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5 things all first-time buyers should know

When buying a home for the first time, the more clued-up you are, the better chance you have of getting a good deal, and everything going smoothly. Here are five of the most important things to know.

1. Your credit score

To get a loan from a bank or building society, you first have to qualify for one. A good credit score will be the biggest gun you have in your mortgaging arsenal. The better your credit score is the more attractive loans will be available to you.

The exact number for the best credit score changes from lender to lender, but the higher your score the better offers and deals you’ll get on a mortgage. Even if your credit score isn’t very high, it doesn’t mean you won’t get approved for a loan. It just may mean your interest rates are higher.

2. Your budget

Saving for a home is a big commitment but you also need to know that you’ll be able to afford it after you’ve done the hard graft of getting the deposit.

Lenders will investigate your income (bank statements and tax details will be needed to prove this) and outgoings (bills, credit card repayments and insurance) to see if you’re able to sustain the mortgage you’re applying for.

Assessments will also be made to see if you can afford payments if your circumstances change, such as increased interest rates, an illness that means you can’t work, being made redundant or if you have children.

When budgeting for your new home, it’s best to save up for 4 or 5 months’ mortgage payments and other outgoings, just in case.

3. Where your money will need to go to

As a first time buyer, it’s a common mistake to think that you apply for a mortgage, save a deposit and get keys to your home. But taxes and other unforeseen costs will be coming your way, such as:

  • Mortgage arrangement fees
  • Stamp duty - a land tax that you pay when you buy a property over £125,000
  • Solicitor’s fees - they handle all the legal work on your house or flat
  • Valuation fee - a mortgage lender evaluates the price of the property
  • Survey costs - getting someone in to check the condition of the property before you buy can save you thousands of pounds in the long run.
  • Removal costs - getting everything out safely and securely
  • Furnishing and decorating costs- decorating your new pride and joy how you want.

4. Say NO to new credit

When you’re in the thick of hunting for a mortgage, protect your credit score at all costs. Avoid applying for new lines of credit and limit your use on current credit cards until you get approved.

Taking out more credit affects your debt-to-income ratio (DTI) negatively which lenders will take into account by comparing your monthly debts to your monthly income. Increasing this DTI will make it harder when applying for loans.

5. Shop around

It’s easy to get excited at being approved for a loan but don’t go with the first mortgage lender that accepts you. Have a look at a minimum of 3 different lenders to see if you can get a better deal elsewhere, because you may be surprised at the price difference.

Rates will vary from lender to lender and estimation will be given from each company of what they’ll be able to loan you. Put your haggling hat on and take the best estimations you’ve gotten to a few of your preferred lenders and try to get yourself the very best deal.

Try our broker matching service for some expert advice tailored to your circumstances.

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