Buying a home is a major life decision and a major financial commitment. It is important to make sure you are financially prepared for a mortgage you can afford and to make sure that you are able to afford to buy a home. So, in this guide we are going to cover:
- How much am I able to borrow?
- What deposit will a mortgage lender accept?
- How much money is the home going to cost?
- Am I able to pay the monthly mortgage payments?
- Does my credit score affect my chances of getting a mortgage?
- Tips to help you afford to buy a home
How much am I able to borrow?
When you buy a home the chances are you will need to borrow money from the bank. The amount you can borrow to buy a home depends on your income, credit score, and other factors.
You will find different banks usually will offer to lend you different amounts. The maximum figure a bank will usually lend you is five times your salary. However, it is usually between four and four and a half times your salary that a bank is willing to lend you. The chances are if you have a lot of debt that needs paying off then the amount the bank is willing to lend you will be less that the average amount.
To get a better idea of how much you can borrow, you could speak with a lender or mortgage broker. They can help you review your finances, credit score, and other factors to determine how much you can borrow.
What deposit will a mortgage lender accept?
You will usually be required to pay a deposit, this is another important cost you will need to consider when buying a home. Generally speaking most mortgage lenders will want 10% of the value of the property. However you may find that a lender will be willing to have a deposit of only 5% of the value of the property. You usually find that the bigger the deposit the more money you will be allowed to borrow.
It is important to make sure you have enough money for the deposit before you start looking for a home. This will help ensure you can afford the home you want and will make the entire buying process much easier.
If you would like to read more about the deposit and mortgages you can read our guide here. In addition, take a look below at the deposit you would need for a home worth £250,000 and £500,000.
How much money is the home going to cost?
The cost of a property depends on a variety of factors, including the location, size, and condition of the home. Generally speaking, the cost of a property will depend on the current market value of the home. You can get an idea of how much a home costs in your area by speaking with an estate agent and looking at recent sales in the area.
Aside from your mortgage fees and the deposit there are other costs you may need to pay for when buying a home these potential costs are:
- Stamp duty – you can read all about this in our blog post here.
- Valuation fee
- Surveyor’s fee
- Legal fees
- Removal costs
- Ongoing costs (maintenance and repairs)
What mortgage can I afford and am I able to pay the monthly mortgage payments?
Before you make any decisions about buying a home, it is important to make sure you can afford the monthly mortgage payments. Start by calculating your monthly income and expenses to get an idea of how much money you have left after paying your bills.
The amount you will pay back each month depends on the type of mortgage you had and the size of the deposit you paid. If you choose a fixed rate mortgage then the amount you pay each month will stay the same which makes budgeting easier as you will know exactly how much you will need each month.
Whereas, a variable rate mortgages changes therefore, you likely won’t be paying the same each month. However, the benefit to a variable rate is that some months the rate may go lower therefore, you will benefit from a lower monthly repayment. We cover all about the different mortgage types in our blog post here.
Once you know how much your mortgage payments will be, you can determine if you can afford them. Make sure to factor in other costs associated with owning a home, such as property taxes, insurance, and maintenance costs. Additionally, you should make sure you have enough money left over each month for other expenses. If the mortgage payments are too high, you may want to look for a less expensive home.
Does my credit score affect my chances of getting a mortgage?
Your credit score has an impact on whether or not you can get a mortgage. If you don’t have a very good score then the mortgage lender may not be willing to lend to you. Therefore, if you do have a bad credit score it would be worth trying to improve it before applying for a loan. It would also benefit you to improve on your credit score because it affects how much you will pay back each month. You can check your credit score on websites like Experian.
Tips to help you afford to buy a home
1. Save money: Before you even start looking for a home, make sure you have saved up the deposit. This will make it easier to qualify for a loan and make your monthly payments more manageable.
2. Improve your credit score: Your credit score is a big factor in determining your eligibility for a loan and the interest rate you will be offered. Make sure to review your credit report and take steps to improve your score.
3. Shop around for a loan: Don’t just accept the first loan offer you get. Shop around and compare different lenders to find the best deal.
4. Negotiate: Don’t be afraid to negotiate when you are buying a home. You may be able to get the seller to reduce the price.
5. Factor in additional costs: Make sure to factor in additional costs associated with buying a home, such as stamp duty, removal fees and legal fees.
6. Consider other options: If you can’t afford to buy a home, there are other options, such as renting or looking into government programs.
Buying a house is a big decision and a major financial commitment. Make sure to review your finances to make sure you know what mortgage you can afford, have your deposit ready and improve your credit score to put you in the best possible position when buying a home.