Whether you have been renting and are considering buying your first home or have been living in your family home and are ready to get a foot on the property ladder, being prepared is key.
Although buying your own home is exciting, it can also be stressful. Knowing what to expect in advance can help your purchase to proceed smoothly and avoid any unwanted surprises.
Coronavirus impacted many things, including the amount lenders were prepared to lend to first-time buyers. At the beginning of 2020, there was a choice of lenders offering low-deposit deals for first-time buyers; however, as the pandemic took hold, these low deposit deals disappeared because the lenders considered the risk too high.
This was a huge blow to first-time buyers, as it meant they needed to save for a bigger deposit against the backdrop of pay freezes and even pay cuts; however, the good news is that following last month’s budget, some of these low-deposit deals are coming back to the market. This shows that confidence is slowly rising and means that people buying property for the first time can now borrow up to 95 per cent of the property value.
How much can you borrow?
As a guideline, lenders are prepared to lend you four and a half times your salary; however, you will need to shop around and may even find lenders that offer a Help to Buy loan or are prepared to lend you five times your income or more.
What is the lending criteria?
Not every first-time buyer will be offered a low-deposit deal, as lenders will take the buyer’s previous financial history into consideration. If you are worried about anything that may affect your application, do a free credit score check in advance.
Following the 2008 mortgage crash, a stress test was introduced in 2014 to calculate whether buyers would still be able to pay their mortgage if there was a sharp interest rate rise.
Obtaining a mortgage
To apply for a mortgage, you will need to provide bank statements, have a good credit score, and provide other documents such as a passport and household bills. It is always worth seeing what mortgage you can get before searching for your dream home so that you are in a better position when making an offer.
Don’t forget that you will also need to budget for a conveyancer, such as Sam Conveyancing, to complete the legal aspects of your purchase for you.
Help to buy schemes
There are schemes available to help first-time buyers. These include LISAs and equity loans, both of which are government incentives.