Buying your first home is an exciting time, but the barriers to home ownership have never been greater. Despite a substantial property price correction in recent years, buying a house remains difficult. This is because the major lenders have tightened their eligibility criteria. You're going to need a full-time, permanent job that pays you a sufficient wage. You should also have a sustainable income-to-debt ratio so that you are able to afford the monthly repayments.
Criticism of Banks Behind Higher First-time Home Buyer Interest Rates
Banks have come under considerably scrutiny over the last few years for lending too much money to customers who couldn't afford the repayments. The problem is that they have now over-compensated and, in doing so, have excluded many customers who lack financial backing of their parents.
The Council of Mortgage Lenders (CML) recently stated that 84% of first-time house buyers now require parental assistance when raising a home deposit. This compares to just 37% just 5 years earlier. The CML's figures are indicative of how difficult it now is to get a first time mortgage.
Higher House Deposits Help Secure Low First-time Home Buyer Rates
Lenders offer the lowest first-time home buyer interest rates to customers who provide a higher down payment. Rosie Murray-West of The Daily Telegraph stated: "If first-time buyers with a 10pc deposit choose a five-year fixed-rate mortgage, they'll pay £1,727 a year more than those with a 25pc deposit."
Falling house prices and negative equity have served as a warning to the banking sector and they require this payment to underwrite their own risk. When buying your first home, you're going to find that getting on the property ladder is more expensive if you don't offer a 25% home deposit.
Improve Your Credit Score Before Buying Your First Home
Any adverse credit will show on your credit report for 6 years in the UK. Although there are bad credit first-time home buyer home loans available, they are vastly more expensive. If you have fair credit, there are steps that can be taken to fix your credit rating and qualify for the best first time home buyer rates.
The quickest way to get a better credit score is by requesting a copy of your credit report from Experian, Equifax and Call Credit. Each credit reference agency holds completely separate and unique information so it's important to verify that they hold is accurate before applying for a mortgage for first-time buyers.
There is no such thing as rapid credit repair and you cannot legally acquire a new credit report for the purpose of attaining the lowest first-time buyer interest rates. If you have a really bad credit score, the only way to fix this is by paying your debts punctually both now and in the future.
Buy a House and Qualify for the Best First-time Home Buyer Mortgage Rates
You're in permanent work, have few debts, have saved a 25% house deposit and have a good credit rating. If this is the case, you're ideally placed to qualify for market-leading first-time home buyer rates. If this isn't the case, don't despair. There are still mortgages for first-time buyers available with just a 5% house deposit, albeit at a higher rate of interest. The important thing is that you are in a position to afford the repayments.
Sources
Murray-West, Rosie. "First-time buyers forced to pay higher premium for mortgages." The Daily Telegraph.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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