First Time Buyer Mortgage

One of the most important pieces of advice for first-time buyers is to be prepared! The mortgage you are acceptable for depends on a multitude of areas such as annual income, credit commitments, debts and credit history.

Preparation is key

Our recommended list to get started:

  1. Know what to expect – how long a mortgage application may take, what documents do I need to get ready? What is a valuation? These are questions an adviser can run through with you.
  2. Check your credit report to ensure there are no outstanding payments, you’re showing on the electoral roll, and it accurately reflects your position.
  3. If you’re employed, do you have your payslips filed or saved? Have you been paid for what you’ve worked? Additional payments such as bonus, overtime, commission, car allowance, night shift, locum work (and lot’s more!) can all be taken into consideration for your mortgage application as a first time buyer, but they need to be shown on your payslips to be included.
  4. If you’re self-employed, have you filed your tax return yet? Are your accounts up to date? Lenders may want recent and previous years tax calculations and/or accounts.
  5. Do you know how much you can borrow? You want to make sure that you have a rough guide of your lending amount. Talk to one of our advisers, who can give you an idea of your borrowing potential, and look at applying for a Decision in Principle (This is sometimes referred to as an Agreement or Mortgage in Principle).
  6. Save, save, save! As well as using your money for your deposit, there can be extra costs involved, which you can read more on below.

There are a variety of options available to you as a first-time buyer looking for a mortgage. Our advisers will personally work with you, to find the right one for your circumstances.

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Frequently Asked Questions

As a first time buyer you will need a minimum deposit of 5%, which was introduced by the government in their “mortgage guarantee scheme” which allowed first-time buyers to take a mortgage of 95%, in order to help more people get on the property ladder. However, if you can afford a bigger deposit then you should try to use it. This is because the bigger the deposit you have, the lower the interest rates on your mortgage will be.

The general rule of thumb is around 4.5 times your annual income as a first time buyer, but, as always, there are other options. Some lenders may be able to stretch to 5 or even 5.5 times income, but of course you need to be able to meet other criteria with them. This is where a specialist adviser can review your personal circumstances and advise what is available to you.

There are a few areas to consider here, such as valuations and surveys on the house, solicitors, moving costs and potential stamp duty land tax. Your mortgage product may sometimes (but not always!) have an arrangement or product fee paid to the lender, this can be paid upfront or sometimes added to your mortgage amount. Your adviser will look at whether it’s worth paying this fee to secure a lower interest rate.

Aside from these, don’t forget about the small things we sometimes forget about – will your car insurance charge an admin fee for changing address? If it’s an older house, is there any remedial work you need to do straight away, is the boiler still in good shape? If it’s a newly built house, you may have to purchase bins from the council!

There are varying terms for a mortgage; the longer you take it out, the cheaper it is monthly, but the more interest you pay over the longer term. Your specialist adviser will complete a budget plan with you, to see what monthly payment is affordable yet also comfortable. Terms vary between 5 and 40 years usually, but the right term is individual to you and your adviser can advise based on your personal circumstances.

Yes, there are definitely options available to you. Sometimes it can be difficult when looking yourself, as lenders can be restrictive. You may need a mortgage adviser to advise you on what mortgage lenders are available for new build homes and flats. Standard income criteria usually applies – you don’t need more payslips for example, but it’s best to speak to an adviser who can go through your options. You may also benefit from the Help to Buy scheme….

The government launched their new Help to Buy scheme in April 2021 and will run until March 2023. It allows first time buyers to use just a 5% deposit when purchasing their first home. You then apply to receive up to a 20% (40% in London) loan from the government. That’s a 25% or 45% deposit to put down, and then a mortgage on the remainder. The loan from the government is interest free for 5 years, then after this you start paying interest on a monthly basis or can repay the loan, by way of savings, or potentially borrowing more on your mortgage. It has become increasingly popular because of the low deposit needed, but remember it’s only on new build homes, and it may not be right for you. An adviser can go through this in more detail with you.

A Help To Buy ISA allows the owner to put £200 a month into the account and when you come to close the account, they will give you a 25% ‘bonus’ up to a maximum of £3,000. They will only add this 25% if you use the money as a deposit on your first house or residential property. So yes, it would be beneficial for you to use your Help To Buy ISA for your deposit. Your solicitor will claim this bonus for you, but your mortgage adviser can help with further Help to Buy ISA questions.

Shared Ownership allows first time buyers to buy a share in a property. You would then pay the mortgage payments on the share of the property that you own, in addition to paying rent to the housing association for the remaining share that they own. This can allow you to get on the property ladder as a first time buyer, with a small deposit, especially if you cannot borrow the amount of money you need for the houses in your area. However, it’s not for everyone, and we have specialist mortgage advisers who have experience in Shared Ownership, who can discuss the different options for you.

If you are worried about your credit score as a first time buyer, there are a few actions you can take to improve it. Registering on the voter’s roll can help to increase your credit score, this is because it shows your name and latest address. It is also incredibly important to keep up with your payments and do not let yourself fall into debt, which goes hand in hand with making sure to not apply for credit that you cannot afford. Using a credit card and ensuring that you pay it off every month can also boost your score, and always try to avoid payday loans. One final thing that can help improve your credit score is ensuring that your address history is correct.

An adviser can help you go through credit files and advise on the right mortgage for you as a first time buyer.

It’s important to present yourself correctly to the right lender. Each one has their own criteria; for example, one area of your application won’t be accepted by one lender, but it would with another. This is where a mortgage adviser comes in, as they get to know your circumstances, as well as knowing each lender’s criteria, in order to match these up. One thing you can do as a start, is to ensure your credit file is in order, or making steps to improve it if it isn’t. See our top tips above for other ways to prepare for getting a mortgage as a first time buyer.

Had previous problems getting a mortgage?

If you have been told you are ineligible for a mortgage, speak to a specialist who can give you the help you need.

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