Buying your first home is exciting. It means finally having your own place and decorating it how you want, while knowing your monthly payments are building your own equity rather than someone else’s.
But before you start browsing Rightmove or booking viewings around Leicester, there’s an important step that many first-time buyers overlook.
Getting mortgage-ready.
The gap between wanting to buy a home and being able to secure a mortgage can feel frustrating. You might be earning decent money and saving what you can. But lenders have specific criteria they use to assess whether you’re a low lending risk.
The good news is that getting mortgage-ready isn’t a mysterious process. It’s about understanding what lenders look for and taking practical steps to strengthen your financial position.
This blog covers five essential tips to help first-time buyers in Leicester prepare their finances before applying for a mortgage. Some of these steps take time, so the earlier you start, the better position you’ll be in when you’re ready to buy.
Build a solid credit score
Your credit score is one of the first things mortgage lenders check. It’s essentially your financial reputation, a number that represents how reliably you’ve managed your credit in the past.
A good credit score won’t just help you get approved for a mortgage. It can also unlock better interest rates, potentially saving you thousands of pounds over the life of your loan.
So, start by checking your credit report. You can do this for free through services like Experian, Equifax or Credit Karma. Look carefully at what’s there. Check for errors like accounts that aren’t yours, payments marked as missed when they weren’t, or outdated information.
If you spot any mistakes, contact the credit reference agency to get them corrected. These errors can drag down your score unfairly.
Once you know where you stand, there are several practical steps you can take to improve your score.
Register on the electoral roll at your current address. It helps lenders verify your identity and address history. It’s a simple step that can make a surprising difference.
Avoid making multiple credit applications in a short period. Each application leaves a footprint on your report, and too many can make you look desperate for credit. Space out any applications and apply only for credit you genuinely need.
Keep your credit card balances low, ideally below 30% of your credit limit. Even if you pay off the full balance each month, having consistently high balances can affect your score. And don’t close old credit accounts unless they’re costing you money in fees. A longer credit history generally helps your score.
If you’re a Leicester graduate still repaying your student loan, don’t worry too much. Lenders treat student loans differently from other debts, so yours won’t typically prevent you from getting a mortgage.
Give yourself at least three to six months to work on your credit score before applying for a mortgage. Small improvements can make a real difference to the rates you’re offered.
Sort out your deposit
The size of your deposit affects everything about your mortgage. How much you can borrow, what interest rates you’ll be offered and, ultimately, what properties you can afford.
Most lenders want a deposit of at least 5% of the property’s value, though 10% is more common. The more you can save, the better. A 15% or 20% deposit will unlock significantly better mortgage rates, reducing your monthly payments and the total interest you’ll pay over time.
For a typical Leicester first-time buyer property of around £215,000, you’d need between £10,750 and £43,000 as a deposit, depending on the percentage you’re aiming for.
There are several ways to build your deposit.
Regular saving is the most straightforward approach. Set up a standing order to move money into a dedicated savings account on payday, before you have a chance to spend it. Even modest amounts add up over time.
Lifetime ISAs offer a 25% Government bonus on savings up to £4,000 per year, specifically for first-time buyers. If you’re under 40, this is worth exploring. The bonus can make a significant difference to your deposit, though there are penalties if you withdraw the money for anything other than buying your first home.
Many first-time buyers receive help from family members. If you’re fortunate enough to have parents or relatives willing to gift money towards your deposit, lenders will typically accept this. You’ll need to provide documentation showing it’s a genuine gift, not a loan that needs repaying.
You might also consider using any work bonuses, tax refunds or inheritance to boost your deposit.
Get your finances properly organised
Mortgage lenders will scrutinise your bank statements, typically asking for three to six months’ worth. They’re looking for evidence that you can manage your money responsibly and afford the mortgage you’re applying for.
What are they checking for?
Stable income is the starting point, so you need to demonstrate regular salary payments from your employer. They want to see consistency rather than erratic income.
They’re also looking at your spending habits. Not because they’re judging your lifestyle choices, but because they need to understand your financial commitments and whether you can genuinely afford mortgage payments on top of everything else.
