First Time Homebuyers Guide to Getting a Mortgage
Since the Global reccesion hit and the international banks crisis it has been even more difficult for buyers to getting into the housing market and just as difficult for remortgages and house moves.
Firstly if you want to get on that elusive property ladder you need to look at your income, this is not just your gross income but also your net.
What outgoings do you currently have? Do you have a car loan for example as this will be deducted from your mortgage allowable income. Student loans are not usually taken into account as these are deducted at source from your pay. I am presuming you are employed as if you are self employed it is not impossible but more difficult to gain a mortgage and you would need to show a few years accounts. The days of self certifing your income to gain a higher mortgage are virtually over as too many lenders have been burned.
Likewise, forget the days of 6 or 7 times your income, think instead of 3 times your salary if single or 2 and half times a joint salary.
Next you need to look at your savings, this will be needed for your deposit, legal fees, homebuyers reports, land regisrty fees etc. You need to forget 100% mortgages again lenders have been burnt. 95% will be very difficult, ideally you need to think of as a minimum deposit of 10% of the value of the property you are looking at. The bigger your deposit the more favourably your lender will look at you and the better mortgage deals will be available to you.
What slush fund do you have?
This may sound odd but you have removals, decorating, furnishing etc plus an emergency fund for those little things you can't forsee that may go wrong. Your boiler breaks down, you have an unexpected leak in your roof. These can all place extra finance and burden on what should be an exciting time for you. Some things you can insure against and as funds allow it is recommended you do.
Buildings insurance is a requirement by your lender but you are not obliged to buy from them. Your lender may also require some form of income protection insurance, incase of illness, redundancy etc and in todays market it is probably advisable to invest in some. You do not have to protect all of your income, you may choose the level of protection you think you need. The higher your income you protect the higher the cost.
So if you have worked out you have your deposit, your slush fund, your emergency fund, no you need to look at what other bills and expences you will have, local taxes, utilities your insurance cover, your transportation costs and most of all your food and entertainment costs. Yes you need to eat and you can't stay in staring at your new 4 walls for long without going crazy. To balance this, ask yourself what is your motivation to buying your first property, because that will help in those months when you feel there is too month month left at the end of the money.
Finally if you have done all your homework, you can afford the repayments and you have you deposit and extra funds burning a hole in your pocket, shop around for the best deal as most lenders will want to snap you up, they do want to lend money, that is what they are in business for but they are now more choosy.
Good luck but think carefully about your purchase as it is generally the biggest purchase you make.