first time buyer

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What is a First Time Buyer?

A First Time Buyer is anyone who is looking to buy their first residential property to be used as their main or only home. Whilst First Time Buyers have notoriously found obtaining a mortgage more challenging than other buyers, with knowledge and preparation, it is perfectly possible to secure a mortgage.

There are also a range of schemes, including the new Mortgage Guarantee Scheme, which are in place to help First Time Buyers get onto the property ladder more easily.

What is an Agreement in Principle?

You can obtain an Agreement in Principle from most Mortgage Lenders prior to your full mortgage application, free of charge. This conditional mortgage offer shows the value you would most likely be offered on your full application, which helps narrow down your search. It can also be beneficial to First Time Buyers, as it shows vendors that you’re a credible buyer.

How much can a First Time Buyer borrow?

Being a First Time Buyer should have no impact on the loan you are offered, as this is based on affordability and your credit score. Mortgage calculators can sometimes give you an idea of how much you might be able to borrow, but an Agreement in Principle is likely to be more accurate. The average mortgage applicant can expect to borrow between three and five times their annual income.

How to improve your credit score

Preparation is a key part of securing a mortgage and as the decision is based, in part, on your credit score, improving your score before you apply for a mortgage will be hugely beneficial.

  • