First Time Buyer Mortgages
First time buyers no longer receive preferential treatment from mortgage lenders. At one time they did, and would be offered mortgage packages that were better than the deals available to home movers. The reverse is probably now true, if only for the fact that a first time buyer will usually have a lower deposit.
Lenders often treat first time buyers with a healthy degree of scepticism. They have yet to demonstrate their ability to cope with a mortgage.
Having a deposit of at least 5% of the purchase price certainly helps, it also means that more lenders will offer a mortgage. However having a 5% deposit is not enough. On top of this, mortgage fees will have to be found, plus conveyancing costs, and any stamp duty. Add removals costs, money to repair or improve the property, cash to furnish it, a reserve to meet emergency repairs, and 10% might be more realistic.
Possibly more important now than having a deposit available, is possessing a clean credit record, and a HIGH CREDIT SCORE.
Most parents attempt to teach their children money management skills. Indeed, if the child saves regularly, and only buys things when they can afford to, the parent would consider this a triumph. Whilst such prudence is as admirable as it is rare, this life skill will pose serious problems for the first time buyer.
The credit reference file is blank, save possibly an address or two. This first time buyer has not demonstrated the ability to take on debt, and make monthly repayments on time, over a period of time. The result will probably be a low credit score, resulting in low income multiples being applied. This means that less money can be borrowed, compared to somone with a Medium or High credit score. Occasionally, when combined with other facts that a lender deems to be of higher risk, the result can be FAILED CREDIT SCORING.
So, if you've thus far managed without credit, give yourself a pat on the back. Now set about improving your credit score by borrowing some money. First, go here, and apply for a credit card. Choose one with a low standard rate. Use the card to make purchases where you would normally use cash, a debit card, or a cheque. Set up a direct debit to meet the full monthly payment. Maintain the principle of buying only those things that you can afford i.e. buy only when you have the cash available to pay for them.
This may well suffice, after a year your credit file would show:
That string of twelve zero's indicates to anyone checking your credit file, that you have made your last twelve payments on time.
This WILL improve your credit rating.
If you want to improve your credit rating further, take out a small personal loan, perhaps to purchase your first car. Try and get terms where there is no penalty for paying the loan off early. Resist the temptation to have a short loan term of a year, and go for 3 - 5 years.
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