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First Time Buyer Mortgages - What You Need to Know

It is very important to know as much information before you apply for a mortgage. Accepting a mortgage offer and taking your first step onto the property ladder is exciting but it does come with responsibility. That is why a small amount of expert advice from an experienced mortgage broker can go a long way.

What Is a First-Time Buyer?

A first-time buyer is a buyer who is purchasing their first residence. This term does not only refer to homes, but it can also refer to boats or other properties – anywhere you have decided to have your first residence.

How Much Can A First-Time Buyer Borrow?

First-time buyers can access up to three to four times their annual salary. This does however vary between lenders. There are different criteria to fit for different lenders which is why the advice of a mortgage broker can go a long way. Certain financial products and some privileges made available by the Government are there to support first-time buyers – for example, the ‘Help to Buy’ scheme. This is where the Government lends first-time buyers 20% of the property’s value in the form of a low interest rate loan. To access this scheme however, first-time buyers must already have 5% of the property’s value ready as a deposit.

How Is The Process Different For First-Time Buyers?

For first-time buyers the process of obtaining a mortgage is different for those who already have a mortgage. This is because first-time buyers have to go through a process financially where they  provide a deposit and undergo a credit check. For first-time buyers there a multiple factors that lenders consider:
  • Amount of debt (if any owed)
  • Monthly outgoings (to check you can afford your mortgage)
  • Your age
  • The type of property and area you want to buy in
  • Your payment history (credit cards, loans, mobile phone bills)
  • Your credit score

What Is an Agreement in Principle?

An Agreement in Principle/Decision in Principle is an estimation that your broker will suggest to you when forecasting how much money you can borrow from the lender. You will be given an estimation then you undergo a soft credit check. Through this estimation, you can start checking what are the properties in your price range before your mortgage application is processed. It is worth mentioning that this check is not compulsory and too many of these checks can actually affect your credit. An Agreement in Principle is useful to build confidence between a lender and a first-time buyer.

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We can let you know how much you can borrow, how long it will take and how much it will cost to get the most suitable mortgage.

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How Do I Know My Credit Score?

It is important to have good credit when applying for a mortgage. This is so the lender will have confidence in you making your mortgage payments each month. In the UK, you can always view and check your credit score for free. There are various companies who offer this service including Experian, Equifax, Clearscore and Credit Karma.

How Do I Improve It?

Improving your current credit score is not always easy. However, with time, you can do so by keeping up with payments and ensuring you are not in debt. It is also crucial to keep an eye on your credit report and ensure that there are no misleading or wrongful entries.

You can boost your credit by closing unused credit cards and ensuring to pay your monthly outgoings on time. It is important to have a good credit score so a lender can see that you manage your money well and are reliable.

What Help Is Available for First-Time Buyers?

There are some government backed schemes and initiates including the following:

  • Help to Buy
  • Right to Buy
  • Shared Ownership
  • Joint Mortgage
  • Guarantor Mortgage

What Fees Are Involved When Buying a House?

  • Stamp Duty (currently, there is a nine-month stamp duty holiday which ends March 2021, which is applicable to homes up to £500,000. From £500,000 or more, you can pay a 5% to 12% Stamp Duty)
  • Mortgage fees and Broker fees
  • Searches
  • Surveys and valuation
  • Conveyancing fees
  • Moving costs
  • Protection such as life and buildings and contents insurance

For first-time purchasers it can be worth taking out payment protection just in case your circumstances change suddenly.

How Do You Go About Arranging a Mortgage as a First-Time Buyer?

Arranging a mortgage to buy your first home can seem daunting if you aren’t sure where to start, the help of an expert broker might help you identify all the suitable financial products for your situation and streamline the application process. A ‘whole of market’ mortgage broker can give you an expert overview of the mortgage market and find the right mortgage deals for you. Brokers also have some ‘broker exclusive deals’ due to having strong relationships with lenders.