Purchasing a home for the first time can be exhilarating but also intimidating. You not only have to navigate the stressful house-hunting process but also the funding process. If you do not know much about securing mortgages, getting approved for a home loan can become even more challenging. That being said, we have decided to list a few important things to keep in mind for first-time homebuyers. More information about mortgage here at mortgages Sheffield.
Your Credit Score is Very Important
Lending institutions will check your credit score to determine whether you qualify for a loan. The score varies among lenders, but you’ll want a high score, not just for the best chances of qualifying, but also getting the best interest rate. Ensure you review your credit report for errors in order to increase the score.
Have the Least Debt Possible
Lenders like doing business with people who are not overextended by debt. That said, they will look at a metric known as the loan-to-value (LTV) ratio to compare an individual’s monthly debt to their monthly income. The higher it is, the harder it is to secure a mortgage and so, ensure you shake some debt before applying.
Learn About the Best Mortgages for First-time Homebuyers
There are many types of mortgages in the UK, all falling under the Fixed-Rate and Variable-Rate categories. However, as a first-time homebuyer, you may want to focus on those that cater to you. These include:
(i) Guarantor Mortgage
This is a home loan designed for individuals with a small deposit, with some even having a loan-to-value ratio of 100%. Guarantor loans guarantee repayment through a guarantor who can be a friend or a family member who agrees to their property or savings to be used as collateral.
(ii) Help to Buy Mortgages
This is a program designed by the government to help people own properties by offering equity loans to act as a deposit. They are only designed for new build homes and can be used for houses worth up to £600,000. Help to buy mortgages requires just a 5% deposit and tends to be interest-free for the initial 5 years.
Choose a Mortgage Lender You are Comfortable With
Most lenders in the UK only care about their bottom line, but there are some that actually care about helping people own homes. Speak to at least 3 lenders, compare their customer service, fees and interest rates and pick the one that is best suited for your financial situation.
Get Pre-Approved Before Searching for a Home
Pre-approval is when the lending institution verifies your financial details and sends a letter stating how much you can borrow. Being pre-approved also shows potential sellers that you are serious and it can help you get a competitive edge. Just keep in mind that some mortgage lenders may preapprove you for a higher amount than you can afford, so ensure you look at houses that are within your financial limit.
Applying for a mortgage as a first-time homebuyer can be scary, but that does have to be the case. With the above tips, you will be in a position to approach the process strategically and do the necessary steps to increase the chances of not just qualifying for a loan but also getting the best deal.