First-Time Buyers have a lot of questions, and rightly so. The mortgage market can seem to be a weird and scary place, fraught with different criteria, nonsensical jargon and so-called “experts” telling you what to do. Then you have press coverage, a wealth of house prices indices and friends with tales of woe about how hard it is to get a mortgage these days.
The good news is that getting a mortgage is not as hard as you think, you just need a bit of guidance. Knowing where to look and how to present yourself makes all the difference.
One question I came across lately, which we get asked a lot from First-Time Buyers, is “Will lenders take a dim view on spending in pubs, restaurants and general entertainment? Do I have to cut back on everything?”
This is a really good question and one we get a lot of when we do mortgage presentations around various companies. There is much confusion as to what lenders actually look at with regards to spending patterns and what constitutes good or bad financial behavior in their eyes.
The good news is that First-Time Buyers needn’t worry, you are allowed to have a social life! Lenders look at your credit score as a whole which, if you have always paid your bills, credit cards or any loan payments on time should be fine. Where bank statements are concerned the key things they are looking at are whether you go into overdraft and if you do, is it within limits.
Lenders don’t like things like payday loans, lots of online betting transactions or even joke references from friends when they may transfer money to you. It may seem funny at the time, but lenders sometimes don’t see the humour.
They also look for anything regular like Direct Debits to see where your monthly spending is already allocated. Insurance costs, pension and school fees are other items.
If you generally have a healthy disposable income and your bank accounts are run satisfactorily, there should be no issues. Spending in pubs and restaurants is of course totally discretionary and most underwriters will understand that your lifestyle will change once you have a mortgage.
Saying this, in the three months leading up to getting a mortgage it does make sense to perhaps start to act as if you were paying a mortgage. Reigning in any extravagances or big lump sums that may lead to questions from an underwriter for example. Make sure you keep well within overdraft limits and present the best picture possible to the underwriters. If nothing else this is good preparation to get you used to budgeting for a larger mortgage payment.
In other words, First-Time buyers have nothing to worry about and no need to suddenly revert to cash to pay for everything. Lenders are comfortable with credit as long as it is all paid on time without any issues.
I would also recommend checking your credit score with a reputable firm such as Noddle, Experian or Equifax. This will tell you if there are any concerns at all and provide you with a credit score. The closer you can get to 999 as a score the better, but again if it a little way off that do not worry.
Of course, as a First-Time Buyer who is new to all this, I would always recommend you speak to a professional mortgage broker if you have any concerns at all. They will help to put your mind at ease and find the most suitable product and lender from the myriad of choices now available.
Just don’t deny yourself that beer or bottle of wine just yet!
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