Buying your first home should feel exciting, but for most people it quickly turns into a mix of estate agents, deposits, payslips, bank statements, credit checks and lender rules that nobody explains properly.
The good news is this.
Getting a mortgage as a first-time buyer is not about guessing. It is about getting your ducks in a row before you start making offers.
Start with your deposit
Most first-time buyers need at least a 5 per cent deposit, although a bigger deposit can give you more choice. A 10 percent or 15 percent deposit can sometimes open the door to better rates, but that depends on the lender, your income, your credit profile and the property.
Your deposit can come from savings, a gift from family, inheritance, sale of another asset or certain government backed schemes, depending on your circumstances.
What matters is that the lender can see where the money has come from. If a family member is gifting money, the lender will usually want a gifted deposit letter and proof of funds.
Know what you can borrow before viewing
A lot of first-time buyers view houses first and then think about the mortgage later. That is the wrong way round.
Before you fall in love with a property, you need to know roughly how much you can borrow. Lenders do not all work things out the same way. One bank may say no, another may lend more, another may be better if you have overtime, bonus, commission, self employed income or a new job.
This is why an Agreement in Principle matters. It gives you a guide on borrowing and shows estate agents that you are serious.
Do not just go to your own bank
Your bank only tells you what your bank can do.
They will not tell you that another lender may lend more. They will not tell you that another lender may treat your income better. They will not tell you that another lender may have a lower rate or a more suitable product.
That is where a mortgage adviser comes in. A good adviser looks across the market and checks which lender actually fits your situation.
Get your documents ready early
Most lenders will want documents such as:
Proof of ID
Proof of address
Payslips
Bank statements
Proof of deposit
Employment details
Credit commitments
Details of any gifted deposit
If you are self-employed, they may also want tax calculations, tax year overviews, company accounts or accountant details.
Getting these ready early can save days or even weeks.
Check your credit file
Your credit score is not the only thing lenders care about. They look at the detail.
Missed payments, overdraft use, loans, credit cards, defaults, payday loans and recent credit applications can all matter.
You should check your credit report before applying. If something is wrong, fix it before the lender sees it.
There’s a link to check my file on this website – get your free copy ( 7 day free trial, if you do not cancel within 7 days you will charged so the secret is get your report and if you do not wish to monitor your report you have 7 days to cancel)
Budget for more than the deposit
The deposit is not the only cost.
You may also need money for:
- Solicitors
Survey
Valuation
Mortgage fees
Broker fee if applicable
Stamp Duty if payable
Moving costs
Insurance
Furniture
Repairs
Emergency savings
This is where a lot of first time buyers get caught out. Buying the house is one thing. Living in it comfortably is another.
Think carefully about the mortgage term
A longer mortgage term can make the monthly payment lower, but it can also mean paying more interest overall.
A shorter term can save interest, but the payment may be too tight.
The right term should fit your budget now and still leave room for normal life. Nobody wants a mortgage payment that leaves them eating noodles for five years.
Fixed rate or tracker rate
Many first-time buyers choose a fixed rate because they want payment certainty. When you are moving into your first home, bills are new, furniture is expensive and life is already busy enough.
A fixed rate gives you a set payment for a set period. A tracker rate can move up or down, usually linked to the Bank of England base rate.
There is no single right answer. It depends on your attitude to risk, your budget and how much payment movement you could handle.
Final thought
Getting a mortgage as a first time buyer in the UK is not just about finding a rate. It is about finding the right lender, the right structure and the right monthly payment.
The cheapestlooking deal is not always the best deal if the lender will not lend enough, does not fit your income, or takes too long when you need to move quickly.
Speak to a qualified mortgage adviser before making big decisions.
Your home or property may be repossessed if repayments on a mortgage or loan secured on it are not made.
This article is for information only and is not personal mortgage advice