Five tips from WhatHouse? on being fully prepared for Help to Buy
Help to Buy hopefuls account for 70% of mortgage applications in the under-40s, and almost 40% of 20- to 40-year-olds are considering applying for the scheme in 2014, according to a recent report commissioned by Experian CreditExpert.
The report also highlighted worrying findings about how little some prospective applicants understand about the scheme and, in particular, about preparing themselves and their finances before submitting an application. Avoid missing out on making the most of Help to Buy by following the tips below.
Get on the electoral roll
60% of Help to Buy hopefuls are not on the electoral roll at their current address - Don't let something as simple as failing to register on the electoral roll hamper your chances of getting a mortgage. Your presence on the electoral roll helps lenders to identify you, and the stakes are high - you could be rejected without it. You can find out whether you are registered by contacting your local council or by viewing your credit report. If you need to register, you can do so for free online.
Check your credit report
25% of Help to Buy hopefuls have never checked their credit report. 14% believe a good credit history is less important when using Help to Buy than when applying for a convention mortgage - Your credit file is a vital part of the application process. Lenders will search your file, which will list any credit cards, loans, mortgages and overdrafts you have held for the last six years. Lenders will usually check files with Experian, Equifax or Callcredit, so viewing all three reports several months before applying is highly recommended. Checking early will also give you time to have any errors corrected.
Manage your debts
14% admit to poorly managing their current credit accounts in recent years - Your current credit accounts will show up on your credit report, so you must consider how well they are managed. Having credit cards that are close to their limits may make you appear to be struggling financially and could affect your mortgage application. Although there is no set rule, lenders prefer your debts on cards and overdrafts to be less than 50% of your credit limits.
Consider the fees
£9,590 is the average deposit saved by a Help to Buy hopeful. 55% have a deposit of less than £10,000 saved. 7% are yet to save anything - Don't risk financial ruin by ploughing every penny of your savings in to a deposit to meet the minimum criteria. Help to Buy purchases are subject to application fees and stamp duty payments, and these outgoings must also be taken in to account. It pays to shop around and seek advice from a financial advisor, who will be able to help you decide which of the mortgages on offer best suits your circumstances.
7% of prospective applicants are planning on moving in the next three months. 25% will apply in the second half of 2014 - You should always be well prepared before submitting an application for a mortgage, but if you do tick all of the boxes then you would be well advised to move quickly. Help to Buy offers an excellent opportunity for buyers and government funds may well run out before the end of their planned three-year life.