Published: 23 June 2017
It’s a difficult time to be a first time buyer. In the ’90s, a first time buyer couple on low-to-middle income saving 5% of their wages each month would have enough for an average-sized deposit in 3 years. Today, it would take that couple 24 years.[1]
With the challenges first time buyers face these days, it’s vital that you have all the right information, and that you’re asking the right questions.
We’ve teamed up with Brian Murphy, Head of Lending at the Mortgage Advice Bureau, to answer the big questions. Here’s what they think you need to know.
Before you start thinking about applying for a mortgage…
Before you start researching your mortgage options, there are a few things you should prepare before you get started. The first step, says Brian, is to sort out your credit score.
Credit scores
“Banks and building societies are cautious when it comes to assessing potential borrowers for a mortgage”, says Brian, “and financial histories are always reviewed as part of the lending process.
"One of the most important things that many lenders will look for when you apply for a mortgage is your credit score, so it’s important you understand your credit rating and, if necessary, take steps to improve your score.
“You can request your credit rating report from companies like Experian, Equifax, CallCredit and Clearscore. All of these companies will be able to provide you with a thorough report of all your credit accounts, including outstanding loans and any missed or late payments over the last six years.
“Simple things, such as having a landline phone number and being registered on the Electoral Roll, can also improve your credit rating, as can clearing or making more than the minimum monthly payments on your credit card. It can take up to a year to make improvements to your credit score, so this is the first job to tackle long before you start thinking about applying for a mortgage.”
The common mistakes first time buyers make
As a first time buyer, you're probably not a property-purchasing expert, so you might understandably make a few mistakes.
Use your head
Brian thinks that the most common mistake first time buyers make is following their heart, not their head.
“Having spent months, if not years, saving for a deposit for their first home, first time buyers sometimes have a tendency to make an emotional decision based on their gut feeling for a property and its location.
“While this is understandable, a property is likely to be the biggest investment most people will ever make, so it is important to evaluate what’s important for you in both the short and long term to make sure you make a smart purchase that will work for you financially as well as fitting your lifestyle.
“Ask yourself: are you prepared to live in the property you’re considering buying for more than five years? If the answer’s no, then this probably isn’t the best purchase for you. It may be worth looking outside of your ideal location, even by just a couple of miles, to see if you can get more property for your money, enabling you to stay put for a little longer. Consider whether you're prepared to do work on the property. If you can buy a house that’s in need of a little TLC, then there may be an opportunity not only to add value to your home over time, but also to tailor it to suit your needs and taste.”
[1] Fixing our broken housing market: the housing whitepaper, 2017: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/590464/Fixing_our_broken_housing_market_-_print_ready_version.pdf
This guide is intended as a summary only and does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide. We recommend that you seek independent legal and/or financial advice if you have any questions or queries.
Your property could be repossessed if you don't keep up your mortgage repayments.
