Been dreaming about owning your own home? Buying your first home can be confusing and overwhelming. To make things easier, we’ve outlined our top tips on how to become a homeowner in 2024 to help you make your dream a reality.
CreditLadder have teamed up with the affordability experts at Tembo. Tembo specialises in helping buyers and homeowners boost their mortgage affordability through a range of schemes including Joint Borrower Sole Proprietor mortgages. In fact, on average their customers increase their budgets by £82,000! To see what you could afford with Tembo’s help, head over to tembomoney.com.
1. Open a LISA
One of the biggest barriers to buying your first home is saving a deposit. On average, it takes almost 10 years to save one up. Opening a Lifetime ISA (LISA) can help speed this up. This is a special savings account for first-time buyers that allows you to save up to £4,000 each tax year. The government will then give you up to £1,000 as a bonus on top of that. That’s an extra 25% on top of your own savings, without needing to put any more money away!
2. Get to grips with your budget
When you start house hunting, you need to have an idea of what your budget is to understand what you could reasonably afford. Lenders will typically allow you to borrow 4-4.5x your income, and you’ll need to put down between 5-20% of the property’s purchase price as a deposit. So if you earn 40,000, you could borrow up to £180,000 for a mortgage loan. This would allow you to buy a £200,000 house if you have a 10% deposit saved up.
It’s also a good idea to have a list of things you want in a home. Be realistic about what you need, and what are nice-to-haves. The chances are, you might have to compromise on what you want your first house to be like if your budget is stretched, or the local market is highly competitive. For example, you might need three bedrooms, while a downstairs loo is an added extra. Remember that getting on the ladder sooner, even if it’s not your forever home, allows you to start building your property wealth and benefit from any potential price rises.
3. Maximise your affordability
The next thing which could prevent you from buying sooner is your affordability. Lenders must ensure you can afford the mortgage loan you take out. This is why you can typically borrow up to 4-4.5x your income. But this might not be enough to buy the home you need, or purchase in the local area. Luckily, there are ways to boost your affordability.
First, look at your credit score. If you’ve had credit issues in the past, this could impact your score. Having a lower score can make it harder to be accepted for a mortgage, or might mean you’ll be offered a higher rate, making your repayments more expensive.
You can also boost your affordability by increasing your deposit size, or your household income. There are also higher lending schemes for certain borrowers, such as professionals like teachers, nurses and doctors, as well as those on higher incomes. Remember you can report your rent payments and help improve your credit position with the UKs four largest credit bureaus through CreditLadder Premium.
4. Speak to family and friends about supporting you
You might think your family needs mountains of cash to help you get on the ladder, but this isn’t the case. You could add a loved one’s earnings to yours as a guarantor through an Income Boost mortgage. They won’t be considered an owner, but this will help boost your borrowing potential by increasing your household income. They won’t need to help out with the mortgage payments unless you miss your repayments.
Another option is a Deposit Boost. This is a small mortgage taken out by a loved one on their property to unlock money from their home. They’ll gift the proceeds to you to top up your deposit, helping you buy sooner, afford a more expensive property or reduce the amount you need to borrow.
5. Negotiate on price
When you want to put an offer in on a home, remember you don’t have to meet the asking price. If the property has been on the market a while, or other local properties have sold for less, it’s worth negotiating on the house price. Even a 5-10% reduction could save you thousands! Using data here can be a game-changer. Tembo customers can get free property insight reports, drawing on over 120 data points including EPC ratings, schools and local house prices to help you make an informed offer.
Tembo has helped thousands of buyers and homeowners discover how they could boost their affordability, so they can buy their first home sooner, or remortgage onto a new deal. You could be next! Get started today.
CreditLadder can help you improve your credit score
If you want to improve your credit position by reporting your rent payments, CreditLadder is the only way to improve your credit score and position across all four of the main Credit Reference Agencies in the UK, namely Experian, Equifax, TransUnion and Crediva. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money.
CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.
Remember the information provided in this article is for information purposes only and should not be considered as advice.
