As costs rise and incomes stagnate, first-time buyers may feel they are relegated to paying rents to live.
Those who do manage to find enough deposit money however, must identify the best financial package for their circumstances including where to source their property!
If you answer these 5-simple questions positively, you will be reassured you could progress successfully to becoming a property owner.
1. Is My Bank Account Clean? ~ If your bank statements balance more often than not, it shows you are actively managing your money; something lenders like to see. Lenders normally want at least 3-current monthly statements showing your income and expenditure. Though an overdraft may reduce the maximum loan you could obtain, in itself it is not a problem provided it is not out of control. Unpaid cheques, direct debits or excessive bank charges are red-flags.
2. Can I Get A Mortgage? ~ Paying a lender administration and survey fee only to be turned down is really frustrating and costly so use the Internet to obtain your credit report. But be careful, you should not have to pay very much for it. Your score should be near or better than 900 points to stand the best chance of getting a mortgage. If lower than 700, you might not even obtain an offer unless you have an acceptable guarantor.
3. Where Do I Get Advice? - If you do not have a tried and trusted independent mortgage broker, telephone-interview at least three, locally based firms before deciding who you want to meet with. Most first reviews are free of charge but always obtain terms of business up-front. If any pitch a product to you without striving to understanding your personal circumstances, keep hunting. And, when you meet with them, if they don’t seek to discover where you are right now, where you want to be, explore every different way of getting you there and, agree with you which is the best way right now, walk away and find someone who will.
4. Buy-to-Live or Buy-to-Let? - You don’t have to live in a property to own one but to raise a residential mortgage, lenders tyically take a multiple of your annual earned income (single or joint) to work our your maximum loan. To raise a mortgage to let-out a property is different and a loan is typically based on the annual rental income (though you will need combined annual earned incomes of at least £25,000). Once you own a property you are no longer a first-time buyer so more opportunity opens up before you from a borrowing perspective. You can use excess net rent from your BTL to service a rented property where you choose to live. Then, when it has made a profit, you could sell your BTL to raise a larger deposit for your preferred home or add more investment property generating even more excess rental income.
5. Full Price or Discounted Price? ~ One does not have to be a mathematician to figure out that paying 25% less than the neighbourhood value of a property has a lot of advantages: i) you buy it cheaper; ii) it’s worth substantially more than you paid for it; iii) your lender deposit is lower; and, iv) your rental yield is higher.
WRITTEN BY JOHN ANGELETTA