Table of Content
First Time Buyers
Jamie Elvin talks us through mortgages for First Time Buyers.
There’s no denying it: purchasing your first home and getting a mortgage can be an overwhelming and challenging experience. Where should you begin your search? How much deposit is required? And what exactly is stamp duty?
But worry not. We’re here to assist you. At Strive Mortgages, our advisers understand the overwhelming nature of securing your first mortgage.
Therefore, we are dedicated to providing as much transparency as possible in the property finance market. We will guide you through every step of the process, ensuring that you feel confident and empowered throughout.
From start to finish, we’ll handle all the necessary tasks while you focus on finding your dream first home and gathering your deposit.
To discuss your specific requirements for a first time buyer mortgage, reach out to our team of experts today. Let’s kickstart the process and get things moving in the right direction.
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What is a first time buyer?
Whilst the answer might seem obvious, the definition of a first-time buyer for mortgage purposes differs from that for stamp duty purposes. When it comes to stamp duty, a first-time buyer is typically defined as someone who has never owned any type of residential property, anywhere in the world.
This means that even if you have previously owned a property, but have sold or transferred it, you may not be eligible for first-time buyer stamp duty relief. However, for mortgage purposes, the definition of a first-time buyer can vary between lenders.
Some lenders may consider you a first-time buyer if you have not owned a property for at least three years, while others may have different eligibility criteria. Being classified as a first-time buyer can have certain advantages.
For example, some lenders may offer first time buyer mortgages in London or other regions with reduced fees or lower interest rates, particularly if you meet the lender’s specific eligibility criteria.
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What are the initial first steps for a first time buyer?
As a first-time buyer, here are the first steps you can take when applying for a mortgage:
- Check your credit score:
Your credit score is one of the most important factors that lenders use to determine whether to approve your mortgage application. You can check your credit score with credit reference agencies like Experian, Equifax or TransUnion.
- Determine how much you can afford:
It’s important to know how much you can afford to borrow before applying for a mortgage. This will help you narrow down your property search to homes within your budget. You can use a mortgage calculator available online to help estimate how much you could borrow and what your monthly payments might look like.
- Shop around for the best mortgage deals:
It’s important to compare mortgages from different lenders to find the best deal. You can do this yourself or use a mortgage adviser who can provide guidance and access to a wide range of lenders.
- Get a mortgage pre-approval:
A pre-approval or mortgage promise will give you a rough idea of how much you can borrow and will make you a more attractive buyer to estate agents. Pre-approvals are typically valid for a limited time, usually around three months.
- Gather the necessary documents:
When applying for a mortgage, you will need to provide a range of documents, including proof of income, bank statements, and identification. Be sure to gather these documents in advance to speed up the mortgage application process.
What is an Agreement in Principle?
An Agreement in Principle is confirmation from a lender as to how much they’re prepared to lend you subject to a full assessment. It will usually involve a credit check and a look at your income and outgoings.
It’s really important to secure an Agreement in Principle at the earliest possible stage. It will give you confidence when you offer on a property, knowing that you can actually afford it. It also helps with your negotiation – it’s evidence to an agent that you’re a serious buyer.
It doesn’t tie you to a particular product or to that lender, and they’re typically valid for between 60 and 90 days. That can easily be extended. So it’s definitely worth securing one before you start viewing properties.
How much can a First Time Buyer borrow?
This will vary massively, depending on the client and their personal circumstances. The absolute minimum deposit is 5% of the purchase price, and you will need to meet income and affordability assessment requirements.
Larger deposits than 5% may be required in many instances, such as on certain property types, if you’ve got credit issues or you don’t have permanent residency in the UK.
With regards to how much you can borrow, again this varies depending on your age, your income and employment status. As a general rule of thumb, between four to five times your income is a typical loan amount, but some lenders will consider as high as six times for certain professions.
Your loan to value (LTV) ratio will also be considered, along with any early repayment charges or expected monthly repayments.
Understanding your mortgage repayment options
When exploring your first time buyer mortgage options, it’s important to understand how different repayment types and borrowing limits affect your long-term plans.
Most first-time buyers will choose a repayment mortgage, where your monthly payments gradually reduce the loan and interest until the balance is cleared at the end of the term.
This is typically seen as the most straightforward and reliable way to repay your loan, particularly for anyone looking to get onto the property ladder with confidence.
