally crazy. This allowed me to calculate exactly how much we had left to put in savings. I set up a Direct Debit to my ISA and savings account and if I had any left over at the end of the month I’d add this to the savings too.
Open a Help To Buy ISA
A Help To Buy ISA is a first time buyer’s best friend. You can save up to £200 a month and the Government will give you a bonus of 25% of what you’ve saved. This is absolutely unbeatable. No other ISA or savings account will give you an interest rate that even comes close to this. My ISA was open for just under 2 years and I got a bonus of almost £1400 PLUS just over £200 in interest.
Get The Best Interest Rate On Your Savings
If you can’t open a Help To Buy ISA, or if you can save more than £200 a month, you need to find the next best interest rate. Money Saving Expert has brilliant information on the best savings accounts.
Look Into Help To Buy Schemes
Help To Buy schemes can be a great way to get on the property ladder. If you’re struggling to get a conventional mortgage, or to save a big deposit, Shared Ownership or an Equity Loan might be worth looking into. The Help To Buy website has loads of information about the various schemes available.
Pay Your Debt Off
When you apply for a mortgage, lenders look at a lot of factors before deciding whether to give you money. One of the biggest factors is affordability. This means they’ll look at your income, outgoings and debt and see how much they think you can afford to borrow. The less debt you have the better. If you are just starting to save for your deposit, start paying your debt off now. If you can’t afford to pay it all off right away, pay a little each month and clear most if not all of it by the time you apply for your mortgage. Not only will it help with your application, but it will also be one less thing to worry about once you buy.
Save For The Extra Costs Of Buying
Saving your deposit is undoubtedly the biggest step. But a lot of first time buyers don’t consider the other costs of buying a house. Firstly, you need to hire a solicitor to deal with the sale which can cost a considerable amount. Depending on the cost of your house, you may need to pay Stamp Duty, which is another thing to budget for. If you’re buying a new build you may need carpets, furniture, you may even need to pay for wheelie bins depending on you local council! It can be a shock to the system when you’ve just paid a huge amount to actually buy the house. Try and save a little extra on top of your deposit and moving costs as a little safety cushion and take a bit of the stress out of moving!