While it’s an exciting prospect, buying a house requires preparation and planning to ensure a smooth transition from renter to homeowner—which for many, can feel overwhelming. But if you’re dreaming of owning a home but feeling nervous by all the steps involved? Don’t be. You’re not alone—and navigating the process doesn’t have to be daunting. Here are the top things you should be focussing on to prepare for homeownership.
#1: Pay Attention to Your Credit Report
Your credit history plays a pivotal role in both your mortgage approval and the interest rate you’ll secure. If you’re not sure what your credit history says, you can request a credit report from agencies such as Experian & Equifax to review your score and look through your recorded data. Personally, I prefer Check My File as it pulls data from the main credit agencies that lenders use into one report—which saves you from getting multiple reports. But whichever you choose, having access to your credit report can help you identify any forgotten accounts or fraudulent activity. If you already know your credit history and want to improve it, there are various ways to do so, including paying down existing debts, making sure all of your addresses and electoral register are correct, paying bills on time, and avoiding opening new lines of credit to improve your score.
#2: Analyse Your Debt-to-Income Ratio
Many people will tell you that debt is bad, but the thing is, not all debt is made equal. Borrowing, when done correctly, can actually help you with certain things in life (such as getting a home, by way of a mortgage). However, there is what’s called a debt-to-income ratio (DTI)—and it’s this that you want to be careful of. Lenders scrutinise your debt-to-income ratio (DTI) to assess your ability to manage mortgage payments alongside any existing debts you have. A DTI below 36% is generally seen as favourable for mortgage applications, so if you’re close to this, focus on lowering your debt by prioritising your payments and paying off high-interest debts first.
#3: Keep Your Finances Stable
I’m not going to tell you to save for a mortgage. You already know that you need to do that part. But what I will say is that sometimes with homeownership there can be unforeseen costs on top of the mortgage payments, property charges, maintenance, utilities, insurance etc you’ve already planned for! So, it’s best to build a little bit extra into your savings plan, just in case. It’s also best to avoid significant financial changes in the months leading up to a mortgage application. Examples of this include taking on new debts, or switching to self-employment before an application. When your application is going through, you want to show stability in your income as this type of financial habit reassures lenders of your reliability.
Overall, it’s important to remember that lenders don’t know you personally. They can only base their decisions on the information they have listed on your paperwork—so it’s important to ensure that it represents you in the best way. I hope the above helps you with that, but if you have a specific question or need more in-depth guidance, book a free no-obligation call via this link and I can help you through it!
— Sonya xo
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