As the Government declares Help to Buy a success on the back of promising early application figures from participating lenders, Which? Mortgage Advisers has reminded first-time buyers to be aware of the full range of options available to them and highlighted the importance of the correct preparation.
Royal Bank of Scotland and Halifax revealed they have received a total of 2,384 applications potentially worth £365m in mortgages during the first four weeks of the second part of the Government initiative which led David Cameron to describe the scheme as “already delivering”.
Which? Mortgage Advisers has been keen to stress to first-time buyers that lenders not involved in the scheme are also offering competitive mortgages and that there are alternatives such as guarantor mortgages.
Amid all the confusing headlines, we also want to help first-time buyers be as prepared as possible when they are applying for a mortgage and to this end recommend they discuss their situation with an impartial adviser.
Which? Mortgage Advisers has also compiled a set of five top tips to ensure that potential homeowners have a greater chance of navigating the process successfully.
Barney McCarthy from Which? Mortgage Advisers said:
“It is great to see confidence starting to return to the first-time buyer market and the Help to Buy scheme may well help some homeowners to realise their property ownership aspirations, but it is important to distinguish between applications and approvals. Lenders participating in the Government initiative are still applying the same tough criteria as before, so there is no guarantee that borrowers will be approved, even if they have a suitable deposit.
“Indeed, saving for a deposit may seem like the be-all and end-all, but there are a number of things first-time buyers can do to improve their chances of being accepted for a mortgage. Independent advisers can add huge value to the process by not only reminding first-time buyers of their obligations, but also by being aware of the different criteria each lenders impose and what documentation they require to complete a case. Independent advisers are also able to search thousands of mortgages from the whole market and not just those offered by a particular lender.”
Which? Mortgage Advisers’ top tips are as follows:
- Be realistic
No-one wants to burst the bubble of excited first-time buyers, but sometimes a sense of perspective is required. The most important thing potential homeowners need to remember is that while the situation has improved slightly for first-time buyers, the floodgates haven’t suddenly opened overnight and lenders are still imposing strict criteria on who they will lend to. First-time buyers also need to think carefully about the feasibility of buying and the total cost of moving – not just the deposit, but the associated costs such as legal and mortgage fees, moving costs and Stamp Duty. Affordability calculators such as the one found here: http://mortgageadvisers.which.co.uk/how-much-can-i-borrow-calculator/ are a good place to start.
- Check your credit history
With certain high street lenders only accepting borrowers with perfect credit histories, it is important for first-time buyers to access their personal credit files and address any anomalies contained within. If there are any late or missed payments, an accompanying explanatory note can help lessen the impact it might have. It is also important for individuals to have an up-to-date address history and most importantly, be registered on the electoral roll. With many first-time buyers nowadays forced to live with their parents before they can afford to buy a place on their own, this creates another potential problem in itself. Individuals who have never taken out credit cards or paid bills and contracts on a regular basis may find themselves with a lower credit score. It pays to be mindful of the need to establish a credit history.
- Pre-empt potential problems
No two borrowers have the exact same circumstances. This is why it is important not to assume that lenders or advisers will be able to establish the most suitable mortgage for you unless you provide them with as much information as possible. This is especially important in situations where there may be anything slightly out of the ordinary such as:
– If you are still in a probationary period at work, can you get an employer’s reference?
– If you are self-employed, do you have two or three years of audited accounts?
– If you are on maternity leave, do you have a letter from your employer confirming return date and salary?
It is better to discuss your exact circumstances with an adviser up front rather than waiting to be prompted by a lender to provide this information.
- Presentation is everything
You don’t have to don a suit and tie for your meeting with an adviser or the lender, but it pays to have all your documentation in order. When you apply for a mortgage you will need to prove:
– You are who you say you are (ID such as passport/driving licence)
– You live where you say you do (utility bills)
– You earn what you say you do (latest payslips and P60s)
– Your banking conduct (latest statements and try to avoid being in your overdraft as lenders won’t look favourably on this)
– How you amassed your deposit (savings account statements or, if the money was a gift, some lenders require a letter confirming this)
- Do your property homework
The first stage of the house-buying process for many potential homeowners is searching online property portals, but it is important to register with such sites in order to receive notifications when new properties become available. There are also websites where you can find out what properties previously sold for and it is worth checking local papers for property listings. It is also worth getting a solicitor recommendation as incompetent legal handling is one of the biggest complaints by mortgage lenders. Learning about the different types of surveys available is also worthwhile as is understanding where they might be relevant – after all, it is better to spend £1,000 on checking a property out than having to spend £50,000 to rectify it once you’ve bought it. The type, age and location of a property can all have an effect on this. Researching what type of property you want and the variety of affordable housing options out there might be useful before you make contact with a lender, but it may make sense to discuss this with an adviser first.