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First Time Buyer Mortgage

You are buying your first house. It’s an exciting time. You will have your own space to do with as you wish. But you also have many questions about your First Time Buyer Mortgage. 

You are concerned about getting the best deal. It’s an epic journey and knowing where to start is the hardest part. Surprisingly this has the simplest answer: speak to a mortgage broker as early on in the process as you can. Find one you trust and work with them as you move towards buying your first home.

A mortgage broker will guide you through the process. They will educate you so that you are able to make informed decisions. They will take the time to fully understand your circumstances and priorities and offer you bespoke advice. Even if you have researched everything you can think of and are feeling fairly confident, a mortgage broker can add value. They will have access to mortgages and lenders you cannot access directly. 

See: What is the process with a Mortgage Broker 

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How to Prepare to Get a First Time Buyer Mortgage?

Why would you need to prepare to get a First Time buyer Mortgage? Think of it like this; lenders will assess you as a high or low risk. If you are considered a high risk you will need a bigger deposit and you will pay a higher interest rate. However, if you are considered a low risk you will have the flexibility to borrow more and you will pay a lower rate of interest each month. 

Before you start looking for a property, speak to a mortgage broker to understand how much you can borrow and how much deposit you would need. You can then decide if you can buy a property now and for how much, or whether you need to wait. You might need to save a bigger deposit, or fix items within your credit profile. There’s nothing more disappointing than becoming emotionally attached to a property you’ve been to view, only to find you can’t fund the purchase right now.

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What is a First Time Buyer Mortgage?

This may seem like a silly question but different lenders have different definitions of what a First Time Buyer Mortgage is. 

At its simplest, a First Time Buyer is someone who has never owned property or land anywhere in the world. However, Nationwide currently defines a First Time Buyer as someone who has not held a mortgage (anywhere in the world) within the last three years. Nationwide also states the person must be making a property purchase. So they cannot own an unencumbered (mortgage free) property now. Therefore if you have inherited a property you are unlikely to be deemed a First Time Buyer. If in doubt, let us help

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Should I Use a Mortgage Broker for a First Time Buyer Mortgage?

Whether you should use a mortgage broker depends on how confident you are in managing the process effectively. Getting it right first time is important. It also depends if you want to manage the process yourself. A good broker will act as a conduit between your solicitor, the estate agent and the mortgage lender. This can save time, money and stress. Brokers like us, may offer you a fee free advice service.

Don’t just go directly to your bank. There are 100’s of mortgage lenders and only one can be the most suitable for you. Your bank will only advise on their own mortgages. Correspondingly, they are unlikely to offer the cheapest overall mortgage for your circumstances. Additionally, taking a mortgage with your bank isn’t likely to be much easier or faster. A mortgage broker can consider many more lenders and offer you advice on the buying process, choosing a good solicitor and any insurance you should take. Contact Us to find out how we can help.

See our: Mortgage Broker Guide

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What is the Best Mortgage for a First Time Buyer?

The idea of a best First Time Buyer Mortgage is a fallacy. There is only the best mortgage for you. This is based on your own financial situation, circumstances and preferences. 

Buying your first house involves financial commitments and managing your finances. Many of the First Time Buyer mortgages taken are fixed rate mortgages. This means the monthly payment will remain fixed over a set period of time. First Time Buyers with a fixed rate mortgage can be confident of how much their monthly payments will be and this helps to manage finances. 

Can First Time Buyers Get a Mortgage?

Yes, mortgage lenders will lend to First Time Buyers. There are lots of First Time Buyer Mortgages available from many different mortgage lenders.

How Does the House Buying Process Work?

  1. Speak to a mortgage broker to understand what is possible now, or in the future. Let them guide you as to what you can afford and any actions you can take to improve your situation. 
  2. Find a property you can afford to buy. View it at least twice. My personal tips are see what it is like at night time and find out about the neighbours!
  3. Make an Offer to buy the property – Help with Making an Offer
  4. Instruct a solicitor to act on your behalf
  5. Apply for a mortgage and instruct the valuation (or wait until Contracts have been exchanged for more security)
  6. Exchange Contracts
  7. Completion

What is a DIP and Should I Get One Before Looking for a Property?

