Buying a property can be an exciting time for many looking to get on the housing market.
It has provided a boost to the property market with a flood of first time buyers and people looking to make a move stepping up their timelines to take advantage of the temporary financial relief.
Experts say the tax break has also driven up property prices and reduced time it takes to sell.
So, with so much going on, here are some top tips for first time buyers looking to get on the property ladder from Online Mortgage Advisor managing director Pete Mugleston.
What advice would you give to someone trying to get on to the property ladder?
Understand your credit reports
You should check data held by the three main agencies - they each all hold different data about you, and lenders all look at different ones when you apply.
Sometimes people have surprise missed payments or even CCJs and defaults they never knew about, all of which can cause an issue when applying.
If you have an issue, remember that lenders can accept all sorts, it’s just a case of matching with the right one to fit your profile (something the experts help with).
Sometimes it means you need more deposit or will pay a higher interest rate, but not always. You can also dispute errors with the agency and the lender.
Rent reporting is relatively new to the industry - you can get your rent payments added to your credit report (we have an affiliate page for this), which can improve your credit score before applying.
Bank transactions are important - but don’t get too caught up in it
Lenders will often ask for all of your active bank accounts, including savings, from the last three months (some can go further back), to review your spending and savings habits.
They look mostly at regular committed spending such as loans, credit cards, and maintenance, rather than how much you spend on bills such as your monthly food shop.
One thing you should definitely stop doing is gambling - whilst some lenders are OK with it, others hate it, even if it’s just a casual £20 a weekend on the football.
Avoid going near your overdraft if you can - this shows a mismanagement of money. Especially don’t go over any pre-approved limits for cards or overdrafts.
Try to keep things clean all the time, but especially for the three months before you apply.
Don’t be married to your bank
Far too many people still just go to their own bank thinking it's easier.
In fact, waiting weeks for an appointment to be told no, or that you can’t borrow enough, is painful. Use a broker and get advice from the whole market, to get you the best deal and something that means you don’t compromise on what you want to achieve.
Most lenders have changed their policy due to Covid and many have stopped lending low deposit mortgages, but more are returning to the market in 2021, and 90% deals are more readily available.
Most buyers with a less than straightforward case would be advised to get a 15% deposit together, especially if you have had credit issues.
It’s currently still possible to get a 5% deposit (95% mortgage) on a new build property using the government help to buy scheme.
There’s also a couple of great initiatives right now with private lenders helping you buy any property, not just new builds, taking a loan for the deposit and a mortgage for the rest - we are piloting this and it looks great.
Savings wise, the help to buy (HTB) ISA is great for some, as is Lifetime ISA (LISA), where the government is giving money away to savers buying property or retiring.
Shared Ownership is also brilliant for those in areas where prices are too high to buy outright.