- What is Loan to Value (LTV)?
Your loan to value (LTV) ratio is a crucial factor when applying for a first time buyer mortgage. It refers to the percentage of the property’s value that you borrow compared to your deposit. For example, if you have a 10% deposit, your loan to value LTV will be 90%. Time buyer mortgage products often cater to LTV bands like 90%, 95%, or even 100% in some government-backed cases. However, lower LTVs usually mean better interest rates and lower risk for lenders. If you’re able to save a larger deposit, you may unlock a wider choice of mortgage deals and save more over time.
- Government Schemes and Equity Loan Forces
Many first-time buyer mortgage applicants are eligible for schemes supported by the government or housing associations. These are designed to help people with smaller deposits or lower incomes, particularly those in key worker roles or supported by equity loan forces initiatives. These schemes can lower your effective loan to value LTV and make your mortgage application more attractive to lenders. This is especially helpful when you’re trying to step onto the property ladder for the first time.
- Choosing the Right Mortgage Strategy
Before committing to a time buyer mortgage, it’s a good idea to speak with a mortgage broker about your personal situation. They’ll help you assess how your deposit, income, and financial background affect your loan to value LTV, and whether a fixed rate mortgage or variable rate mortgage suits you best. Getting the balance right is key to managing your monthly payments and future financial security.
- Why You Need an Agreement in Principle
Getting an Agreement in Principle early in your journey is strongly recommended. It shows estate agents and sellers that you’re a serious buyer and gives you a realistic view of your borrowing power. It also prepares you for your full mortgage application, helping you move quickly once you’ve found the right property. Having everything in place early helps avoid delays and gives you the confidence to make an offer when the time is right.
By understanding your repayment strategy, how your loan to value LTV shapes your offer, and where you stand in terms of eligibility, you’ll be better prepared to secure the most suitable time buyer mortgage for your needs.
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How do I know what my credit score is and how do I improve it?
There are various credit reference agencies that you can check with – the three main ones are Experian, Equifax and TransUnion.
When you’re getting a copy of your credit report most will typically charge a fee and some will charge an ongoing fee to use their service in future. Some providers let you access all three credit reference agencies in a single report.
The best way to improve your credit rating is to ensure all your credit commitments are up to date and paid on time. Late or unpaid utility bills and phone bills can be a bit of a banana skin for your mortgage prospects.
Another big thing is being on the electoral register. Even if you don’t vote, it’s worth registering, as it allows companies to verify that you are who you say you are. It does have a big impact on your credit score.
What is a First-Time Buyer ISA? Are they still available?
You can’t open these any more, but if you do have one you can put up to £200 a month tax-free into the account. It’s a good scheme because the government then tops up your savings by 25% up to a maximum of £3,000 when you buy your first home.
It’s worth noting that this only applies on properties valued at up to £250,000, which in the south of England doesn’t go a long way. It can only be used on your first home.
What is a Joint Borrower Sole Proprietor (JBSP) Mortgage?
A Joint Borrower Sole Proprietor mortgage is effectively a guarantor mortgage. It’s a great scheme, perhaps if you have a deposit but you’re struggling on affordability, plus you have a willing friend or family member that’s happy to help.
This mortgage allows you to buy with someone else and use their income for affordability, but they don’t actually become owners of the property – they are not named on the title deeds.
What is Shared Ownership?
For many people, saving for a deposit can be really tricky. Shared ownership helps with that. Instead of buying a whole property you buy a share in it, or a percentage of it. You take a mortgage on your share, put a deposit down and then pay rent on the remainder.
It’s sometimes known as part-buy, part-rent and you can typically own 25% to 75% of the property value. You need a minimum 5% deposit on your share. You also have the option to do something called stair casing, to buy a larger percentage of the property later. It’s a really good scheme if you meet the criteria.
What’s the First Homes Scheme?
The First Homes scheme effectively replaced the Help to Buy shared equity scheme which was available on new builds that stopped in October 2022.
The First Homes scheme is also for new build properties, where you can buy for 30% to 50% less than market value.
It’s available for first-time buyers and key workers and essentially gives you a massive discount on the property. When you come to sell the property on, the discount will be factored in at that point.
It’s a useful scheme to help people get onto the property ladder sooner. It’s also a great option for those looking to benefit from the government’s mortgage guarantee scheme.
What’s the First Homes Scheme?
