Are your finances in a buying state?
15th February 2018
Buying a home can be challenging financially; it doesn’t matter if you’re taking the leap for the first time or looking to move on, your finances can play a major role in determining your success. You will already know you’ll need to save for your deposit, and may even be familiar with the additional costs involved, but before you even get to this stage you need to ask yourself if your finances are in a ‘buying state’.
What do we mean?
In 2014 new rules were put into place to ensure that people could afford their mortgage, not just today, but also in the months ahead. The Mortgage Market Review (MMR) nicknamed this ‘the stress test’, and it really shook up the market. A year after its introduction, research was conducted by the credit company Experian, which found that 45% of people who planned to buy a property since the stress test had been introduced, failed to do so.
At the time, ExplaintheMarket’s Guy Shone stated: “More needs to be done … to encourage personal financial planning and properly support aspiring home buyers, so that all buyers fully understand the rules of the game – and stand the best chance of securing a property they can afford.”
So what can you do to ensure that you’re in the best position possible when it’s time to find a mortgage?
Your credit score is one of the first places you should start – are there any red flags that are lowering your score? It’s worth working on your credit score as early as possible, and lenders don’t want to see late or missed payments, or a high use of credit, so it’s time to start paying off those credit cards.
Are you on the Electoral Roll? Did you know, simply completing this easy and simple task can hugely help your credit rating? So don’t delay, do it today. Another thing to double check is the accuracy of the report, ensuring that all your details are up to date. Is your address 100% correct? Even the smallest of inaccuracies could see your application turned down.
Think about your spending, too, as mortgage lenders may go through your statements to get an idea of your spending habits. It may be worth delaying any big purchases until you’re in your new home, and you may even wish to reduce your monthly outgoings to improve your ‘affordability’ rating.
When you’re working out your budget for buying a property, make sure you have included every additional cost. From mortgage arrangement fees to valuation fees, legal fees, stamp duty, surveys, removal costs, furniture and other extras, the cost of buying a home can really start to put a strain on you if you’re not prepared.
If you would like more advice on buying a home, come and have a chat to a member of our Hunters team