Are you thinking about buying a home in 2023? If so, there are a few key things you should ask yourself before making the jump into homeownership. There's no doubt that buying a home is a huge financial decision. Not only do you have to worry about finding the right property and securing a mortgage, but you also need to think about the long-term implications of owning a home. In this article, we'll discuss a few key things you should ask yourself before buying a home in 2023.
1. Is there anything I can do to generate a larger deposit?
When you are a first-time home buyer, there are many things that you need to take into consideration. One of the most important things is your deposit. The deposit is the money that you have to put down on the house in order to buy it. It is important to try and Maximise your deposit so that you can get the best mortgage rate possible.
By putting down a larger downpayment, you are borrowing less money from the bank which brings multiple benefits over the duration of your mortgage term. First of all, it will reduce your monthly mortgage repayments as your overall loan amount will be lower. A larger downpayment is also likely to give you access to better mortgage deals, with lower interest rates that will help you save money on your mortgage long term
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2. Do I have ‘wiggle - room’ in my budget in the case of interest rate rises?
Rising interest rates have had a significant impact on homeowners in the UK. The average homeowner with a mortgage has seen their monthly repayments increase by £113. This increasehas undoubtedly put a strain on budgets of many individuals, forcing them to cut back on other expenses in order to meet their mortgage repayments.
You can protect yourself against rising interest rates by applying for a fixed-rate mortgage deal, where you will only be expected to pay a fixed amount of interest for a pre-specified amount of time. However, if you choose to go for a variable rate mortgage deal instead in hopes of interest rates reducing in the future - you should always leave ‘wiggle-room’ in your budget in case interest rates end up increasing instead.
3. Does my credit score leave room for improvement?
As a first-time house buyer, it's in your best interest to try to optimise your credit score to get the most favourable mortgage deals. Your credit score is one of the most important factors in getting approved for a mortgage. A high credit score will give you access to the best interest rates, while a low credit score can put you at a disadvantage and can even make it difficult to secure a mortgage in the first place.
There are a number of things you can do to improve your credit score, and it's worth taking the time to do so before you apply for a mortgage. You should always start off with checking your credit report for errors and dispute them if you find any. Be extra vigilant about not missing any credit card or loan repayments, as these will have a detrimental effect on your credit report months down the line. You should also avoid taking out any additional credit before you apply for a mortgage, and attempt to pay off as much of your debt as possible, to bring your credit report to tip-top shape.
4. Can I qualify for a mortgage?
There are a number of reasons why first-time buyers may be disqualified from getting a mortgage. If you have a poor credit history, you may have trouble securing a mortgage, or may have to seek out specialist lenders instead. This is because your credit history is the main indicator of your creditworthiness in the eyes of the lender, therefore the lower your credit score, the more risk is associated with giving you a loan or a mortgage.
Alongside optimising your credit score before starting house hunting, you should also ensure you truly understand the costs associated with going through the mortgage process - such as solicitor or conveyancing costs. If you don’t budget correctly before applying for a mortgage, you may find yourself in a position where you will have to dip into your deposit fund - which could in turn reduce it. If you don’t meet the minimum deposit criteria, which is currently at 10% - you will not be able to qualify for a mortgage.
5. Do you understand the process of applying for a mortgage?
The mortgage application process can often appear difficult and confusing to the average first-time buyer. Making one of the biggest purchases of your life is stressful enough, and if you are unsure of how to best prepare for your mortgage application - you can experience difficulties down the line, which might add time to the application process.
Our best recommendation, once you get your decision in principle and start looking around for properties, is to contact a good Mortgage Broker who will be able to give you tailored advice throughout your mortgage application journey and also give you access to the best mortgage deals.
At Mortgage Propeller, our five-star rated Brokers are experts at providing mortgage and protection advice personalised just for you. Arrange a callback from one of our Brokers now to make a start on your homeownership journey.