LYDIA ON LIFE

“It is even more foolish to buy an unnecessary thing on credit.”
― Mokokoma Mokhonoana

Think you’re ready to take the exciting leap into homeownership as a single first-time buyer? It’s a significant milestone, but it also comes with its own set of challenges. From navigating mortgage lenders’ scrutiny to managing your finances effectively, there’s a lot to consider. But fear not, with the right preparation and mindset, you can make your dream of owning a home a reality.

As a single mum and first-time buyer who finally secured my own home in November 2022, I understand the mix of excitement and anxiety that comes with the territory, particularly during challenging times like today’s cost-of-living crisis and single motherhood.

So in this post, I’m excited to share the insights and tips I gathered during my experience as a single first-time buyer to empower fellow single first time buyers. Even if you’re not buying your first home alone, my aim is to equip you with the knowledge and tools to navigate the mortgage process effectively and confidently.

Let’s get started!

Step 1: Determine Your Why

Understanding your motivation for homeownership is crucial. Whether it’s for investment, stability, pride, or financial independence, having a clear goal will anchor you throughout this fulfilling journey.

For me, it was about reaffirming my self-worth following one of the most challenging and transformative periods of my life – becoming a single mum. I had always wanted to get married and own a home before having children. Faced with the reality that my dream wouldn’t unfold as envisioned, I was determined to come as close to it as possible. I even posted a tweet as my way of saying, “By faith, this is happening!” That tweet became my daily motivation to keep praying, saving and getting ready for my homeownership journey. 

What is your reason for wanting to buy your first home? 

Step 2: Organise Your Finances

Getting your finances in order is crucial, especially as a single first time buyer. Lenders scrutinise affordability carefully, considering factors like income, expenses, and credit history. Utilising online budget planners can provide clarity on your financial standing and identify areas for improvement. Read till the end if you’d like to use the LOL home buying planner I created.

For me, I had to navigate expensive childcare costs and really tighten my budget to meet my savings goals. From selling unused items like my car to exploring additional income streams, every effort contributed to my financial readiness for homeownership. If your expenses outweigh your income, it’s time to seek professional advice on improving your financial situation. Here are some ways you could cut down on expenses and boost your income:

Reducing Expenses:

• Sell unused items – If you don’t need it right now or don’t need it at all, consider selling it on Gumtree, Ebay, Vinted, Shpock or Facebook Marketplace. 
• Optimise childcare discounts – Always check to see what you are eligible for using the government childcare calculator. If you aren’t eligible, see whether you can reduce the hours where feasible for a while.
• Self-maintenance – Learn to manage personal care like hair, nails, and beauty treatments on your own through YouTube, Instagram and TikTok. You might actually enjoy it!
• Thrifty shopping – Embrace second-hand clothing, affordable groceries, and discounted experiences on websites like Groupon, Wowcher, VoucherCodes and Honey.
• Prioritise necessities – Avoid unnecessary expenses like phone upgrades or luxury items temporarily.

Increasing Income:

• Negotiate salary – Discuss salary increases at your current job or explore new roles on websites like Otta, LinkedIn, Indeed or Find a Job.
• Side hustles – Leverage platforms like Etsy, Fiverr, Upwork, Freelancer, TaskRabbit or TalentTalks to offer your skills, talent and products to those that need it.
• Online Marketplaces – Join platforms like MTurk, Swagbucks, dataannotation, Toluna, Triaba Panel or LifePoints Panel to complete virtual tasks for extra money.
• Cashback and Coupons – Utilise cashback and coupon websites like Topcashback, Quidco, Kidstart and Cashback to earn rewards and gift cards while making purchases which in the long run will save you some money.

It may seem like a lot of work at first and can at times feel overwhelming but let me tell you, once you have those keys in your hand, it will all be worth it. Trust me!

What changes do you need to make to improve your finances?

Step 3: Boost Your Credit Score

A healthy credit score significantly impacts your mortgage application. Essentially, lenders use your credit history to predict your future behaviour based on your past behaviour in order to determine if they should extend credit to you.

Prior to having my son in 2018, my credit history was limited to a phone contract, living at the same address for a long time (my mum’s house) and being on the electoral roll. While a poor credit history is detrimental, having little to no credit history poses challenges as well. In a bid to improve my credit score, I first checked my eligibility for a credit card through a soft search on credit card eligibility checker. This led me to secure a purchase-only credit card with minimal interest which I utilised for various everyday expenses, ensuring to clear the balance before the end of the month. By the time I was applying for a mortgage, I had a healthy credit history which instilled confidence in lenders about my responsible borrowing and repayment habits.

If you’re on the electric roll register, have checked your credit file on platforms like Credit Karma or Expirian and need to boost your credit score, here are some practical tips:

• Limit credit applications – Avoid opening new bank accounts, credit cards, phone contracts, or loans unnecessarily.
• Close joint accounts – Terminate accounts you have with people you’re no longer sharing financial commitments with, such as ex-partners, friends, family members or business partners and request disassociation notices from credit reference agencies.
• Soft Search for Eligibility – If you’re yet to get a credit card, use a soft search on Compare the Market or Moneysupermarket.com to assess eligibility for a low-interest credit card and once approved, utilise it often and responsibly. 
• Repay on time – If you have credit cards, phone contracts, or any loans, ensure you make timely re-payments and if possible, clear the balances in full, starting with the highest-interest balance.
• Stay in one place – If possible, remain at the same address for an extended period which will demonstrate stability and reliability to potential lenders.

