Monday marked the start of First Time Buyer’s Fortnight, which aims to give potential home buyers the information they need to make more informed decisions about the home buying process.
Securing your first home isn’t the simplest process and there are many factors that determine when the right time to buy your first home is. Ensuring you are in a strong financial position is vital to getting the best mortgage deal possible as lenders will want to be sure you can afford the monthly repayments.
To help you on the way, Brian Murphy, Head of Lending at Mortgage Advice Bureau, offers his top tips for potential first-time buyers to get into the best financial position possible.
Work out what you can afford and create a budget
Creating a budget based on your income and outgoings will help you to see any areas where you can potentially cut back on and make some savings. It can also help you create a savings buffer should any unexpected financial costs or bills arise in the future. To help work out what your monthly repayments on your mortgage might be, or your overall monthly spending to identify where savings can be made, try our mortgage repayment calculator and budgeting calculator. A mortgage adviser can also help you with budgeting and affordability – this will be the first thing they look at to ensure you can afford mortgage payments both now and in the future.
Consider your priorities and save what you can
Saving doesn’t need to be daunting, and it doesn’t mean you have to save large sums of money every month. Depending on how quickly you want to reach your end goal, you may choose to temporarily cut out some luxuries like holidays and meals, putting whatever you can towards your savings target. Someone else may want to keep their luxuries but decide against getting a new car.
The key is to get the balance right for you and make your saving plan a sustainable one.
Even saving small amounts here and there will make a difference to long-term savings goals. It can be as simple as going for a less expensive option at the supermarket. Some banks and apps also provide the option of ‘saving round-ups meaning if, for example, you spend £1.80 on an item, the account will ‘round-up’ the transaction and put aside 20p in a separate pot. This way you can save little and often without even realising.
To support first-time buyers with their home buying journey, Mortgage Advice Bureau created the Home Buying App which provides useful tips on the home buying process as well as a checklist for buyers to stay on track with their buying journey. You can also set up a savings goal through the app, which will help prompt you on how much to put aside each month for a deposit in order to reach your goal in the time frame you’ve chosen.
Make your savings work for you
In addition to saving up your money, it’s equally important to make sure you’re saving in the right places. Saving into a Lifetime ISA is a brilliant way to boost your savings when you’re buying your first home. Okay, so how do they work?
You can put in up to £4,000 each year - until you’re 50 years old.
The government will add a 25% bonus to your savings - up to a maximum of £1,000 per year.
You can save lump sums - you don’t need to commit to saving each month.
Improve your credit score
When you apply for a mortgage, the mortgage lender will take a look at your credit ratings to decide whether to lend to you, how much to lend you, and sometimes how much interest to charge too.
The amount you need to borrow for your mortgage will depend on the size of the deposit you are able to put down, so if you are looking to put down a small deposit, having a strong credit score will be vital to ensure you get the deal you need.
There are three main credit agencies that hold credit reports on you, these are Experian, Equifax and TransUnion. It’s a good idea to check all three reports and go through them carefully, if you happen to spot any mistakes, get these corrected as soon as possible.
Next, you should be taking steps to improve it, not missing repayments on any current lines of credit and ensuring you use credit cards responsibly are a couple of great ways to improve your credit score without drastically altering your spending or borrowing habits