The Lloyd’s survey found that many potential homeowners believe existing debt will hinder their chances of being approved for a mortgage, and others believe they need at least a 20% deposit.
Now a mortgage lender is trying to dispel these misconceptions in an attempt to inspire confidence in aspiring homeowners, who may be unnecessarily delaying their plans.
Indeed, the study of more than a thousand potential first-time buyers found widespread confusion about what might prevent someone from getting a mortgage.
Up to 58% incorrectly believe that having existing debt will automatically prevent them from being approved. Meanwhile, 37% incorrectly thought a 20% deposit was necessary.
Here are some other factors that people questioned believe could hinder their dreams of homeownership:
- Outstanding debts 58%
- Work on a contract without working hours 54%
- Being in overdraft 40%
- Earn interest 38%
- No deposit 20% 37%
- You have recently changed jobs 31%
- Not having a perfect credit score 30%
- Earning less than £50,000 per year 27%
- Self-employed 24%
- Use buy now pay later 21%
- Get 20% maternity or paternity leave
- Having student loan debt 13%
What is the reality for aspiring homebuyers?
In fact, Lloyds has stressed that none of these factors will automatically prevent most lenders from being able to offer a mortgage, taking into account individual circumstances and assessments of eligibility and affordability.
First-time homeowner Levy Sheldon, who is also a TV personality and wrestler, explained what it was like to experience this.
She said: “Buying my first home was an amazing achievement, but I know how easy it is to look at the challenges involved and wonder if it is possible.
“A lot of people assume they need everything to be perfect before they can even think about getting a mortgage, but that’s not necessarily the case. Talking to experts and understanding your options can make a big difference.
“Getting on the property ladder isn’t easy, especially when you’re working hard to save, cutting back on things you enjoy and putting off other plans. But it’s important not to rule yourself out before you’ve explored what’s possible.”
Some common myths about home buying – busted
Lloyd’s has revealed some of the most common first-time purchase misconceptions identified in the research and explained what buyers can actually expect in reality.
myth: You must be debt-free to get a mortgage
reality: Existing borrowing, such as student loans, credit cards, car financing, or overdrafts, does not automatically prevent a person from getting a mortgage. Lenders consider whether the repayments are affordable along with other financial obligations.
myth: You need a 20% deposit
reality: Some mortgage products are available with much smaller deposits than many people realize – e.g New Lloyds deposit of £5,000 Offer – meaning buyers may be able to purchase a home sooner than they think.
myth: You need a perfect credit score
reality: There is no single credit score required to get a mortgage. Lenders take a range of factors into consideration when evaluating applications.
myth: Self-employed people cannot get a mortgage
reality: Many lenders offer mortgages to self-employed applicants, although they may need to provide additional proof of their income.