Even with limited or poor credit history, you can take proactive steps to improve your score over time. This not only enhances your credit score but also aids in managing your purchasing behaviour effectively. To improve your chances of acceptance, take the time to whip your credit report into shape before applying. 

What other ways could you improve your credit score?

Step 4: Save Strategically

Saving for your first home can be a challenging aspect of the home buying journey, with the average first-time buyer typically aiming for a 10% – 20% deposit to minimise monthly costs. This could mean needing a deposit between £25,000 to £50,000 (based on a £250,000 property) or even more. Additionally, you’ll likely require an extra £5,000 to cover legal fees, home surveys, and other essential completion services. Lastly, you’ll need a budget for furnishing, decorating, and unexpected expenses that may arise during the initial months of settling into your new home. It might seem like a lot, I know, but with time, patience and discipline, it can all be possible.

To make the saving process more manageable, you should explore alternative methods that might be more suited to your saving habits and fun. Here are some examples:

• The 100-Envelope Challenge –  Label 100 envelopes with numbers 1 to 100. Every week, randomly select two envelopes and deposit the amount that is labelled on them. Repeat this until you’ve reached your savings goal.
• The £1,500 Challenge – Incrementally increase your savings by a pound each day of the week, restarting the cycle the following week. For example, save £1 on Monday, £2 on Tuesday, and so forth until Sunday then start again the following week. Repeat this until you’ve reached your savings goal.
• The Cancellation Challenge – Temporarily cancel any unnecessary direct debits for the duration of your saving period, regardless of the amount. Every little helps!
• The Vault Challenge – On payday after all necessary bills are paid but before you decide to splurge, transfer 10% (or more or less) of your remaining income into an account you cannot easily access until you reach your savings goal. 

If you’re fortunate to be eligible for any of the government schemes available or have a rich and generous family member somewhere then definitely consider utilising those options too. 

Where you save your money is just as important as how much you save. High interest rate accounts that are especially geared towards first time buyers like the Lifetime ISA (LISA) are a great way to boost your savings overtime. Having your motivation, finances, and credit score in order will significantly ease the lengthy but necessary home buying process. 

How do you save your money for a deposit?

Step 5: Seek Professional Advice

Consulting a mortgage advisor early in your home buying journey is invaluable. They provide insights tailored to your circumstances, ensuring you understand your borrowing capacity and available mortgage options. 

In 2018, three months after welcoming my son, I reached out to a mortgage advisor to kickstart my home buying journey. Mentioning my recent motherhood, the advisor honestly and sincerely said, “It’s unlikely you’ll get approved as a new mother on a single income.” While the advice seemed harsh, it resonated, especially considering the cost of childcare in the UK. So I chose to enjoy the early years of motherhood whilst I prepared for the journey to homeownership that would happen 4 years later.

Securing a mortgage as a single person isn’t always easy, especially for single parents. Without the consultation in 2018, I might have underestimated the impact of childcare costs on affordability, potentially missing out on my current home because I was rushing into things.

So once you feel ready to embark on the mortgage process, consider the following factors when getting advice from a broker: 

• Is the firm affiliated with the Association of Mortgage Intermediaries (AMI)
• Are they a whole-of-market broker who assesses all available mortgages to ensure the recommendations align with your needs?
• Do they disclose cheaper mortgages available only through direct application i.e. without a broker?
• Would an online service be better than traditional in-person advisors?
• Is their fees and commission flat rate or a percentage of the borrowed amount?
• What is included in their services, such as administrative tasks and lender follow-ups etc?
• Do they offer related services like life insurance or mortgage protection, potentially saving time and money?

Before settling on a mortgage advisor, compare at least 5 or 6 options and read reviews but most importantly, trust your instincts. Remember you will be sharing personal information such as finances with your broker. So, you need to feel comfortable working with them, otherwise it will make the process a lot more stressful for you.

I personally recommend Nicola McKenzie from Dunham McCarthy, who facilitated my home buying journey. For more information, visit their YouTube, Instagram, or website.

Where would you go to get a mortgage deal – a broker or direct to the bank?

And that’s it! That’s my 5 steps to getting a mortgage as a single person.

Access My Home Buying Planner

Navigating the home buying process can be overwhelming, especially for single first-time buyers with no previous experience. The amount of information to absorb and remember can be mentally draining and emotionally overwhelming. Personally, I found myself running low on brain power during my process which prompted me to create a dedicated home buying planner as my guiding companion and I’m making it available to you.

My hope is that having access to this comprehensive home buying planner will equip you with tools and carefully curated resources needed to demystify the complexities of mortgages and help you confidently buy your dream home. From tracking your spending and understanding your mortgage information, to knowing which questions to ask when viewing properties and making an offer on your perfect home – my home buying planner has got you covered. 

To gain access to this planner and the invaluable resources inside, simply click here and make a copy of your own if you have a gmail account or download as an excel document. You’ll then be able to view the comments I’ve left as a guide. If you need any help with the planner please don’t hesitate to reach out. All I ask in return is some constructive feedback via email (lydiaonlife@gmail.com) to help me improve the planner for everyone who needs it.

I wish you all the best on this journey and I would love to hear your experience with your mortgage application.

Thank you for your dedication in reading through to the end. 

If any part of my journey resonates with you then stay tuned for more of my property investment adventure. I look forward to sharing my insights and experiences with you in the next post. Till then, you can stay up-to-date with my home renovation journey and more on my Instagram – @lydiaonlife.

With love and excitement,

Lydia x

Disclaimer: The content provided is for informational purposes only and does not constitute financial advice. For personalised guidance, consult with a qualified financial advisor or utilise reputable financial resources.