In 2022 the number of people buying their first homes in the UK fell to just over 360,000. There are many reasons for this; people are finding their outcomes increasingly squeezed due to the rising cost of living, wages aren’t increasing in comparison to inflation, house prices are still high, and lenders are tightening their criteria and eligibility.
But just because it is more challenging doesn’t mean you should give up on buying your first home. In fact, now is probably the best time to get your life and finances in order to help you be in a better position to take out a mortgage and be accepted for first time buyer mortgages on your first application so you are ready to move when the time comes.
With this in mind, these three things can help you be first-time buyer-ready.
Make Yourself Attractive To Lenders
This doesn’t mean scrubbing up well, doing your hair and getting your glad rags on; although this can work well for your confidence, it means getting your life in order to appeal to lenders. You need to prove you are in an excellent financial position, you are a responsible borrower, and you have everything in place to be successful.
Pay down debt and maintain a low debt-to-income ratio. This means keeping your debt under 36% of your income; this should factor in any potential mortgage repayments, so use your current rent to determine your figure; you need to be maintaining stable employment and not change jobs, pay your bills on time, improve your credit score, being financially responsible, i.e. not large frivolous expenditures, excessive gambling payments from your bank account, and a proven ability to manage any financial changes in your life.
Save and Use Government Schemes
There are a few options on the table for first-time buyers. From using a Lifetime ISA, a Help to Buy scheme, buying a house on a first home scheme where developers offer first-time buyers homes for 30-60% lower than the value, along with Right to Buy and shared ownership plans, there are plenty of options for support to get on the property ladder. Also, the more you can save, the better it will be when you come to take out the mortgage, as more considerable lump sums can reduce interest rates and repayment duration and look good to lenders too.
Know Your Limits
Think long and hard about what you can realistically afford to pay, what you will manage when you take on a new home and what your life might look like once you have your own home. This means considering the type of property you need, the size of the home you can manage, and any renovation work that needs doing. If you can handle a fixer-upper, you can get a better deal, but if you don’t have the funds to do this, you might be best going for a turnkey property you move into right away. Be realistic about the size of your mortgage repayments, too; just because your budget might stretch to a higher amount, you might find you struggle on top of the added expense owning a home comes with. Avoid maxing out your budget for your first home, and stay under this figure.