Buying your first home is a massive commitment. What is more, it can seem like a leap into the unknown. Whilst you may crave the financial independence of owning your own home, it can seem like a daunting prospect when you finally leave the cocoon of renting and start proceedings to borrow money for a mortgage.
Of course, in today’s financial climate, buying your first home can seem like a pipe dream. Many people want to escape from the hellish nature of renting, but they cannot save enough money to get on the property ladder.
If you are looking at buying your first property, there are some things that you need to know before you do so. Purchasing a home is a big commitment and many people are not prepared for the financial implications that may arise during this process. Regardless of your financial history, you will be able to get a mortgage for your dream home. This may take a little longer than anticipated, but it will be worth it in the end.
Should you be in the research stages of buying your first home, then this article will provide you with an excellent starting point for your research:
Managing Expectations
Amidst the excitement of purchasing your first property, you need to ensure that you have a firm grip on reality. You need to prepare for a plethora of eventualities. These include:
- Having your finances investigated
- Making considerable cutbacks
- Ensuring that you have a savings account
- Make lifestyle changes
While this may seem rather pessimistic, mortgage lenders want you to prove that you are a viable loaning option. Should you waste money on meals out, gym membership and other luxuries, they may consider you to be a risky loaner. This means that you may not be considered for a mortgage. With this in mind, it is imperative that you make cutbacks and take stock of your financial affairs.
Saving is Important
While the idea of saving can be daunting, it is imperative that you put money aside to assist you with the purchase of your dream home. Many mortgage companies will expect at least a deposit of 20%, so you need to be prepared to make cutbacks if you desperately want to purchase a property.
Plan For Additional Fees
Saving the initial 20% deposit is commendable, but you need to ensure that you have more money in a separate savings account so that you can cover additional fees. Fees for solicitors, administration costs and the like will all mount up, so if you do not have the money to spare for these necessary costs, your mortgage application may be rejected. Ensure that you plan for additional fees. While the mortgage deposit may seem high, you will incur additional costs on top of this. Prepare for this eventuality to guarantee that your mortgage application is successful.
Help is at Hand
Government incentive schemes are available for first time buyers; however, this is subject to financial scrutiny. It is important to remember that purchasing a home is a privilege, not a right, and therefore you can be rejected for a mortgage, should not you not be considered a viable lender.
Government incentives can help you get on the property ladder, but they are not a dead cert. Seek the advice of an independent financial expert such as http://homestart.net.au/. They will be able to determine whether you are entitled to financial support, or not.
What is more, you may be entitled to grants to assist you with the purchase of your first home. While this financial assistance cannot be guaranteed, simple research will provide all the information that you need prior to making an application for a loan.
Bad Credit? Don’t Panic!
Should you have a history of bad credit, you may have to prepare yourself for disappointment. Mortgage lenders need to know if you are a risk, so in the event that you have a history of bad credit, this may go against you. Do not despair, this can be resolved.
You can request a credit history check from an independent financial service. This will provide you with all the relevant information that is required for your mortgage application. If your credit history is less than impressive, then take positive steps to correct this. While it may take a couple of years to rectify, it will stand you in good stead in the long term.
Do Not Make Excuses
Should you not be a viable candidate for a loan, this can seem like bad news. What is more, making excuses will not help. You need to make positive steps to improve your credit history. Contest any errors that you see (if applicable) and ensure that you prove yourself to be a worthy candidate for a mortgage. Take out a credit card and make a few low-cost purchases on it. Make sure that you pay the applicable fees on time, so you do not incur interest costs. Once you have done this, simply cut up the card to ensure that you do not use the card excessively. You need to prove to your potential mortgage lender that you are viable, and trustworthy, candidate.
Should you dispute any information on your credit report, you will need to contest this within 28 days of receiving the report. Include proof of why the information is inaccurate. Providing bank statements will help you prove your case as to why the information is inaccurate.
Change Your Spending Habits
If you are prone to spending more than what you earn, then the mortgage company is highly unlikely to provide you with a loan to buy your property. Changing your spending habits is imperative if you have ambitions of becoming a homeowner. Take positive steps to ensure that you are not spending money in a frivolous manner. It may be worthwhile compiling an income and expenditure so that you are fully aware of your finances. Once you have identified unjustified spending on frivolous activities, you can take positive steps to ensure that you do not spend more money than what is justifiable. You need to make sure that your are only purchasing things that you need, as opposed to spending money on things that you want.
Be Realistic
While we all dream of living in a luxury apartment in the heart of the city centre, this is not viable for first time buyers. Being realistic when planning on buying a property is critical. Ensure that you are not pricing yourself out of the market when you are considering your dream home. While the idea of a mansion is alluring, it is not a possibility. You need to be realistic, and apply logical thought to your mortgage needs. While living in the moment is wonderful, being realistic will stand you in good stead when it comes to purchasing your very own home