You may be eager to buy a house but that doesn’t necessarily mean that you’re ready to buy one. Before you start getting too absorbed in the property listings, make sure you’ve considered these five points.
Do you have current photo ID?
You’ll need either a driving licence or a passport to apply for a mortgage. If either is due to expire any time soon, then organize renewals as a priority. Remember this can take time even under normal circumstances.
How does your credit score look?
Your credit score is a major factor in the mortgage application process. If it’s less than stellar you have two options. Option one is to look for a mortgage deal that is open to people with poor credit. Option two is to improve your credit score and then apply for a mortgage.
From a financial perspective, the best course of action would be to run the sums on both options and see which delivered the best result. Of course, in the real world, there may be many other factors to consider.
For example, if you know you need to move home anyway, you might prefer to take out a bad-credit mortgage even if it is more expensive than renting. That way, you’ll only have to go through the hassle of moving once instead of twice.
Whatever you do, make sure that you take care of the sort of basic administration which can affect both your credit score and the lender’s checks. In particular, make sure that you’re on the electoral register at your current address. Also, make sure that all key service providers (like banks) have your correct address details.
Are you covered for moving costs?
If you’re a first-time buyer you still get a discount on Stamp Duty. In fact, you may not have to pay anything at all on properties worth up to £250,000. If not, you definitely need to factor this into your considerations.
You’ll also need to think about surveying and conveyancing fees and mortgage arrangement fees. You may be able to roll any or all of these into your mortgage. If you do, however, you’ll be paying interest on them for the duration of the mortgage.
Last but definitely not least, you’ll need to think about the cost of getting yourself and your belongings to your new home. There may be some flexibility on this cost. For example, you could move your belongings yourself instead of hiring movers. In principle, however, you should generally expect it to cost something.
You need to be able to afford all of these and still have enough money left over to satisfy your lender’s deposit requirements. Ideally, you should have some money on top of this so you can be sure you have a bit of room to manoeuvre if you need it.
What is your five-year plan?
Even if you’ve ticked all the boxes so far, you might still want to hold off buying a house. Per the previous comment, buying a home involves paying a lot of upfront fees. Over time, these fees will usually be negated by the increased value of your property. You should, however, be prepared to allow roughly five years for this to happen.
If you’re not totally confident that you can pay your mortgage and various other bills for the next five years, then you should think very carefully before committing to buying a house. If you do go ahead, you should be aware of the fact that you could end up having to sell for a net loss.
Can you get pre-approved for a mortgage?
Getting preapproved for a mortgage lets you know your home-buying budget. Remember, however, that it’s a limit, not a target. It also sends a message to sellers that you’re a serious buyer. This can give you an edge if there are competing offers.
For mortgage advice please get in touch
Comments