Mortgages for first-time buyers

What’s required to get a first-time buyer mortgage?

When you apply for a mortgage, the lender will make a full assessment of your financial situation. Your income from all sources will be considered, together with any regular outgoings and commitments.

These commitments will include loans, credit cards, childcare and travel costs. It’s important that you don’t over commit yourself. A lender’s affordability calculations will take account of potentially higher interest rates in the future.

In addition to assessing affordability, lenders will carry out a check of your credit history. They will also need to establish your address history for at least the last 3 years. Furthermore, they would expect that you are registered on the electoral roll at your current address.

To support a mortgage application, you will need to provide evidence of your income. This is usually the latest 3 months payslips if you are employed or tax calculations and accounts if you are self-employed.

Together with your latest 3 months banks statements, proof of identification and address, documentary evidence of your deposit will also be required at the application stage.

What deposit does a first-time buyer need?

Generally speaking, a first-time buyer deposit will need at least of the purchase price.

Although, there may be some exceptions to this in the event that you are buying a property under the market value. This could possibly be with a gifted equity deposit from the vendor who would usually be a family member.

A larger deposit will influence the rates of interest and mortgage deals that will be available. Essentially, the higher your deposit in comparison to the property price, the better rates you may be able to access.

According to Zoopla, the average first-time buyer property price in 2023 was £240,000. With the average deposit, at this price for first-time buyers, is £34,500 – equating to around 15%.

How much can first-time buyers borrow?

It is important that an affordable monthly budget is established at the early stage of a discussion. Traditionally, a lender would calculate lending based on a multiple of income. For example, the household income x 4.

However, this is no longer the case as individual circumstances are very different when it comes to how people spend their income. A lender will have a specific affordability assessment into which all income and known commitments are entered.

Any future unknown costs may be estimated, or they may assume a figure based on information from the Office of National Statistics.

Some types of benefits may also be acceptable, and these can be clarified by our experts.

The amount of deposit may also influence the amount available to borrow, with some lenders applying a “cap” on higher loan-to-value cases. This cap may be 4 or 4.5 x the income, regardless of the affordability calculation.

As a guide, if you have a good credit record, you can expect to borrow between your income.

If you want an accurate indication of your borrowing capabilities, reach out today.

What are the mortgage costs for first-time buyers?

Some common first-time buyers mortgage costs are as follows:

• Deposit – this usually starts at 5% of the value of the property you are looking to purchase.
• Interest rates – what your lender charges you to borrow money from them.
• Stamp Duty – will be payable if you purchase a property for over £300,000.
• Solicitor or Conveyancer fees – they will take care of all the legal paperwork when purchasing a property.
• Survey/ Mortgage Valuation fees – what your charged if a lender requires a property to be valued.
• Mortgage broker fees – a charge paid to your broker for their services. This is either a set fee or a small percentage of the borrowing amount.

First-time buyer mortgage interest rates

First-time buyers can usually access mortgage rates that are available to all applicants. So don’t think because it’s your first mortgage, you will be charged a much high rate.

On top of this, lenders sometimes have exclusive first-time buyer mortgage rates, that also include extra benefits added to them. The benefits can range from free mortgage valuation/ surveys, cashback and in some instances, help towards fees.

If you want to improve your chances of accessing a better mortgage rate, you can:

• Supply a larger then average deposit. As the loan-to-value will decrease, you are seen as less of a risk. Therefore, its likely you could access a better deal with a better rate.
• Ensure you have a good credit score – Again, if you can demonstrate to a lender you are less of a risk they are

As the market fluctuates so much, it can be hard to give precise figures to expect. If you want an accurate idea of the rate you might pay, get in touch today.