If you are thinking to make that first step on the property ladder, there are a few things you should consider before doing so. A deposit, monthly payments, interest rates and preparation all have a part to play in the mortgage application and approval process.
You will typically need to save between 5% and 20% of the value towards the property you are hoping to buy. For example, a house costing £125,000 would require a minimum 5% deposit contribution of £6,250. Putting a bigger deposit down does enhance the range of products with cheaper interest rates.
Budgeting for and calculating a realistic and affordable monthly repayment is an important first step for the first time buyer, which is why lenders have checks in place when you apply for a mortgage.
Lenders will complete a detailed checklist of income and outgoings to “test” the buyer's ability to make payments, and check how adaptable they are should they have a change in circumstance, such as a change in interest rate or employment status.
Lenders assess your outgoings which may include; debts, bills living costs and other repayments you have in place. Likewise, they will also require you to prove your income, which is usually done by supplying payslips and bank statements. If you are self-employed you could be asked for tax returns and business accounts prepared by an accountant.
First time buyers may be surprised to learn that there are a few other additional costs to consider when buying a home, so it's a good idea to do some research. Other costs can include:
There are a number of government-backed schemes aimed at putting home buyers onto the property ladder, including affordable housing schemes, “Help to Buy schemes and shared ownership schemes.
Lenders will still make sure you can afford the mortgage repayments, even if you accepted onto one of the home buyer schemes.
Apply for a mortgage using a guarantor mortgage
For those who struggle to get accepted for a mortgage, a guarantor mortgage may be a viable option. Guarantor mortgages require the guarantor to complete the same affordability checks as a normal home buyer, and are legally binding.
Any missed repayments become the responsibility of a guarantor, who could be a partner or a parent, which means entering into this arrangement should not be taken lightly by either the guarantor or the person taking out the mortgage.