There are so many myths that surround the first time buying process. It’s enough to put you off from committing altogether. The pre-approval process, having a big deposit and ‘genuine’ savings are three elements that seem to be essential to start climbing the property ladder. But what if we told you it’s not actually all that hard. Here, we’re going to take you through each of these three common first-time buying myths and how to overcome them. 

Getting pre-approval 

Whilst the pre-approval process may appear to help your application, it can actually hinder it. This once pretty foolproof method of pre-application meant that you could have confidence at an early stage about the status of your application and start looking for properties based on this. However, with the advent of automated and computer-marked pre-approval, you can no longer pin your hopes on their results. 

The problem: 

• First-time buyers think it’s an essential part of the buying process. 
• With many major banks, the pre-approval process is no longer manually scored. As a result, the same bank that may pre-approve your application could reject your actual mortgage application.
• The automated responses do not look deeply enough into your employment, savings or credit bills. They may seem easy to fill out but this means that the ‘window of acceptance’ is relatively low. 
• These pre-approval processes do not allow nuance in applications. So, if your credit score or employment don’t meet their specific criteria, you won’t get the opportunity to fill in the blanks or apply again. 

How to fix it: 

There are several workarounds for this issue. Ultimately, we would avoid any pre-approval processes with major banks as their cookie-cutter approach doesn’t bode well for most first time buyers. We would also advise you to seek out some more professional help to assess the mortgages you will likely be approved for. This will not only give you more confidence in your application but a much more realistic view of the deposit and properties you can aim towards.  

Think you need a 20% deposit? Think again 

Gone are the days where a 20% deposit is realistic or even necessary. When you’re trying to live your life and compete against rising house prices, 20% seems like a super daunting amount of money. 

The problem 

• First-time buyers wait around until they hit the magic 20% mark. 
• An increased amount of time and money spent on rental properties. 
• Makes saving for your first home feel like a real slog. 

How to fix it: 

Aiming for a higher deposit is of course preferable. Higher deposit = lower rate and fewer repayments after all. But some lenders offer deposits as low as 5, 8 or 10%. What’s key is understanding where your benchmark is in terms of properties you’re looking at. As of course, the lower your budget, the less your deposit will be too. At Roston, we help our clients work through their financial position and help to estimate their total borrowing capacity. We can also help you to find the perfect supplier to meet your borrowing capacity to ensure you’re getting the best deal for the deposit you’re able to afford. 

You’ve come into some money – but don’t you need genuine savings? 

Whether it’s inheritance, a bonus or a tax refund, more often than not it’s these large sums of money that help us to make buying your first home feel like a reality. But what if, other than this big boost you don’t have any other savings? Well, it’s game over then right? 

The problem 

• The exciting prospect of buying your first home is quashed by fears of not having genuine savings. 
• First-time buyers think they need to have savings dating back a fair while. 
• There’s a misconception that genuine savings only means dollars in your bank accounts. 

How to fix it

There are several ways to get around this. Most lenders want to see that you can hold at least 5% of the property value in a bank account for 3 months – whether that be savings or general. However, other ways to show genuine savings also include: 

• Rent receipts for over 6 months 
• Equity in property or real estate 
• Shares or managed funds for 3 months or more 
• Term deposits managed for 3 months or more 

If you’re not sure if you fit into any of the above, or just want some reassurance we can work with you to look at your options and ways you can prove genuine savings without a lot of effort. 

Now we’ve got those three things straight, you’ll be well on your way to making your first steps in buying your first home. But, if you’re still unsure of the process or need some further assistance, we’d be happy to help. Get in touch to book a no-obligation chat with one of our friendly mortgage advisers.