What you need to buy your first property in the United Kingdom?

If you want to be well prepared to apply for a mortgage to buy your first property – the one you will live in, not the one you're planning to let, as different rules apply in this case - you need to consider the following:

1. Income
2. Credit history
3. Deposit
4. Positive attitude

All the above are equally important, but shortcomings in one area can be made up for in the other. However, if you're failing in more than one area – you will need to put more time and effort into preparing yourself better.

Income

The value of your first dream house will be largely dependent on your income. How much you are able to borrow will be calculated by most UK banks by multiplying your annual income by 4.5. For example, if your household income is £100k, you can apply for a mortgage of about £450k. There are exceptions though to this rule as each bank has its own way of assessing a client’s creditworthiness, according to its own policy and criteria, considering income, current debt, number of financial dependants, mortgage term, loan-to-value ratio or even client's occupation. Therefore, it is worth
talking to a broker who will check your creditworthiness in different banks. It may be even twice as much in one bank compared with the other.

Credit history

As credit consumers, we leave footprints. Credit Reference Agencies such as Experian, Equifax etc. collect data on our credit activity. When you buy a washing machine or a car on credit, the agencies receive information about the transaction, including details such as how much you borrowed, what is your monthly repayment or how long you will need to be paying it back. Information about your credit history is stored for 6 years, so if you were late with one of your repayments several months ago – the bank has access to this information.
Each bank has its own way of looking at your credit history. The big high street banks prefer customers who make their repayments on time, and they are more likely to decline a mortgage to those who have used payday loans. But there are also banks that will provide a mortgage to those who stumbled and had delays in paying off their liabilities. Although a higher-interest mortgage will be the price to pay as clients with lower credit scores are considered higher risk by the banks.

You can check your credit history in three different credit reference agencies by following this link:

https://www.checkmyfile.com/?ref=Aitana&cbap=1&tap_s=1578900-625d3c.

This service is free for 30 days from the day of registration so you will need to remember to cancel early enough to avoid being charged any future access fees. Once you’ve downloaded your credit history report, it is worth discussing it with a mortgage broker to find out if you can improve your credit score and if so, how.

Deposit

The higher the deposit, the better the chance of getting a cheaper, lower-interest mortgage. Loan-to-value (LTV) ratio is a financial term used by mortgage lenders to express the ratio of a mortgage loan to the value of a property purchased, i.e., 70% LTV is when the value of a property is £100k, a mortgage loan is £70k and the deposit £30k. The lower the LTV, such as 60%, the more likely you are to be offered a cheaper mortgage as this is less risk to the bank than if you're deposit is only 5%.
In addition, some banks take into account where the funds for the deposit come from – for example, whether they are from your own savings or have been received as a gift. This should also be discussed with an adviser when applying for a mortgage.

Positive attitude

As with any serious undertaking in life, it's all about the right attitude when you’re buying a property. You need to be patient and determined when looking for your dream property and applying for a mortgage. You should also be prepared and have the courage to take on a long-term commitment and believe that you will succeed. Often, we lack confidence because we're not sure how to go about the whole property buying process or how to take advantage of government support programmes. Property prices are constantly on the rise, so it is not worth delaying the purchase of your own flat or house – it is better to take the first step and talk to a financial advisor to
prepare properly.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS
ON YOUR MORTGAGE