Buying your first home is exciting – however it can feel daunting too. But the good news is we’re here to help guide you every step of the way. So if you’re looking for first time buyer advice, this article offers our top tips.
1. First time buyer deposits: Save as much as possible
When you’re buying your first home you’ll want to save as much as possible towards your deposit. You’ll usually need at least a 5% deposit to get a mortgage, but if you have a larger deposit, you may get access to a greater range of mortgages. Plus you’ll need money to pay for other costs such as solicitor’s fees and potentially stamp duty too.
So go through your finances, work out a budget and save as much as you can each month. As well as building your deposit, this will also demonstrate to potential future lenders that you can manage your finances well too.
2: Boost your deposit with a Lifetime Isa
You can give your deposit a serious boost by opening a Lifetime Isa if you’re eligible. They’re for those aged 18-39 years old and are for buying a first home or for retirement. You’re able to put in up to a maximum of £4,000 a year until you’re 50. And you will get a 25% bonus on your savings of up to £1,000 a year. There are various t&cs you should read to check if it’s right for your circumstances.
3: Investigate help to buy schemes
There are several schemes available that may make it easier for you to get on the property ladder. So if you're asking for first time buyer advice, we recommend taking time to find out more about them. These include:
- Help to Buy Equity Loan scheme: When you buy through the scheme, the Government will lend you up to 20% of the property’s value – or up to 40% if the property is in London. This is the equity loan. You’ll need at least a 5% deposit and you’ll take out a mortgage for the remaining amount. Regional price caps apply on the value of property you can purchase through the scheme, up to a maximum of £600,000 in London.*
- Shared Ownership: This involves buying a share of a property, between 10%-75% and paying rent on the rest.
- Deposit Unlock: This new scheme has been devised between the housebuilding industry and lenders. It’s designed to allow buyers to purchase a new build home from participating home builders with just a 5% deposit.
4: First time buyer advice: Boost your credit score
When you apply for a mortgage, one of the tools the lender will use when deciding on whether to lend is your credit rating. This will also help them decide on how much to lend you and sometimes how much interest to charge too.
So it’s vital that you find out how good or bad your credit score is - so check your credit reports. Credit reference agencies compile these reports; the main credit reference agencies are Experian, Equifax and TransUnion. They each hold a report on you and you can check what’s contained in them for free online. And if you're asking about first time buyer advice we recommend you do everything you can to boost your credit score, from making sure you’re on the electoral role to ensuring every bill is paid on time.
5: Think about your debt
If you have debts it will affect how much you can borrow but don’t assume you won’t be able to get a mortgage. Lenders will look at your whole financial picture when deciding on whether to lend. And they’ll view different types of debt differently, such as whether it’s student loans, car finance or pay day loans.
But everyone’s circumstances are different so if you have debts, your first port of call should be an expert mortgage adviser as they’ll be able to talk through your options. It may be the case your debts are unlikely to have a big impact on your ability to get a mortgage. Or it may be that it’s better to save and pay off the debts first before buying a house.
6: Don’t move jobs
When you apply for a mortgage you’ll need to provide proof of income. And while some lenders will consider your application if you’ve recently started a job, most lenders will require you to have been with your current employer for a certain period of time – this will vary by lender. So be wary of switching jobs just before you apply – if you’re planning to do this, make sure you raise this with your adviser before applying.
7: Think about a joint mortgage
Purchasing a property can be extremely expensive. So could you split the costs with someone, whether that’s your partner, a friend or a family member and buy a home together? With two incomes you may be able to borrow a significantly larger amount. And if you’re both contributing to the deposit you’ll have more to put down too.
But if you’re considering this, you and the other party should get legal advice first and you should speak to an expert mortgage adviser too.
8: What about a Guarantor Mortgage?
With guarantor mortgages, a parent or close family member takes on some of the risk of the mortgage by acting as a guarantor. This generally involves them offering savings or their home as security against the loan as well as agreeing to cover the mortgage payments if the homeowner defaults.
You may be able to borrow more if you choose this option, but your guarantor will need to consider the potential risks to them and the lender may require them to have received legal advice on the matter.
9: Explore your options and ask for help!
We’ve given you a lot of information here but don’t worry about doing all the legwork yourself. Our team of mortgage experts are ready to chat with you whenever you are. You can make an appointment, request a call back using our quick enquiry form, or speak to us straight away on 0300 303 0913.
*There are different Help to Buy equity loan schemes for England, Greater London, Wales and Scotland. They all vary; this information relates to England and Greater London only
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