First Time Buyer Mortgage Advice
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First Time Buyer Mortgages
What is a First Time Buyer mortgage?
Technically there isn’t really a difference between a normal mortgage and a First Time Buyer mortgage. Some lenders may offer some additional extras to First Time Buyers to help them with their purchase.
For example, they might allow people to borrow a little bit more – say 90% or even 95% of the value of the property. Or they might offer free valuations or cash back as part of the deal, to just to try to help people settle into their first home. But generally speaking, most mortgages are very similar to each other.
What are the typical requirements to apply for a mortgage as a First Time Buyer?
To qualify as a First Time Buyer you need to not have owned any property previously. If there are two of you buying together, then both of you need to not have owned property before.
You’ll then be able access those specific First Time Buyer mortgages and also qualify for stamp duty exemptions, which will help you get onto the property ladder.
What is the maximum amount that can be borrowed for a mortgage as a First Time Buyer?
The amount you can borrow is going to depend on your income and your deposit level. Most lenders are willing to lend you between four and five times your combined income, but it does vary depending on your circumstances. They will look at your deposit, your creditworthiness, your credit score and other loans or debts to decide how much you can borrow.
If you’re looking to take on a long-term fixed rate mortgage and your circumstances meet that lender’s requirements, some lenders may offer you a little bit more. We can potentially reach up to six times your income. It does mean you’re on a fixed rate for a longer period of time, and it all depends on your unique situation.
What’s the minimum deposit required for a First Time Buyer?
We would suggest between 5% and 10%, but the bigger your deposit, the better your interest rate is likely to be. It’s just because you will be borrowing less compared to how much your home is worth.
Some lenders offer innovative products for those who may not have enough deposit. They could allow friends or family to help you put that deposit together and then take it back in the future.
But generally speaking, the bigger your deposit is, the better the interest rate you’ll get and the lower your monthly payments will be.
What are the types of interest rates available on a mortgage for a First Time Buyer?
First Time Buyers will have the option of different rates. We look at fixed rate mortgages or tracker rate mortgages for most First Time Buyers. Most choose to go onto a fixed rate initially, as it’s giving them certainty about their monthly payments.
The exact interest rates itself will depend on your circumstances. But that’s where we come in – helping to match our clients with the most appropriate mortgage for them and their situation.
What are the pros and cons of a fixed versus a variable interest rate mortgage for First Time Buyers?
A fixed rate will provide you with more certainty. When you move into your first home, you don’t always know what your monthly outgoings are going to be. How much will your energy bill cost? Or your broadband and TV?
A fixed rate mortgage helps people budget – they know exactly how much that payment’s going to be for that initial period of the fixed rate. If the interest rate does reduce while you’re fixed in, you won’t benefit. But you are protected from any increases in the interest rate.
A variable rate mortgage or tracker rate mortgage will change along with the Bank of England base rate. This could mean that your monthly payments will reduce, if the base rate reduces – but if the Bank of England decides to put the interest rate up, your payment will increase. So that provides less certainty.
Variable rates do work for some people, if they have a level of disposable income that can absorb an increase in interest, for the potential long term benefit of a reduction. We’d want to assess your situation carefully, understand your budget and make sure that you’re making the right choice.
What government schemes are available to help First Time Buyers?
They’re limited in number currently, but there are some things to have a look at to see if they can help you get on the property ladder more quickly.
If you’re not quite ready to buy yet, you should open what’s called a Lifetime ISA to help you save for a deposit that little bit quicker.
There are also schemes like shared ownership where you can buy a percentage of a home and then rent the rest. Over time, you can increase the share that you own, and you could own that home completely in the future.
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What documents do I need to get pre approved for a mortgage as a First Time Buyer?
We will want to see your income, so we need your pay slips or your self-assessment documents if you’re self-employed. We also want to have a look at your bank statements to assess what your outgoings look like and help us set a budget with you for your monthly payments. That’s how we will work out how much you can borrow.
We will need information about any loans or credit cards and whether you pay them off each month or always have a balance on them. Are they on 0% interest rates? That way we understand your credit worthiness. We also want to see your credit report, just to make sure everything’s okay – because sometimes people are surprised with what they find on it.
