Buying a property is most likely the largest financial commitment most people will make in their lifetime, so it’s important that such a decision is approached with due diligence and care. Here are some essential tips for securing your first mortgage.
1. Check your credit score
When you make an application for any type of credit, the lender will look at your credit score. This is a score that is produced by credit reference agencies. The higher your score, the better a borrower looks to a lender. It’s therefore crucial to look at this score before applying for a mortgage so you can understand where you stand from a lender’s point of view.
2. Financial responsibility
In order to maintain a strong and healthy credit score, it’s crucial that you’re aware of how a lack of financial responsibility can damage it. Here are some things you should do to ensure you keep a healthy credit score:
- Electoral Roll: Lenders check this to ensure you live where you say you do, so make sure you are on it
- Credit Utilisation: Your credit utilisation is how much of your credit limit you use – try and keep this below 25%
- Bills: Simply put, pay your bills on time – lenders place high value on this
- Credit Score Boost: Some credit referencing agencies give you the chance to boost your score by linking your bank account to their platforms
3. Affordability assessment
Understanding how much you can borrow is essential before you start looking for a property. Lenders will typically give you a loan of 4.5 times your income. For example, you’d need to be earning at least £45k to get a £200,000 loan
Lenders will also assess bills, loans, credit card payments & other expenses when calculating your mortgage.
You can get a surface level understanding of your affordability by obtaining what is called an agreement in principle from a bank or building society. These can be produced in a matter of minutes upon application (an agreement in principle in almost all cases is a soft check on your credit file – meaning no impact on your credit score)
4. Assess all options available to you
Once you have obtained a good understanding of your affordability, you want to ensure you have explored all options available to you in order to buy a property. Government schemes such as help to buy, shared ownership & right to buy are all designed to help you get on to the property ladder.
Make sure you explore and understand how these schemes work before making a decision to buy a place through your own means.