Unexplained large transactions raise red flags. If you suddenly deposit £5,000 into your account, lenders will want documentation showing where it came from. Similarly, large unexplained payments out might suggest undisclosed debts or financial obligations.
So, what practical steps can you take to get your finances properly organised?
Set up standing orders to savings accounts. This demonstrates financial discipline and shows you can manage regular payments.
Avoid using your overdraft in the months before applying. Relying on an overdraft suggests you’re stretching your finances, which doesn’t inspire confidence from your lender.
Review your subscriptions and cancel any you don’t use. That forgotten gym membership or streaming service you never watch can soon add up, and lenders will notice frequent small outgoings.
And cut back on excessive spending on takeaways, entertainment or impulse purchases in the months before applying. You don’t need to live like a saint, but demonstrating some restraint helps.
Reduce your existing debts
Your outstanding debts can affect how much you can borrow for a mortgage. Lenders look at your debt-to-income ratio, comparing your monthly debt repayments against your income.
The more you’re already committed to paying each month on loans, credit cards or car finance, the less they’ll be willing to lend you for a mortgage.
So, start with your expensive debts first. Credit cards and payday loans typically charge the highest interest rates, so clearing these provides the biggest financial benefit.
Car finance also needs looking at. If you’re close to paying it off, clearing it might help your mortgage application. But if you’ve still got years of payments remaining, the impact of clearing it early versus the benefit to your deposit might be worth calculating.
As we mentioned earlier, student loans are treated differently by lenders. They’re factored into affordability calculations, but they won’t typically prevent you from getting a mortgage. So, don’t prioritise paying these off over building your deposit.
Aim to clear or significantly reduce your debts three to six months before applying for a mortgage. This will give your credit report time to update and show lenders a sustained pattern of improved financial management.
Understand what you can actually afford
Working out what you can afford, comfortably, is one of the most important steps in getting ready for your first mortgage. Just because a lender will offer you a certain amount, it doesn’t mean you should borrow it.
Lenders use calculations based on your income and outgoings to determine their maximum offer. But these calculations don’t always reflect your real-world financial situation or lifestyle.
Think beyond the monthly mortgage payment. There are other costs involved in homeownership that many first-time buyers underestimate.
Buildings insurance is mandatory if you have a mortgage. Life insurance, while not always required, is strongly recommended to protect your partner or family if something happens to you. Your lender will want to see that you’ve considered this.
Maintenance and repairs also become your responsibility. You’ll be on the hook, instead of your parents or landlord, for boiler services, leaking taps and the fence that needs replacing. So, setting aside an emergency fund for these unexpected costs is sensible.
If you’re buying a flat, there will be service charges and possibly ground rent. These can be substantial, particularly in newer developments around Leicester. Make sure you factor them into your affordability calculations.
Council tax, utilities and general running costs will likely be higher in your own home compared to renting, especially if you’re currently in a house share.
And consider potential interest rate rises. Most mortgage rates aren’t fixed forever. When your fixed period ends, your payments could increase.
Would you still be able to afford your mortgage if rates go up by two or three percentage points?
Many Leicester first-time buyers find that getting professional mortgage advice helps them avoid overstretching. A mortgage adviser can look at your complete financial picture and help you find the balance between maximising your buying power and maintaining some financial breathing space.
How can BDWM help?
Getting mortgage-ready takes time and effort, but every step you take strengthens your position as a first-time buyer.
Starting early gives you the best advantage, allowing you to build your credit score, save your deposit, organise your finances, reduce debts and understand what you can afford.
At BDWM, we help Leicester first-time buyers navigate the entire mortgage journey, from understanding what you can afford through to finding the right mortgage product for your circumstances.
Our experienced mortgage advisers can assess your current financial position, identify any areas that need strengthening, and help you create a realistic plan for buying your first home. We have relationships with multiple lenders across the market and can find options that suit your specific situation, even if your circumstances aren’t straightforward.
So, whether you’re just starting to save or you’re nearly ready to buy, we offer a no-obligation consultation to discuss your situation and explain how we can help. Contact us today to take your first confident step onto the property ladder.