Mistakes do happen and we want to make sure that when we apply for your mortgage there are no surprises. We’ll also want to see your proof of deposit, whether that’s savings or mum and dad are helping you with a gift. Some evidence of that, such as a bank statement or a letter from your parents gifting you some money, is what’s required there.
What are the steps to follow when applying for a mortgage as a First Time Buyer?
First, we suggest speaking to a mortgage broker as early as possible. Even if you’re not ready to buy yet, we will talk you through every step.
When a First Time Buyers comes to see us, as well as assessing their situation we talk to them about the whole home buying process. We explain what will happen when they go to a viewing, and when they speak to an estate agent, the whole conveyancing process and what to expect at each stage. We talk you through how you exchange contracts and complete.
It is quite complex and there are lots of steps to it, so we want to make sure that people understand.
Then we will make sure you know how much you can borrow, get you an Agreement in Principle if you need that, or information on your options. Then we’ll develop a plan with you on the next steps.
You might be ready to go to viewings and start making offers on properties, or you might need a longer-term plan. We’ll put touch points in place to make sure that everything is okay and see when you’re ready to proceed. So we’ll guide you through that whole process, every step of the way.
What are the most common mistakes to avoid when applying for a mortgage as a First Time Buyer?
There are lots of different things that can happen. We often find that people start viewing properties first. They fall in love with a property and then come to us for a mortgage… and we have to break the news that they can’t quite get a mortgage for this property.
So it’s important to have a realistic picture of what you can achieve with the amount of income or debt you have. Avoid that disappointment by finding out exactly how much you can borrow.
The other mistake that we see is not doing enough research into the area where people want to buy. Does it meet all your criteria? Does it fit your long term plans? How long do you see yourself living there?
We’ll talk to you about that to make sure you look at the options in the right way. Don’t just buy the first property you see – buy somewhere that fits your financial and long-term plans as well.
What happens if I miss a mortgage payment as a First Time Buyer?
The first thing you should do if you do miss your mortgage payment is talk to your lender. They are there to help.
We always give that dreaded phrase that ‘your home may be repossessed if you don’t keep up repayments on your mortgage.’ It’s on every document we give to our clients. So speak to your lender, don’t panic. It does happen.
The lender will work with you on a resolution, whether that’s catching up on that payment in the next month or another option. It’s likely to impact your credit score, because it will go down as a missed payment and that can affect you in the future.
If all else fails, speak to us and we can have a conversation with you about what it may mean and what to do next.
Can someone qualify for a mortgage as a First Time Buyer with bad credit?
Yes, absolutely. There’s a misconception out there that if you’ve had tough times you can’t get a mortgage. Everyone had tough times through the pandemic and some people missed payments and it impacted their credit score. They panic now that they can’t get a mortgage or can’t get onto the property ladder. It’s not the case.
We often help people with bad credit. It’s more common than you think. The key thing is understanding what happened to get you into that position, what you’re doing to rectify it and how you’re managing your credit today.
That’s what lenders want to see. It may mean we can’t put you with a high street lender, because they have certain criteria, but other lenders out there are very flexible and considerate. They understand that people can get into this kind of situation and work with people with poor credit all the time.
Can I get a buy to let mortgage as a First Time Buyer?
Technically, yes, it is possible. There are lenders out there that will consider that situation. You will need a bigger deposit – potentially a minimum of 25%, depending on the lender. Some might ask you for a 30% deposit.
So it’s doable, but you will need to have more finances behind you. You’ll still need to go through all the same checks on your income to make sure that you can actually afford to keep up the payments on the mortgage. Lenders will look at your whole credit situation and whether you have any of the other loans and debts out there. It is possible, but it’s quite unusual.
How can a mortgage broker or mortgage advisor help someone with their First Time Buyer mortgage application?
A good mortgage broker will guide you every step of that way. They should recognise that as a First Time Buyer you are new to the whole process. It’s complicated, so they should be explaining each step and what everything means.
We explain the consequences of the decisions you’re taking and what your options are. We are there to guide you through the conveyancing process right up until you get your keys, to make sure that everything runs as smoothly as possible.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.