How to get a first time buyer mortgage

Being a first-time buyer is exciting, but it might leave you feeling very confused about the process ahead of you. What’s more, a mortgage is a huge financial commitment and it’s important that you know what you’re letting yourself in for.

You are a first-time buyer if you are purchasing your first residential property, and have never owned a flat or house in the UK or abroad. This includes shared ownership schemes.

Here we take a look at getting a first time buyer mortgage and what information you should be aware of before you start the process.

Schemes to help first-time buyers

There are a number of schemes available to help you get on to the property ladder, and it’s helpful to be aware of these early on. The First Homes scheme is aimed at local first-time buyers and key workers, offering at least 30% discount on the market value on new build properties.

Similarly, you may be eligible for the Help to Buy scheme. This allows you to buy a house with a 5% deposit, while the government lends you up to 20% of the cost of a new build home. There are different price limits on homes that you can buy under this scheme, and it can vary between regions.

You can also sign up for a Lifetime ISA to buy your first home. You can put up to £4,000 into your ISA each year, and the government will add an additional 25%. This can be used to buy properties of less than £450,000.

In some cases, parents or grandparents can help you with a deposit, but it’s important that you understand any legal and tax implications associated with a gifted deposit.

Getting yourself organised

The biggest secret to making sure your mortgage application goes smoothly is by being prepared early. It can be helpful to understand your current financial situation and how eligible you are. You can do this by checking your credit file and credit rating and researching ways of improving your score if necessary. This can put you in a good position to start with.

It can also be helpful to start saving up a cash deposit as early as possible. The bigger your deposit, the better and this means you’ll need to borrow less from a lender. It will also give you a lower loan to value ratio.

Consider talking to a mortgage broker, as they will be able to offer independent advice. A broker can help you to understand how much you can afford to borrow, which is important as this will determine what property prices you should be looking at.

Getting a mortgage agreement in principle

A mortgage agreement in principle is often recommended when you’re ready to start viewing properties, as it can give you a better idea of how much you’re able to borrow. It can also show estate agents that you are serious about buying a house.

During the mortgage application process, it’s important to remember that lenders will consider your affordability by looking at a variety of factors. This includes your salary and any other income, as well as your outgoings, which can include credit cards, loan debts, bills and general living costs. They will also look at your credit history.

Choosing the right kind of mortgage

Typically, a repayment mortgage is your main option as interest-only mortgages are harder to come by. A repayment mortgage means you will pay off some of the capital, which is the amount you borrowed, along with any added interest. It means that over the years you are gradually paying back what you borrowed. 

You should also consider which mortgage rate you will choose. A fixed-rate deal will keep your monthly repayments as a set rate and can be for 2, 3 or 5 years depending on your lender. There are also different variable rates, which can change. This could affect how much you owe each month.

Using a mortgage broker can help you make sense of it all and choose the right deal that’s suited to your circumstances and financial situation. Look for a broker that is whole of market, and not tied to specific lenders.

Don’t forget the extra costs

Buying a house can be incredibly expensive but if you are aware of the costs early on, it can help you to be more prepared. There are additional fees to consider such as property searches and surveys, as well as solicitor fees for facilitating the house purchase. Luckily, there is no stamp duty for first time buyers on houses under £300,000.

You should also carefully consider taking out the right home insurance once you have bought the property.