Financial preparations for your first step onto the property ladder

Getting ready to take your first step onto the property ladder is a significant milestone in your life. It’s probably going to be your first big financial commitment and you need to be ready for it. Fortunately, below we’ve outlined the steps you should be taking to ensure you’re in a good financial position to improve your chances.

Get in the habit of budgeting

Any sort of financial planning requires a keen eye for budgeting. If you haven’t developed the skill already, there’s no time to waste! It gives you transparency and control over your money.

Tally up all your monthly expenses and take them away from your income to see how much disposable income you have left. If you’re in the minus, that’s not a good sign. You ideally need to be putting money away if you’re working towards buying a house, as we’ll discuss next.

Save for a deposit

The average down payment for first-time buyers is now up to a staggering £34,500 in the UK. Most people don’t have that sort of cash lying about, so you’ll have to get saving. With your budgeting efforts in full swing, start putting away some money every month if you can afford to.

If you’re struggling to accumulate funds, you’ll have to find ways to boost your income or cut your expenses. Every little helps when it comes to savings and you’ll undoubtedly need some discipline to get to your target.

Work on your credit score

If your credit score isn’t favourable, mortgage providers are unlikely to take the risk of lending you money. Check yours through one of the established credit agencies, namely Experian, Equifax or TransUnion.

You can improve your credit score by reducing your levels of debt, building a healthy credit history, making payments on time and proving where you live by registering to vote at your current address. Avoid making too many credit applications, especially ones that involve hard checks, because these will signal financial volatility.

Consider the cost of mortgage payments and bills

Before you commit to a near-lifetime long loan, you need to be sure you have the financial resources to keep pace with repayments and all the other associated costs of homeownership.

With your mortgage in principle offer, work out how much you would need to pay back each month and estimate other expenses such as utility bills and council tax. You should be confident that you can afford it all before you sign on the dotted line. Don’t forget those pesky closing and solicitor’s fees too!

Avoid major financial changes

Many first-time buyers aren’t aware that mortgage lenders don’t take too kindly to you making major financial commitments or changing circumstances too soon before you apply. In their eyes, the higher your outgoings or the lower your income, the more likely you are to fail to make payments.

Changing jobs, taking on new debts and making large purchases can be red flags to lenders who may reevaluate your financial standing. As such, it’s best to avoid any of these before and during your application process. Best of luck!