- Start saving for a deposit early
The less you put down, the higher your monthly payments will be. And even a small deposit of 5% on a £200,000 property is £10,000. So you need to start saving as early as possible.
- Check how much can you afford to spend on your new home
You need to know what’s actually in your price range.
A mortgage calculator will tell you the upper limit. You’ll need to chat to a mortgage broker to find out the exact amount and rates you’re eligible for.
- Check your credit score
When applying for a mortgage, lenders will review your credit score to decide whether to lend to you. A good credit score will make lower interest rates available to you. And good credit makes it more likely that your mortgage application gets approved.
- Pay off any higher interest loans
High interest loans can be toxic. You don’t want to be taking out huge debt in the form of a mortgage when you have high interest loans in your name.
It will also affect your credit score which I’ve just told you impacts your ability to borrow for your mortgage.
If you’ve saved funds for a deposit, consider paying off any high interest loans before buying a home. It makes good financial sense to do so.
- Compare mortgage rates
This might be the single largest amount of debt you’ll take on in your life. Be sensible. Don’t go with the first high street lender you can think of.
Make sure you compare mortgage rates from a range of lenders. As a broker I can search the whole of market for you and show you the best deals available to you based on your circumstances. That’s why I always recommend that my clients use a mortgage broker even if it’s not me!
- Get a mortgage in principal
This will pre-qualify you for a mortgage with a specific lender. It gives you an estimate of how much that lender may be willing to let you borrow based on your income and debts.
- Budget for other costs
On top of your deposit, there are other costs you’ll need to save for before you can buy your first home. These costs can fall anywhere between 2% and 5% of your loan amount.
Make sure you budget for other costs. Buying a home is expensive. You need to keep money in the bank to live at the end of it. And if you go all in and overstretch yourself, you could put yourself under unnecessary financial strain.