First-time Buyers

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First Time Buyer Mortgages - What You Need To Know

Being a first-time buyer is exciting and stressful at the same time. There are so many questions that you want to ask before letting go of your deposit and buying your first home. We have put together a first-time buyer guide to help prepare you as you purchase your first property.

What Is a first-time buyer?

It may seem obvious but a first-time buyer is someone who has not owned a property in the UK or abroad before and is looking to purchase one for the first time and get on the property ladder. To be considered as a first-time buyer, you should fall into one of these categories:

  • You have not previously purchased a residential property abroad or in the UK
  • You own a commercial property but have no living space within it

If you are unsure of whether you qualify as a first-time buyer, you can contact a mortgage adviser who will be able to assist you.

How do I get a mortgage as a first-time buyer?

If you are in the position to purchase your first property, you can investigate first-time buyer mortgages. To get a mortgage, you should contact your local banks and building societies and speak to a mortgage specialist who will be able to advise you on how much you can borrow. Be aware that by speaking to an individual bank or lender you are limited only to the products they offer. You can also talk to an independent mortgage broker who will have access to a variety of lenders and be able to advise on the most suitable one for you.

How much can I borrow?

The amount you can borrow for a mortgage depends on a variety of factors;

  • How much do you earn a year?
  • Do you have many outgoings?
  • How many people will be applying for the mortgage?
  • What is your credit score?

As a guide, you should multiply your salary by four to get an idea of how much you can borrow. For further guidance search online for a mortgage calculator that will consider your position and tell you how much you can borrow. For an accurate assessment of your mortgage application position speak to a professional adviser.

What is an agreement in principle?

When contacting a mortgage broker, they may give you an Agreement in Principle, sometimes known as a Decision in Principle. Having one in place demonstrates that you are a serious buyer and that the bank considers that you are in a position to make an offer on a property you would like to buy.

Your agreement in principle will indicate how much you can pay for a property and, crucially, how much the bank is willing to lend you. Once you have put your offer in for a property, the bank will check your financial position in greater detail to make sure you can afford the mortgage payments.

How do I know what my credit score is – how do I improve it?

Mortgage lenders will check your credit score to determine how financially stable you are which in turn will determine whether they are willing to lend to you. To check your credit score, you can sign up with a credit checking website such as Experian or Equifax. These companies will check your financial profile, and let you know your credit score, which will influence the number of lenders who are likely to lend to you.

Generally, the greater the amount of credit you have accessed in the past, the less likely it is that you will be able to borrow the amount you want. To improve your score, you should be regularly paying back any debt you have, on time, and if possible always pay back more than the minimum amount. You should also make sure that you are on the electoral register and reduce the amount of money you are borrowing.

What types of mortgage deals are available to first-time buyers?

There are several different types of mortgage that you might be offered as a first-time buyer including:

  • Fixed-Rate Mortgages – where the interest rate is fixed for a while.
  • Variable Rate Mortgages – this type of mortgage is not discounted and the monthly payment may vary from the start.
  • Tracker Mortgages – these are effectively variable-rate mortgages where the interest rate is set at a point above or below that set by the Bank of England.
  • Discounted Mortgages – a discounted mortgage is a type of tracker mortgage where your mortgage rate is set at a fixed percentage below the lender’s standard rate.

How much deposit will I need?

Generally, a first-time buyer will need at least a 10% deposit which can be difficult to get together but it’s worth bearing in mind that the bigger deposit you can save, and the more equity you have in your desired property, will mean better interest rates and lower monthly repayments, so saving up is very beneficial in the long run.

What help is available for first-time buyers?

Getting a first-time buyer mortgage offer can be hard and involve a lot of saving and hard work. If you are struggling to get on the property ladder, there are a variety of government schemes out there to help you.

A Lifetime ISA will get you a 25% savings boost every year until you are 40. Shared Ownership Schemes and Starter Home schemes can help and an Equity Loan, where the Government will lend you up to 20% of the cost of a brand new house can be invaluable.

You can find out more about the Government Help to Buy scheme here Help to Buy but remember, your local mortgage adviser will also be able to help.

What other costs are involved when buying a house?

When buying a property, you must consider all of the costs that are involved. Typically, these include the following:

  • Solicitors fees – These can be a percentage of the property value or a flat fee.
  • Stamp Duty – This is free for first-time buyers unless you purchase a property over a certain value.
  • New furniture – Don’t forget that when you are buying your first property, you will need to furnish it.
  • House Survey – All lenders will require a survey, the cost will vary depending on how detailed the survey is.
  • Mortgage Broker Fee – If you are using a mortgage broker they may charge a fee for their services. This can be a flat sum or can be covered by your monthly mortgage payment
  • Insurance – House Buildings and Contents insurance should be purchased and may be a requirement of your lender.

Why One Mortgages, Protection and Estates?

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Based in Leeds, One Mortgages & Protection Limited offers impartial and unbiased advice to customers UK wide, no customer is too far away to help.