Buying more than you can afford
Setting a clear budget before buying is an essential first step to ensure you have an idea of what properties you can afford, and to help the search. Without a budget, you may waste time looking at homes over budget. To avoid this, getting an agreement principal from your lender can help. This helps to see how much you can afford to borrow.Failing to Check your Credit Score
When deciding to buy your first home, one of the main steps as a first-time buyer is to make sure that your credit score is spot on. A higher credit score means that when applying, you are more likely to be accepted. With a higher credit score, lenders will offer you better rates, due to you being a lower risk customer.Not saving enough
When buying a home, most people believe that they will need either 5% or 10% of the property value for the deposit. However, the deposit amount will depend on your annual income and expenses, along with other variables depending on the lender so the deposit needed can vary. There will also be additional costs such as legal fees and getting a valuation, along with expenses such as insurance, council tax etc. It’s a lot more than just the mortgage cost, so budgeting for these extras is essentialNot choosing a mortgage suitable for you
Being sure to choose the right mortgage is important, and so you will need to take time to gather all the information you need to determine what type of mortgage suits you, and if you will qualify. There are several different types of mortgages available:- Fixed-rate mortgages give you the same monthly payment until the agreed date, regardless of what happens with interest rates in the market. These usually work in periods of 2, 3 and 5 years.
- Capped-rate mortgages are a type of mortgage deal that sees the interest rate rising and falling in line with the Bank of England’s base rate. However, unlike other variable rate deals, capped mortgages have an interest rate ceiling that prevents payments from rising above a set amount.
- Variable-rate mortgages see interest rates rise and fall in line with the Bank of England’s base rate. If you want to benefit from low interest rates (and you’re confident you can afford to keep up with mortgage repayments when rates are high) a variable rate mortgage deal may be suitable.