The First Homes scheme effectively replaced the Help to Buy shared equity scheme which was available on new builds that stopped in October 2022.
The First Homes scheme is also for new build properties, where you can buy for 30% to 50% less than market value.
It’s available for first-time buyers and key workers and essentially gives you a massive discount on the property. When you come to sell the property on, the discount will be factored in at that point.
It’s a useful scheme to help people get onto the property ladder sooner. It’s also a great option for those looking to benefit from the government’s mortgage guarantee scheme.
What fees are involved when buying your first home?
The costs involved for a first-time buyer in the UK can vary depending on several factors, such as the location, type of property, and the price of the home.
Here are some of the common costs associated with buying your first home:
- Deposit:
You’ll typically need a deposit of at least 5% of the purchase price, though many buyers aim for 10% or more. A higher deposit usually reduces your loan to value (LTV) ratio and can help you access lower interest rates.
- Mortgage Fees:
These can include arrangement fees charged by the lender for setting up your first time buyer mortgage, valuation fees to check the property’s worth, and legal fees if the lender appoints their own solicitor.
- Stamp Duty:
Good news for many first-time buyers – you won’t have to pay stamp duty on homes valued up to £425,000. If the property costs more, you’ll only pay a reduced rate on the amount above this threshold.
- Conveyancing Fees:
These are the legal costs paid to a solicitor or conveyancer to handle the legal work and contracts involved in the property purchase. Fees vary based on the property type, whether it’s leasehold or freehold, and the complexity of the transaction.
- Survey Fees:
A home survey helps you understand the condition of the property you’re buying. Basic condition reports start at a few hundred pounds, while full structural surveys cost more.
- Removal Costs:
If you’re moving your belongings from another property or rental accommodation, factor in the cost of a removals company or van hire. Prices vary depending on distance, the size of your move, and whether packing services are included.
From offer to ownership: final stages of the mortgage process
Once you’ve found a property and had your offer accepted, your mortgage lender will carry out a full affordability assessment.
If successful, you’ll receive a formal mortgage offer confirming the terms of your new mortgage. This offer is typically valid for several months, giving you time to complete the purchase.
During this period, you’ll need to organise buildings insurance – this is a condition of most mortgage offers and ensures the property is protected from day one. You should also prepare for buildings transaction tax or stamp duty, depending on your location, as well as legal fees and other costs.
If you’re applying for a joint mortgage, make sure both applicants are on the same page regarding responsibilities, especially if you’re not both listed on the title deeds. Getting clarity early helps avoid complications later.
Whether you’re applying through a first time buyer scheme, the mortgage guarantee scheme, or a time buyer boost mortgage, a broker can help you secure the best mortgage deal suited to your circumstances and move up the property ladder with confidence.
How can a mortgage Broker like Strive Mortgages help a First-Time Buyer?
A mortgage broker can be extremely helpful when you’re buying your first home. Here’s how:
Access to multiple lenders: We compare mortgage products from across the market.
Understanding the market: We explain market trends and help you identify the best mortgage options for your personal circumstances.
Pre-approval: We support you in securing a mortgage in principle to strengthen your offer.
Negotiation: We liaise with lenders to negotiate better terms.
Paperwork and documentation: We manage the application and keep things on track.
We’d love to hear from you – get started online or call us on 0330 043 1121 today to speak with one of our expert advisers.
Frequently Asked Questions
Can I get a mortgage with a 5% deposit as a first-time buyer?
Yes, some first time buyer mortgage products accept a 5% deposit, especially through the mortgage guarantee scheme. A lower deposit means a higher loan to value (LTV), which may impact your interest rate.
Is a fixed rate mortgage better than a variable rate?
A fixed rate mortgage gives you predictable monthly payments, while a variable rate mortgage may change over time. The right choice depends on your budget and risk tolerance.
What is a mortgage application and how long does it take?
A mortgage application involves submitting your documents and details to a lender after getting an agreement in principle. It usually takes 2–6 weeks for approval.
Do estate agents need to see my mortgage documents?
Yes, they may ask for your agreement in principle to confirm you’re a serious buyer.
Can I apply for a mortgage with someone else?
Yes, a joint mortgage allows you to apply with a partner or family member, which can boost borrowing power.
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Jamie Elvin
Jamie is an expert in all things mortgages, and our most experienced broker. Connect with Jamie and get started to see how Strive Mortgages can help you.
