With the average house price in England exceeding £290,000 and mortgage rates remaining at record lows, it has never been a better time to buy. However, many people are still apprehensive about leaping into homeownership due to fears that they won’t be able to secure a mortgage. In fact, research by Halifax showed that just 58% of first-time buyers managed to get on the property ladder in 2017. And while this might seem like an alarming figure, it is an improvement on the 45% who were successful when the same survey was conducted in 2016. If you are looking at getting a foot on the ladder, this post looks at 5 common mistakes first buyers make.
Not getting approved before beginning their home search.
The first step in the mortgage application process is to get pre-approved for a mortgage. Pre-approval is an early indication of how much you can borrow based on your financial circumstances, employment, and expected mortgage rate. It’s best to get pre-approved before you start searching for properties to rule out properties that are out of your price range. You’ll also have more confidence when making an offer, as you can be sure that you can cover the cost of the mortgage.
Not getting the best mortgage advice.
Obtaining independent mortgage advice from a trusted financial advisor or mortgage broker is absolutely crucial for any homebuyer who wants to minimise the risk of falling foul of the lender’s eligibility requirements. It’s important to remember that the mortgage application process is a numbers game. The more appealing your financial situation, i.e. the lower your outgoings and debt, the more likely you will be approved. So, you may not be approved for a mortgage if you have a significant debt, an irregular income, or a history of missed payments that haven’t been cleared from your credit history. That’s why it’s crucial to get expert advice on how to structure your finances to maximise your chance of approval.
Not saving enough money for additional costs.
Most people know that there are ongoing costs associated with owning a home. However, you must also remember there are additional costs to buying a home during this process. As well as your deposit, you need to find the money for estate agent fees, surveys, legal fees, valuation fees, electronic fees, stamp duty and much more. These costs need to be paid in addition to your mortgage and can affect your budget or deposit amount if you don’t have additional funds set up.
Not paying attention to their max budget.
Although many first-time buyers have a ballpark budget in mind when they start looking for a home, many are guilty of spending beyond their means and being ruled out as a result. When shopping for a house, it’s important to remember that the property’s price is one of many things that will affect your monthly payment. That’s why it’s important to crunch the numbers and ensure you can afford to service your mortgage. That means taking into account the other costs associated with homeownership, such as maintenance, property taxes, and mortgage insurance. It’s also a good idea to consider that your lifestyle will change once you become a homeowner. For example, you may spend more on household repairs or gardening supplies.
The home purchase process can be stressful and challenging, but it can be made easier if you properly prepare. It is essential to start saving money, getting your finances in order, and finding an excellent real estate agent so that you are ready to buy when the time comes. Having a plan, being prepared, and knowing what to expect to make all the difference.