People who are looking to settle down, buy their first home would find it hard to secure finance, due to the strict regulations of banks introduced after the recession. There are new requirements set, and one needs to save up more to put down a deposit for their new home. Some people would think that banks do not want to deal with young people at all. However, this is not the case. They simply need securities that customers will be able to afford the payments long term, and will not get into bad debt. Find out below how to get on the property ladder while playing by the banks’ rules.
Banks look at people who have a limited credit history as “high risk” borrowers. The less credit is on one’s name the harder it is to get a large sum approved for a mortgage. One or two missed credit card payments would generally not be a huge problem, but if customers have already built up a large balance and have outstanding loans already, the bank will look at these to determine how likely the person is to make payments on time. While credit cards are dangerous, they can help young people build up their credit rating, if used right.
Not Enough Security
It is likely that people who are looking to buy their first home were living in either rented accommodation or their parents’ home for a while. If they moved to university or worked away a lot, this will show on their credit rating. The more a person moves, the less secure their background will look on the credit rating. Further, people who are in their 20-s will have lower earnings, as they just started their career. Lower income will mean less disposable income for repayments. It is also hard to build up enough savings to put down enough deposit for a house for both single applicants and couples.
People who rent or live with friends/parents would generally spend more on weekly shopping and going out. As the bank completes an income and expenditure analysis for all customers applying for home loans and mortgages, this will show on their account. Trying to show the bank that one is saving up for the deposit and is serious about getting on the property ladder can positively influence the decision. Consolidating all credit cards and loans into a lower interest rate product a few months before applying for a mortgage can also help.
Banks and Finance – The Main Obstacle Stopping People from Getting on the Property Ladder
Banks, now requiring larger deposits, more secure background, and excellent credit rating, stop many people from getting on the property ladder. It is important that customers review their budget, get their finances in shape and have a savings plan in place when applying for a mortgage first time. Further, they need to make sure that they shop around for properties they can afford, and research the market for the lowest repayments, so they can meet all their financial commitments.
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