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5 key steps to getting “mortgage ready” as a first-time buyer

Category: News

FTAdviser recently confirmed that the number of mortgage approvals for February 2024 was the highest since the mini-budget.

Mortgage approvals for house purchases (net of cancellations) reached 60,400 in February, the highest since September 2022. The figure also marked an increase from 56,100 approvals in January 2024.

If you or a loved one are looking to get on the property ladder this year, solid preparation will be key to securing a mortgage.

From reducing debt and controlling your spending to having a firm grasp on your credit rating and realistic expectations, here are five simple steps you can take now.

1. Find all your paperwork

One important factor of the mortgage market post-mini-budget is that mortgage offers come and go quickly. In fact, the BBC reported in March on offers arriving and then being withdrawn within days.

You or your loved one will need to be ready to strike as soon as the right deal appears. And that means being on top of your paperwork.

An affordability test will be a key part of your application, so be sure you have bank statements easily to hand, covering at least the last six months.

You’ll also need to dig out your latest P60, three months of payslips, and two to three years’ accounts if you’re self-employed. Finally, if you have earnings from multiple sources, or are self-employed, you might need to provide your tax return form SA302.

Having all of the documents in an easy-to-reach file means that you’ll be able to provide them as soon as they are needed, reducing stress and saving you time when the application process begins.

2. Cut back on spending if you can afford to

Your lender’s affordability “stress test” will make sure you can afford to cover your potential remortgage payments now, but also in the future.

The lender might account for future economic changes like shifting interest rates or inflation, and changes to your circumstances, like a new baby or a sudden redundancy.

Using the months before you apply for a mortgage to cut back on non-essentials could help you pass this stress test.

3. Check your credit score

Your credit score is another important factor your lender will consider. Be sure to check in with it before you make a mortgage application.

The process is simple and can be done online using companies like Experian. An early check means there won’t be any nasty surprises and that you’ll have time to rectify any genuine errors.

There are steps you can take to improve your credit score too, like:

  • Ensuring you’re on the voter’s roll, improving your score and helping lenders find the information they need more quickly, without having to come back to you.
  • Managing your existing credit by making repayments on time and trying to keep your credit utilisation (the amount of money you borrow as a percentage of the overall credit available) low.

While regularly paying off a credit card can help to build a credit history you might consider paying off unsecured debt as your time to make an application nears.

Also, avoid seeking new credit too close to applying for a mortgage. Credit applications require a credit check and too many of these checks could be viewed negatively by a lender.

4. Build a large deposit

A large deposit lowers your loan-to-value ratio, which in turn can increase your borrowing power and the overall cost of your mortgage.

This is Money recently reported that in 2023, the average deposit for first-time buyers was more than £53,000.

The Telegraph, though, found that in London, first-time buyers would need to save for 31 years to afford a deposit, as house prices rise to 12 times the average UK salary. The average deposit in London in 2023 exceeded £108,000.

Thankfully, government help is available in the form of the Lifetime ISA (LISA).

Open to UK citizens aged between 18 and 39, contributions to a LISA are subject to a 25% government bonus. The annual LISA Allowance of £4,000 (for the 2024/25 tax year) means a maximum annual bonus of £1,000.

You just need to be aware that you lose this 25% bonus if you use the money for anything other than a deposit on your first house, unless you wait until age 60 to withdraw funds.

Back in April, FTAdviser reported that first-time buyers were able to purchase their own home four years earlier, on average, using a LISA.

5. Speak to the experts now

Expert financial advisers and mortgage brokers can help you prepare for a mortgage application and then find the “right” deal for you.

Knowing you have an expert in your corner can reduce stress, save you time and ensure that you get the best possible deal.

Contact us now to find out how Fingerprint Financial Planning’s expert team of professionals could help you. Get in touch by emailing or calling 03452 100 100.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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