A DIP is a Decision in Principle. This is sometimes called an Application in Principle (AIP). It’s the same thing so we’ll refer to it as a DIP. 

A DIP is an initial decision whether a mortgage lender is likely to accept your mortgage. It may also indicate how much they would be prepared to lend you. It’s not guaranteed and is usually valid for 30 days.

Whether you should get a DIP early in the house buying process depends on your circumstances. If you have relatively simple circumstances a good mortgage broker will be able to accurately assess whether you can obtain a mortgage without a DIP. 

Comparatively if your circumstances are complex it is advisable to obtain a DIP early in the process. You should also get a DIP if you are looking to borrow close to the maximum you can afford. 

You can do your own DIP online, but I wouldn’t advise on it. Each mortgage lender requires information to be input differently. Depending on how the information is input will have a bearing on whether the DIP is accepted or not. Applying for a DIP leaves a ‘soft footprint’ on your Credit Record. It is usually advisable not to have too many soft prints.  This is because it can affect your Credit Score and be counter productive to securing a mortgage. 

It’s also important to understand that a DIP is not a cast iron guarantee of a mortgage. Therefore you need to get it right or it’s false hope. Equally, you could end up creating a DIP that shows you can’t afford a mortgage which you could! Contact Us if you require a DIP.

See: Everything you need to know about DIPs


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What Costs Are Involved with a First Time Buyer Mortgage?

Lenders may offer mortgage incentives for first Time Buyer Mortgages. These can be things such as a free mortgage valuation, free legal services, or cashback on completion. A mortgage broker will help you to find the cheapest overall mortgage for your circumstances considering any special incentives available.

Some costs you might need to consider are:

Mortgage Advice Fee

Some advisors charge a fee some don’t. There isn’t a right or wrong answer. We sometimes do and it depends on whether your circumstances are complex. See: Should I pay a fee for Mortgage Advice

Mortgage Booking Fee

An administration charge from the mortgage lender for considering your application. Also known as an Application Fee or a Reservation Fee. Some lenders charge this and some don’t. If it applies expect to pay £99-£200.

Valuation / Survey Fee

Many lenders will offer a basic Mortgage Valuation Report for free. This won’t tell you much about the property and you may not even receive a copy. If you want feedback on the condition of the property you will need a more comprehensive report. This is either a Homebuyers Report or a Full Structural Survey.

Valuation Fees start around £350 and are dependent on a number of factors including location and type of property.

Read more about Surveys here: Property Surveys Explained

Legal Fees

Expect to pay legal costs for a solicitor to work on your behalf to purchase the property. A solicitor will ensure the property legal paperwork is in order.  They will conduct searches to investigate the history and title of the property and register your ownership with the Land Registry. Learn more about the legal process here: Conveyancing Explained

Stamp Duty

As a First Time Buyer you will not pay stamp duty if the value of your property is £500,000 or less. This applies in England until 31 March 2021. If you want to know more or are buying in Scotland, Wales or Ireland read our guide.

Mortgage Product Fee

The mortgage lender will likely charge a product fee. A common amount of product fee is £999. This can be paid upfront or added to the loan. If you choose to add it to the loan it will attract interest over the term of the mortgage. Therefore you will pay more back overall.

Learn more about different mortgage products and fees here:

Transfer Fee

This is the cost to electronically transfer the mortgage money to your solicitor to buy the property. The fee is usually £40-50.

Removal Costs

Removal costs usually range from £300 upwards. However you could enlist family, friends, or rent a van and do it yourself. The British Association of Removers can provide estimates from approved firms.

Remember once you have bought your new home there will be ongoing costs to run and maintain the property. It’s important to ensure your budget allows for this. You should complete a Budget Planner.

Have further questions: Get in Touch

Get Your Finances in Order Before You Apply for a First Time Buyer Mortgage

You may have to provide up to three months personal bank statements as part of the mortgage process. This is to show your earned income being paid in, and to assess how you manage your finances. Bank statements are used to demonstrate the affordability for the mortgage. 

