Mortgages for first-time buyers

Mortgages for first-time buyers are the same as any other type of mortgage for a house purchase.

Although, a more thorough discussion regarding regular budgets and affordability is normally appropriate. This is to ensure that applicants are fully aware of all the ongoing costs associated with home ownership.

As a first-time buyer, you will probably have a lot of questions and concerns regarding the whole property-buying process. By having an initial discussion with one of our team, we can answer your questions and guide you through it.

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Author: Carl Shave - CEO and co-founder
Last updated: 14 Jul 2024

Using a mortgage broker as a first-time buyer

As a first-time buyer, its likely you’ll have many questions and a limited understanding of the whole house-purchase process. So a discussion with a suitably qualified mortgage broker may prove invaluable.

You will be guided through the purchase process, where your advisor will make sure you understand all of the key points.

Once the broker has a full understanding of your current circumstances, they will be in an ideal position to recommend a suitable lender.

Following on from the completion of the purchase, the broker will contact you before your mortgage rate finishes. This is to review your circumstances and assist with finding another good deal, with your existing lender or by moving to a new lender.

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First Time Buyer topics

Helping you choose your first mortgage.

Useful Information

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.

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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%.

 

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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.

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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.
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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.

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How do lenders work out affordability for first-time buyers?

As mentioned above, income is still very much a deciding factor. However, there are many other elements that are now also taken into consideration. Some of these being:

  • An applicant’s age, i.e. how long can the loan be?
  • How much deposit or amount of equity is there?
  • Number of dependants – someone that relies on you financially, e.g. a child
  • Your credit history
  • Outstanding credit commitments
  • Childcare costs
  • Pension contributions and other salary deductions
  • Council tax
  • Travel costs
  • Ground rent and/or maintenance payments where applicable, i.e. leasehold properties

Keep in mind, that the list above is not exhaustive and different lenders apply different rules. This means that there is no ‘best’ mortgage lenders for first-time buyers. So, where one lender may reject you, another may not.

However, this doesn’t mean you should go around applying for lots of different products trying to get the best deal. This can be damaging to your applications and could lead to you being rejected by everyone.

At the end of the day, a crucial factor for any lender is risk. If you can show that you aren’t a risk to lend to, then you will likely be more successful.

You can do this through things like improving your credit score, providing a larger than average deposit and showing a clear overview of your finances.

Finding the right mortgage advice as first-time buyers

Buying your first home is a time of excitement, but for many it represents a period of anxiety and a step into the unknown.

With so many different options available alongside a mind boggling amount of terminology, it is perhaps no surprise that this is a part of the house buying exercise that many seek help and advice.

Advice can be found from a variety of sources including:

Family and friends – A good source of honest and hands on experience of home ownership. It does, however, depend on their knowledge of the current mortgage industry to the accuracy of the information being provided.

Internet – A huge amount of information at your fingertips 24 hours, 7 days a week. Remember, with such a vast amount of information it can be difficult to know where to begin and determine what is relevant.

Lenders – Fully qualified advice tailored to your individual needs. This could represent a restricted viewpoint of the market, as they’re only able to advise on what they can offer or do for you.

Mortgage Advisors – Fully qualified advice again tailored to your individual needs. However, do check on their access to the market. A broker with access to a wider range of lenders will be able to offer more options than a broker who is tied to a particular bank. This option will likely incur a fee as well.

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First-time buyer mortgage FAQs

Unless you have a record of a mortgage on your file, a lender has no real way of checking. The question is asked as part of the application and should be answered honestly.

Not divulging the correct information on any part of your mortgage application is deemed as fraud. Your status will also need to be discussed with your solicitor where the same principles apply.

Lenders may class you as a first-time buyer as per their criteria even if you have owned a property before. So, do ensure you check this out before proceeding, it could get you a better suited mortgage scheme.

It’s highly likely that some exclusive rates and terms may be available through a mortgage broker.

Certain brokers have memberships to a variety of professional mortgage networks or mortgage clubs. This allows them to access exclusive deals, because of the volumes of business they provide to lenders.

An exclusive deal could be a lower arrangement fees, or fees assistance from lenders which are not available elsewhere.

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