First Time Home Buyer – getting mortgage-ready

Being a first time home buyer and getting mortgage-ready can be both exciting and daunting. Where do you start? What is the process like? Will you qualify for the right mortgage? Let’s take a look together at what it takes to buy your first home and get prepared for your mortgage journey.

How do mortgage providers check if you can afford a mortgage?

Over recent years, mortgage providers have tightened the criteria for prospective home buyers.

Mortgage lenders will typically ask you for proof of your income, so they can work out how much you can afford to borrow. They will also request details about your monthly expenditure. They will want to look at your household income. This can include wages, bonuses, commission second jobs and benefits.

Checking mortgage affordability is a much more detailed process

Mortgage providers will take outgoings such as rent, childcare costs and debts into account when working out how much you can afford to borrow. It is no longer acceptable to simply look at your current income when applying for a mortgage. Mortgage providers have started looking at disposable income.

Banks will usually consider around 4 times your gross earnings. This is where mortgage affordability calculators can come in handy. Using one of these online tools should mean you don’t have to spend hours at the kitchen table working it out yourself.

Lenders also have to ‘stress test’ whether you could still afford the mortgage repayments if interest rates were to rise, or if you were to retire, go on maternity leave or have a child.

In addition, they’ll make a credit check with a credit reference agency once you make a formal application for a home loan. This is to create an affordability profile of you, although it doesn’t affect the credit score itself.

If there are any outstanding bills, defaults or CCJs on your credit history, they will be visible here. They don’t necessarily mean that you won’t get a mortgage.

How to prepare for your mortgage application

First time buyers getting mortgage-ready need have a lot to think about but another important area is your credit file and score.

Before applying for a mortgage, contact the three main credit reference agencies and look at your credit reports. Make sure there is no incorrect information about you or your partner or financial dependants. If there is, you can have it removed by calling the credit reference agency’s error-resolution line.

What documents you will need to apply for a mortgage

Start collecting all the documents you’ll need for the mortgage application process. These include:

• utility bills
• your last three months’ payslips
• passport or driving licence (to prove your identity)
• bank statements of your current account for the last three months
• tax form SA302 if you have earnings from more than one source or are self-employed

How you spend your money

You might also need to show your outgoings, including how much you’re borrowing on credit cards and other loans.

As well as your household bills, including:

• utility bills
• Council Tax
• insurance policies, and
• general living costs such as travel, childcare and entertainment

Speak with a Mortgage Broker like MDFS

If you are a first time buyer and thinking about getting mortgage-ready a good first step, if you haven’t already, is to engage the services of a Mortgage Broker. Mortgage brokers work on behalf of first time borrowers and can help applicants find suitable mortgages regardless of where they are in the buying process. By working with mortgage brokers, first time buyers getting mortgage ready can be assured that they have an experienced professional in their corner who will provide guidance throughout the entire buying process.

A mortgage advisor will work with you to find the right type of mortgage for your needs. Your advisor will work with you to find a range of mortgages that are suited to your circumstances, including both traditional lenders and non-traditional lenders.

Once you have identified your options, your advisor will search the market to find great rates and the best terms for you.

Advisors can also work with first time buyers who are already in process of purchasing a home. If something comes up during the application process that leaves first-time buyers concerned about their financing, an advisor can step in to offer guidance and help resolve any issues quickly so that first-time buyers can get back on track toward closing. Advisors can even go to bat for first-time buyers when there is negative information on their credit report that could pose a problem later down the road.

Not only are advisors able to provide first-time homebuyers support throughout this exciting but sometimes stressful time, but they are also able to help first-time buyers navigate through getting a first mortgage .

MDFS Can get you mortgage ready

When first time homebuyers are looking for mortgages, they are often surprised to find that their choices are much more limited than they originally thought. Many first-time buyers will be on the hunt for a first mortgage with low rates and low fees, but first-time homebuyers should not confuse finding these traits with finding any first mortgage on the market. Low rates and low fees go hand in hand with good credit scores. If first-time buyers want to get approved for a first mortgage , then it is important that they have good credit scores before even applying for financing.

MDFS are regulated by the FCA