It’s a big decision to buy your first home, and you probably have questions about the process of applying for a loan. There are a lot of options available to you when you are looking to apply for your mortgage. This overview of the process should get you started on your dream of owning your own home.
The first thing you need to do before filling out any loan applications is to save money for your deposit. The minimum deposit lenders will require is at least 5% of the value of the home. Having a larger deposit of 15% or more will help you obtain better credit scores. Also, you will need to take into consideration other fees such as solicitor’s fees, stamp duty, mortgage arrangement fees, and home insurance, to name a few.
Your lender will check your credit history to determine if they believe you are a high or low risk for paying back your mortgage. The better your credit score, the better your rates will be, and the less money you will pay for the overall life of the loan. This is why it is important to pay your bills on time and keep your credit card balances low in the years before you want to buy your first house. Lenders will look at your credit score along with your income, other debts, household bills, and other living costs to determine if the loan will be affordable for you.
Timing of Applying for Your Mortgage
When you decide the time is right to buy your first home, it’s a good idea to check with lenders before you get serious with house hunting. This way, you won’t have any questions about what you can afford. You will know you are approved for the price of the houses you are looking at, taking away any stress of wondering if you can truly afford the house.
However, be careful of the type of credit pull that lenders will do when approving you for a loan. You want a lender that will do a soft credit pull so that your credit score is not affected. It’s not a good time to have your credit score getting dinged when you are trying to buy your first home. Most offers for mortgages will last about 30 to 90 days before expiring.
Types of Mortgages
There are several different options when choosing your mortgage.
Fixed-rate. A fixed-rate mortgage will keep your loan payments set for a certain amount of time. Usually 2, 3, 5, or 10 years. The benefit is they protect you from rate increases, however, you won’t benefit if the rates decrease. Once your time is up, you may want to renegotiate for another fixed-rate loan.Offset. An offset mortgage links your savings account to your mortgage, offsetting the interest on the amount of money you have in savings. You won’t accrue interest on your savings account, but you will save from having to pay it on your mortgage. Tracker. This is the Bank of England’s base rate. It can go up or down depending on the rates of the Bank of England. If you choose this option, be sure you can afford if your rates go up.
If you are ready to buy your first home and you’d like to compare rates with multiple lenders, check out NowLoan today. We can compare rates with over 40 lenders in a matter of minutes. And we don’t do hard credit pulls, so your credit score will not be affected. Give us a try today.