These are rather difficult times for anyone looking for a mortgage, but perhaps especially for you if you are hoping to buy your first home. Perhaps you’ve been waiting years for house prices to come down, so that you can at last get a toehold on the housing ladder – only to find that, when at last they do come down, the supply of mortgages has almost dried up.
So first-time buyers in particular have seldom been more in need of mortgage advice. Should you persist in looking for a house, hoping that someone will be able to lend you the money? How do you know what you can afford? If you did manage to buy a property, how could you be sure it wouldn’t drop further in value? Would it be better to continue renting for the time being until there were more mortgages around? Or would this mean that prices would suddenly rise out of your reach again?
If you are in this situation you certainly should seek mortgage advice. The adviser can help you:
- clarify your options
- work out your finances
- make sure you are a good mortgage prospect
1. Clarify your options. In the first place you are no doubt very confused about whether you should try to go for a house purchase now, or continue renting for a bit longer. Mortgage advice will help you to be clear about what options you have. The adviser will look at your income, your prospects, the local property situation, what type of property you require and, crucially, how much you can raise as a deposit. It may then be possible to identify what type of property you could realistically be looking at. Alternatively, the advice could be that you would be better off continuing to rent until you have built up a bigger deposit.
2. Your financial prospects. You need help from your adviser to work out with you how much you can borrow and how much you need. The adviser will know what multiple of your income lenders are currently likely to offer – the days of four, five or even six times your income have certainly gone. Based on your income and on the deposit you have available, the adviser will see if there is a property you can make an offer on. The deposit should be at least 10%-15% per cent of the selling price, and the higher above this you can go, the better mortgage deal you are likely to get. One very important piece of advice you are likely to get – be very careful in estimating the value of a property for mortgage purposes – it’s not necessarily the same as the asking price. Quite often a lender will offer you 70% loan to value, so you arrange a 30% deposit. But then the survey will downgrade the valuation of the property, so you only get 70% of that – and find you need more for your deposit than you’ve budgeted for. Bear in mind also that if a property has been on the market a long time, and been reduced a few times, it’s probably less likely to drop much further than one that has recently been put on the market.
3. How to make yourself a good mortgage prospect. As you will have realised, there is a shortage of mortgages. There certainly are some around, but there is a lot of competition for them. So one very important aspect of mortgage advice is how to make sure you have the best prospect of getting a mortgage. Your adviser will help you identify what lenders look for. For instance, you should make sure you are on the electoral roll. Check your credit rating with each of the three credit reference agencies and if there is any problem there, get it sorted. With lenders able to pick and choose whom they lend to, they are unlikely to accept anyone with a less than perfect credit record. If you haven’t got a credit card, get one, use it and make some prompt repayments. Ideally, you should also have a record of stability in your living arrangements and your work situation, though obviously this is less within your control.
Don’t let your confusion cause you to give up. There is mortgage advice available for people just like you.