Some first-time buyers may be closer to owning a home than they realise. New research reveals that common mortgage myths could be causing people to delay buying their first home.
Aspiring first-time buyers could be delaying their plans because of common misconceptions about mortgages, according to new research from Lloyds.
The lender's study of more than 1000 prospective first-time buyers found that 58% mistakenly believe that having existing debt would prevent them from getting a mortgage. Some 37% think they must have a 20% deposit before they can buy.
Other perceived barriers include using an overdraft, receiving benefits, recently changing jobs, being self-employed or not having a perfect credit score.
In reality, none of these circumstances automatically rules someone out. Mortgage lenders consider the applicant’s wider financial position, including their income, regular spending, existing commitments and ability to afford the repayments.
Existing financial commitments
One of the biggest myths is that buyers must be completely debt-free. Credit cards, car finance, student loans or an overdraft won’t necessarily prevent you from getting a mortgage. However, lenders will consider the repayments when assessing affordability.
A perfect credit score is not essential. No single score is required by every mortgage provider, as lenders use their own criteria and consider a range of information.
Self-employed applicants can also secure mortgages. They may need to provide additional evidence of income, but many lenders offer options suitable for self-employed borrowers.
The belief that every buyer needs a 20% deposit is another misconception. A range of lower-deposit mortgages is available, subject to eligibility and affordability checks. Some lenders will accept a £5000 deposit.
Buyers are making sacrifices
Concerns about mortgage eligibility affect more than property plans. Over half of those surveyed said they had delayed or given up important life milestones while saving for their first home.
These included travelling, buying a car, getting married and having children. Almost two-thirds had reduced their daily spending, cutting back on holidays, eating out and buying clothes.
More than a third said they were worried about having a mortgage application rejected.
Seek advice from a mortgage broker
Buying a first home can feel daunting, but it is important not to assume that one aspect of your finances will prevent you from obtaining a mortgage.
Speaking to an experienced mortgage broker early on can help you understand how much you could borrow and what deposit you need. It will also reveal which lenders are more likely to consider your circumstances. And if it’s too soon for you to borrow now, they will explain what you need to do to get mortgage-ready.
We research the mortgage market on your behalf and can clearly explain your options. Even if you are still saving or haven't started viewing properties, an early conversation can help you create a plan to buy your first home.