First Time Buyers

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First Time Buyer mortgages – what you need to know 

Getting ready to buy your first home is exciting, but there’s a lot to think about. Even learning all the terminology can take a while.  

At Fancy a Mortgage we help First Time Buyers understand each step in the property journey, including how much they can borrow and finding mortgages that offer a good deal.

What is a First Time Buyer mortgage?

Mortgages are targeted at either First Time Buyers or Home Movers. The process can be slightly different depending on whether you’ve had a mortgage before. 

A First Time Buyer mortgage is a very general term – there’s no specific product for new buyers. Choose any type of mortgage: fixed rate, variable rate, repayment or interest-only mortgages. You can also decide how long your mortgage term will be. The norm is 25 years, but various terms are available.

There are advantages and disadvantages to each mortgage type – we’ll help you narrow down the options.

How much can a First Time Buyer borrow?

Finding out how much you could borrow is a vital step towards owning a home. It will set your property budget so that you can start looking at homes for sale. 

Lenders generally offer around four times your annual income. You will also need a deposit – ideally at least 10% of the home’s value. A mortgage calculator will help you explore your potential loan amount and monthly mortgage payments. 

How much deposit does a First Time Buyer need?

Any mortgage will require a cash down-payment called a deposit. The average deposit is around 10%, but some mortgage lenders will accept 5%. If you reach 15% or 20%, you will get better interest rates and lower monthly payments. 

In 2021 the government announced a Mortgage Guarantee Scheme. It provides financial support so that lenders can offer more 5% deposit mortgages. This will be in place until December 2022.

What is an Agreement in Principle?

This is a statement from a mortgage lender that they will – in theory – lend you a certain amount to buy a home.

It gives you good credibility with sellers and estate agents. It shows you’re serious about buying a house and can get a mortgage. You can ask a lender for an Agreement in Principle and they will run a few checks on you. The agreement is free and usually valid for 30 or 90 days.

It’s not a binding agreement though – you will need to put in a full mortgage application once you’ve found a property you want to buy. 

How do I check my credit score?

Your credit rating is very important when you’re ready to get a mortgage deal. If you‘ve run into debt in the past you may have a poor credit score. Bad credit can mean lenders are less likely to accept you – or they’ll offer you higher mortgage rates.

Check your credit rating online and look at the details. Sometimes a poor score is down to an error. But if you do have bad credit, you may still get a mortgage offer. It will be easier if your debt issues are a couple of years in the past. Research ‘bad credit mortgages’ for more information on this.

Can I improve my credit rating?

If your credit score isn’t too good there are a few quick wins. First check with your local council that you’re on the electoral roll – it’s a basic requirement for credit. 

Generally, your rating will improve if you avoid going overdrawn, you always pay bills on time and stay well within your credit card limits. It also helps if you can stay at the same address for a while. 

Support for First Time Buyers

A few government-led ownership schemes are designed to help First Time Buyers own a home: 

Help to Buy – Equity Loan

This initiative helps you buy a property with just 5% deposit. The government will loan you up to 20% towards a deposit, which is interest free for five years. You will then need to get a mortgage for the rest of the value. 

Help to Buy –  Shared Ownership 

With Shared Ownership you can buy a 25% to 75% share in a home and pay rent on the rest. You can increase the size of your share over time.

Right to Buy 

If you are a council or Housing Association tenant, the Right to Buy scheme helps you buy a home with a good discount. The longer you’ve rented, the bigger the discount.

How can a Mortgage Broker help First Time Buyers?

It can be really helpful for First Time Buyers to talk to a Mortgage Broker. As mortgage experts we’ll help you through every stage, from setting your property budget and checking your credit rating to comparing deals and applying for a mortgage.

We’re here for all your questions too: see us as your First Time Buyer guides. Ask us about anything from stamp duty to legal fees and insurance cover. Our offices are open 9am to 5pm Monday to Friday – so get in touch!

Your home may be repossessed if you do not keep up repayments on your mortgage.

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