So you have made the decision to take the plunge and buy your first home! This can
be a daunting experience, with many questions that you are struggling to answer. We
are here to help!
How Much Can I Borrow?
Depending on your circumstances, this amount can vary from lender to lender, and when using online calculators, you may be confused as to why you are given different figures by different lenders. Generally speaking, the loan amount that will be offered to you is based upon your financial circumstances, and sometimes your credit score. However, this can be impacted by a number of factors, such as the type of income you receive; whether this is variable or static, if you are self employed, and your monthly outgoings. By using a Mortgage Broker, you will have an expert on your side to wade through the confusion and provide you with a better understanding of exactly how much you might be able to borrow.
How Much Deposit Do I Need?
For a standard residential purchase, you should expect to need a minimum deposit of 10% of the cost of the property you want to buy. However, the deposit amount required can be impacted by a few factors, such as credit score and property type. If you have a low credit score, lenders may want a larger deposit from you in order to reduce the risk they are taking on. Similarly, if you are looking to purchase a certain type of property, such as a flat, you may need to put down a larger deposit. For those unable to meet higher deposit requirements, some lenders do offer mortgages which only require 5% deposit and are aimed at helping First Time Buyers get onto the property ladder. There are also some additional government schemes available, such as Right to Buy.
How Does My Credit Score Impact the Mortgage?
Your overall credit score demonstrates your credit worthiness to a lender, so when assessing your eligibility for a mortgage, a lender will perform a credit check. A low credit score might mean that you are not eligible for lower deposit mortgages. A poor credit score might mean that a lender isn’t prepared to accept your application at all. It’s therefore essential to ensure you are aware of your credit rating prior to making an application, and we would recommend registering with a Credit Reference Agency. You should also take any possible steps to improve your credit score, where
necessary.
A Few Examples of How to Improve Your Credit Score:
- Make sure you appear on the electoral roll at your current address
- Ensure your current address is correct on all of your accounts
- If you have any current credit agreements, it is generally advised to stay within a portion of your available credit amount
- Close down old, dormant accounts that you no longer use
- Make full and timely payments on all accounts held in your name
- If you have a low score due to a lack of credit, consider taking out a credit card and using this
sensibly; spending small amounts each month and repaying the balance on time.
What is an Agreement in Principle?
Although not a requirement, an Agreement in Principle can be very beneficial to you. Put simply, an Agreement in Principle (AIP) is a provisional mortgage offer from a lender, subject to receipt of your full application with supporting documents. Obtaining an AIP prior to making an offer on a property can help assure both estate agents and vendors that you’re a serious buyer who is in a position to proceed. This can significantly increase the chance that your offer is considered and accepted.
A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.