Six mistakes not to make for first time buyer mortgages
You’re young, bright and about to buy your first home.
How difficult can it be?
Helen Crowther-Dowey, a Mortgage and Protection Adviser for Nottingham Mortgage Services, sees lots of first time buyers full of mistaken ideas.
It’s Helen’s job to sort out their finances and find the best mortgage for their particular circumstances.
“When a first time buyer comes in I probably scare them half to death,” says Helen. “People think they understand the first time buyer market. They often don’t. There are a lot of misconceptions.”
Here is Helen’s list of things first time buyers most often get wrong:
Thinking all your earnings are counted by mortgage lenders
First time buyers often assume every penny on their pay slips and P60s will be counted as income. Wrong. Most lenders will use your basic salary and a proportion of overtime earnings and bonuses to calculate whether a mortgage is affordable. Why? Because lenders work on worst-case scenarios. Bonuses and overtime are easily cut if your firm has a bad year or two.
Believing the Help to Buy Guarantee is cash that can be put towards a deposit
Lots of first time buyers think the Help to Buy Guarantee will give them 20% of the deposit on a home, meaning they only have to find 5%. But it doesn’t work like that. The government’s Help to Buy Guarantee scheme gives lenders a cash guarantee should a first time buyer default on their mortgage. It removes risk from the lender (theoretically making it easier for them to offer mortgages) but borrowers don’t see any of the money. Similar guarantees in the new-build market - known as New Buy Schemes - operate on the same principle. They don’t give a borrower free cash.
Not being on the electoral roll
First time buyers have often lived in lots of rental properties. They have moved from job to job and place to place. Being on the electoral roll perhaps hasn’t been a priority. It needs to be when you’re buying a home. Fail to show up on an electoral roll and you run the risk of failing a lender’s credit score.
Failing to pay mobile phone bills on time
We swap phones, we change contracts and providers. Sometimes we forget to pay a bill - or withhold payment to punish a phone company for tawdry customer service. Unfortunately that unpaid bill will flag up red in a credit score. An unpaid mobile bill is the most common reason for otherwise financially responsible first time buyers running into problems with lenders. Other things that will harm your credit score include unauthorised overdrafts and failing to make credit card payments on time.
Forgetting the “hidden” costs of buying a home
Lots of first time buyers think they’re ready to purchase a home when they’ve saved the deposit. It is easy to forget all the other costs such as search fees, survey fees, valuation charges, mortgage arrangement and booking fees, stamp duty and legal fees. All can severely shrink your ability to buy.
Not speaking to an independent mortgage adviser earlier
Mortgage advisers don’t just run a match-making service for lenders and borrowers. A good one will give you advice months before you are ready to make a mortgage application. They will tell you how to put your finances in order, make sure you get a good credit score, have enough cash to fund your move and, generally, put you in the best possible position to get the best available deal from a lender. Too many first time buyers don’t take advantage of that expertise early enough.
Nottingham Mortgage Services can help first time buyers with advice on finding the right mortgage. Advisers will search from a large pool of available mortgages to find the deal that will be best for your needs.