What can I afford to buy?
If you’re a first time buyer, you’ll need to have a deposit saved ready for your house move. If, however you have the deposit but are unsure if you can afford a mortgage, you should ask yourself the following six questions.This will help you understand the sort of things you should be taking into account when considering if you can afford to buy a house at this time, or whether you need to re-think your plans.
1. What’s your credit rating?
Your credit rating is one component used by banks and mortgage companies to assess the risk involved in lending money to you, looking specifically at how responsibly you use your existing credit. To understand your current credit rating, you can check it through credit reference agencies such as Experian, Callcredit, or Equifax. Regularly checking it enables you to correct any mistakes that may be impacting your score, as well as understanding what you can do to improve it – this includes closing any credit cards you no longer use and getting yourself on the electoral roll.
2. How much do you earn?
3. What are your outgoings?
Mortgage lenders consider your outgoings such as any existing credit cards and finance arrangements (including car loans), as well as your day to day spending before deciding to lend you any money.If your outgoings are too high, you may be considered high-risk, so it’s worth looking at ways to reduce your expenses as early as possible. Create a personal budget and stick to it. This will also help in preparing you for the costs involved in owning a home.
4. What is the value of the property you’re looking to buy?
5. Are you employed or self-employed?
If you’re self-employed, you’ll likely need to provide additional evidence of your viability to borrow money. This could include a minimum of two years’ worth of accounts, so before you begin an application it’s worthwhile sitting down with your accountant to ensure everything is in order and your accounts are up to date. You should also look around for any specialist mortgages designed especially for people who are self-employed.