If you have lots of payments to online gambling and casinos you will want to clear this up prior to applying for a mortgage. If you spend most of your earnings buying clothes or socialising this isn’t going to show you can afford a mortgage payment either. You should ensure your account is managed well within the limit and ideally not living out of an overdraft. 

After your expenditure there should be sufficient income left over to comfortably cover a new mortgage and the new property costs. Lenders sometimes talk about a 50% income to debt ratio. This means you should not have more than 50% of your net income going towards debt repayment. However, this is a guide and is not set in stone. You can get specific and personal affordability advice by speaking with a mortgage broker. Contact Us to find out more.

Can You Get a First Time Buyer Mortgage with a 5% Deposit?

To simplify the website, I have removed the pages:

No. There are currently no 5% mortgages available in the UK.

If you have a 5% deposit you may be able to buy a home through the Help to Buy Equity Loan Scheme. With an Equity Loan the government will lend you an additional deposit to enable you to purchase a new build home.

Learn more here: Help to Buy

How Much Mortgage Can First Time Buyers get?

There is no set amount which all First Time Buyers can get. The amount of mortgage you can get is primarily based on affordability. This means considering income and outgoings. Amount of deposit and Credit Rating also play a part. 

A broad rule of thumb is that you may be able to borrow 4.5 times your annual gross salary, less if any existing debt. This isn’t guaranteed. Some mortgage lenders will allow less, and some will allow more. 

Some mortgages are designed for specific groups of people. You may be able to borrow up to 6 times your income if you are eligible for one. For example if you have graduated and are a qualified practicing ‘professional’ such as teacher, dentist, doctor or solicitor you can access special mortgages. These mortgages are called Professional Mortgages and are also available to other professions.

See the full information here: Professional Mortgages

You can even get a mortgage while on a graduate employment scheme or if you have just started permanent employment.

First Time Buyer Mortgages and Professional Mortgages will always be subject to an affordability assessment. 

The best way to calculate how much First Time Buyer Mortgage you can borrow, is to speak with a Mortgage Broker. A Mortgage Broker will quickly and easily assess your circumstances to confirm how much you can borrow. You can then be confident you can afford to buy while you search for a new home. Contact Us and we will calculate this for you.

Check Your Credit Report

When you apply for a First Time Buyer Mortgage, lenders will assess how you have handled other credit commitments as a guide to how reliable you will be making the mortgage repayments. If within the last six years you have missed any payments, have defaults or a County Court Judgement, it is going to be more difficult to get a  mortgage. Note I did not say ‘impossible’. However, expect to pay a higher rate of interest and be asked to provide a larger deposit. 

Sometimes people tell us they have great credit because they’ve never taken any credit. However, this can be a bad thing. This is because lenders don’t have anything to assess against and so might err on the side of caution. 

We use Check My File to obtain a free Credit Report for every First Time Buyer Mortgage. The reason we use Check My File is because they collate information from the three biggest Credit Reference Agencies. If you obtain a report from one agency, but the lender consults another, there is a risk the information could be different. In fact, information is often different between credit agencies. 

If you want to obtain a Credit Report from Check My File you can access a free 30 day trial. You’ll need to input your payment card details but once you have downloaded the credit report cancel the account within 30 days and you will not be charged. You can cancel anytime. Check My file is £14.99 per month if you keep it more than 30 days. You can obtain the Credit Report using this link: Check My File 

For more information see our detailed write up here: Credit Reports & Credit Scores

Save the Biggest Deposit You Can

The bigger deposit you have, the less mortgage you will need to borrow. The less mortgage you need to borrow, the more mortgages which will be available to you. If more mortgages are available to you, this means you pose less risk to mortgage lenders. Therefore, the better mortgage deal you will be able to get. 

Unless you are using a government scheme such as Help to Buy you will currently need a minimum of a 10% deposit to buy a home. 

Even then you can only access a 90% mortgage if you and the property satisfy the lenders criteria.  There is a limited number of lenders offering 90% mortgages and the criteria is strict. 

Having a 15% deposit makes a world of difference, opening more mortgage options and better interest rates. In addition, the less you borrow the less you will need to repay each month. 

See: Should I repay Debt or Save for a Deposit


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