Due to the affordability tests introduced 12 months ago, first time buyers will need to get their finances in order to secure a mortgage this spring. Just saving up a deposit used to be the hardest part of buying a home, but now the mortgage application process is tougher than ever before.
Luckily with the spring weather comes a thaw in the first time buyer mortgage market. Some of the really tough affordability requirements are now being relaxed and mortgage rates are falling.
Here are four simple steps to spring mortgage success:
Get Saving
Interest rates on mortgages are currently dropping quickly, and some five-year fixed-rate deals are on offer for less than 2% at the moment. Unfortunately though, the best mortgage deals will go to the borrowers who have the largest deposit.
Experts are saying that if you can put down at least a 10% deposit, you are more likely to get the better offers and end up with lower monthly payments. Many banks and building societies have special saving schemes that can help first time buyers increased their deposit.
Arrange Your Finances
It is vital that you have your finances in order when applying for a mortgage. If you don’t have the biggest deposit, then your application is likely to be scrutinized by lenders. If you have any marks on your credit history, then you are much more likely to be rejected.
Go to a credit reference agency like Equifax or Experian and see what your current credit rating is and how it can be improved. Try and pay off any debts you have as soon as you can and get your finances in order before applying for a mortgage.
Consider the Affordability Challenge
The affordability tests that were introduced as part of the Mortgage Market Review last year scared both lenders and borrowers, and resulted in lenders carefully inspecting every application in great detail to ensure borrowers could cover repayments.
Some lenders are now taking a more laid back approach to applications, but it still a good idea for first time buyers to spend some time looking into their bank account in the run up to a mortgage application. Any unnecessary spending should be cut back on, so that each month you end up with plenty of cash that could be used for repayments.
Look Around
Research from the Lloyds Banking Group has found that 80% of first time buyers think lenders don’t want to offer them mortgages. This isn’t actually the case at all, and borrowers just need to look in the right places.
Local building societies are often the best bet when it comes to first time buyers, as they will analyses applications on an individual basis. You could try using a mortgage broker, as they will know who is more lenient with first time buyers, but it’s important to find a no or low fee broker as you don’t want to have to pay them a huge sum of money.
