Why is it so complicated getting your foot on the first step on the property ladder? From mortgage applications to dealing with estate agents, you have to take a big GULP as it’s time to be a grown-up. And I hate grown-up things – they make me palm-sweaty! So if I can do this, anyone can. Here’s my step-by-step guide.
1. Speak to the money people
Accountants, banks, mortgage brokers – they’re not as scary as you may think and they know the housing market inside out. Ask friends and family for recommendations for the people they used. Call them up and explain your current money situation. Base your course of action on their advice. I spoke to two accountants, six mortgage advisors and went in to see two bank managers. Chatting is your research.
2. Get yourself in order
As a freelancer, my money was all over the place. I had one bank account which all my money went in and out of. Credit cards I used for pleasure and business, as well as pools of savings that I dipped into as and when. On paper, I looked a mess. Banks do not like this. They like things to be simple. So I got an accountant. I got a business account. I shopped around for a free business account (HSBC for one year) which all my invoices got paid into; a bank account purely for my household bills; a personal bank account just for me (wine and shoes mainly); and finally, I had one credit card for work and one for holidays – both paid off each month. Now both the banks and I could see where and what my money was going on.
3. Clean up your credit report
Banks like things clear and simple. An unused store card registered to an old student address will be frowned upon. For £2 I got my credit reports online. Best £2 spent. These reports list all cards, accounts and people that have a financial connection with you. You may find old boyfriends and flatmates on there from days past, as well as cards and accounts you may have forgotten about. You can write to them to clear up your report. This is important as this info is what banks will use to decide if they will give you a mortgage. I realised that had somehow slipped off the electoral register, and some of my cards were not all registered at the same address. I cancelled a couple of cards I never used. I sent off a letter to the credit report agencies so now my credit report was whistle-clean.
4. Spend & save wisely
To get a mortgage today, they look at affordability as well as what you have to put down as a deposit. It’s not all about your income, it is how you spend it. Separating your accounts into ‘household’ and ‘personal’ will help clarify what you spend each month. If a bank sees you spend a fortune on hairdressers and meals out, they may think that your lifestyle might not suit a mortgage. I set myself a strict budget of £500 to live on for a month for food, going out, clothes, parties and travel. It was tough, but it made me save. In six months, I managed to squirrel an extra £2,000 to put towards my new home.
5. Get the right address
Finally, make sure all your paperwork is registered at your main address. Banks will want to see a clear history of where you live. Getting yourself on the electoral register is so important. Make sure your bank statements, credit cards and driver’s licence are all registered to your home.
These little money things take forever to sort out. It took me two years from start to finish to get myself in a good place before a bank would even touch me. They are fiddly, time-consuming and boring but when you finally come to apply for a mortgage, nothing can stop you.