We know that renting is not a dirty word, but the culture is such that we aspire to own a property, and for that the majority of us need a mortgage. Whenever this starts to be a serious consideration for someone, the first thought, naturally, is about affordability. The step to owning a home should not be one that stretches you to a point of financial discomfort, but one that is a reflection of what you are happy to spend per month. On a basic level, lenders look at your incomings (salary) and your outgoings (household bills - direct debits, essential costs) to establish an overall amount that they will lend, but sometimes, owing to interest rates, this can work out to be a monthly payment that you are not comfortable paying. As brokers, we listen to our client’s circumstances and attitudes to risk, discuss potential pay rises or a need to increase debt - for a new car - to establish a mortgage that is affordable to them. 

Deposits  

A key aspect that improves affordability is a deposit. All first-time buyers need a deposit. This sets what the loan-to-value will be - the percentage of loan required against the value of the property - which is reduced the more deposit you can afford. Most lenders accept a minimum of a 10% deposit (90% LTV), with some lenders offering products that only require 5%, or even a minimum of £5k, allowing you to buy with 1% deposit. However, the bigger the deposit, the lower the LTV and the lower the interest rate, helping affordability overall. Starting a longer term savings plan, like opening a Lifetime ISA, is a logical way to build a decent deposit and demonstrate your financial discipline. Gifted deposits from family members are also accepted by lenders, but if providing a substantial deposit, or if affordability is an issue, then government schemes for first-time buyers or having a relative as a guarantor are all options we can explore. 

Boost your Chances 

Affordability is not just based on the difference between the incomings and outgoings of a person’s bank account. Lenders look at the ‘healthy’ nature of an account as a indication of an attitude to financial risk. Avoiding excessive spending and patterns of unnecessary costs, particularly gambling transactions, shows your accounts in a more favourable light. Your credit file is also very important. There are three major credit referencing agencies and your file can look different on each of these, using Check My File gives a picture across them all. Your credit file score can be affected by missed payments, regular applications for credit and your financial associations. Think carefully before opening joint accounts or making joint credit applications: a person’s credit score can affect yours. Buying is something we should build towards proudly by saving, keeping our financial activity calm and clear, being predictable - lenders want to find you on the electoral roll at your address - and, as best you can, painting a picture of financial reliability. 
 
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