How your Financial Situation Impacts Home Buying

If you’re buying for the first time, your financial situation can end up being the difference between you securing a home or missing an opportunity to get onto the property ladder.

This is because there are many financial factors that determine if you’ll be able to buy the property you want, however, if you’re new to the process you might be unsure as to what these are and what they involve.

This is where our latest guide can help as we’ve broken down all the relevant personal monetary circumstances that come into play and how they can impact on home buying – this covers everything from deposits, to mortgages and savings.

How much you have saved

Buying your first home can be expensive and one of the biggest initial costs is your deposit. We’ve previously covered how much the average UK house deposit amount is in a previous guide (£10,815) and this is often something new buyers will pay for from their savings.

So when you add to this some of the additional fees involved in the buying process – which can total thousands of pounds – plus your general living costs, if you don’t have a practical and plentiful amount of money in the bank, it’s likely you won’t be able to afford to buy right now.

However, if you’re be in a position where you are being given financial support from a family member – e.g. your parents paying your deposit – it can of course limit the amount of savings you need. That being said, having a bank of your own savings is still useful when you consider the above mentioned fees and costs.

Your employment

The status of your employment – and ultimately how reliable your stream of income is – can be a big deciding factor in your approval for mortgages and favourable interest rates.

Having fixed, full-time employment is the more ideal option for lenders as in their eyes this makes a stronger case that you’ll be able to keep up with your repayments. If you’re self-employed you may have to show more evidence of your income (ideally at least 12 months of payments) and if you’re part time you may need to provide more evidence of your additional income to supplement the payments if needed.

Your credit history

Alongside your savings and employment, mortgage providers will also look at your credit history to get a more detailed picture of how stable you are financially.

According to credit agency Equifax, they may look at the following:

  • Any debt you have and whether you’re paying this back
  • Any missed payments on bills or existing debts
  • If you’re on the electoral roll
  • If you have any CCJs on your record
  • If you’re linked financially to anyone else and the effect their credit rating subsequently has on yours

If a lender feels you have a ‘bad credit history’ it can limit your chances to be approved for a mortgage and/or determine how high the interest rates will be on the mortgage you get offered. Getting a first time buyer mortgage with bad credit isn’t completely out of the question though and some lenders treat applications on a case-by-case basis.

If you are concerned that you do have bad or poor credit, the Money Advice Service recommend trying the following to give your rating a boost:

  • Register on the electoral roll
  • Correct any mistakes on your credit file – you can find out more about how to do this in this guide from Uswitch.
  • Pay off your debts
  • Pay your bills on time
  • Keep your credit utilisation low

Seller’s approval

In some cases, the seller of the property – be it a developer or on the market – may also want to know more about your financial circumstances.

At Tilia Homes, we ask all our potential customers are qualified by the New Homes Group, so both parties get a clear understanding of your financial situation and we can provide better guidance on the right home for you. You can of course proceed with the New Homes Group or use a mortgage provider of your choice.

While a seller’s analysis of your finances won’t be as forensic as a mortgage provider, they may also want to know about things like your employment status and whether or not you’ll be able to afford the initial deposit.

Make sure you’re financially secure

It’s no secret that buying your first home is a significant investment, and with this and the above in mind, it’s very important you make sure you’re financially secure before you start looking for a property.

This is something we can also support you with, as our expert sales teams are on hand to answer any questions you might have about your home buying finances. Plus, they can advise on options like our shared ownership, as well as also handling any enquiries on our quality new build developments.

To get in touch, find our contact information here. You can also find out more information about what additional support is available to first time buyers.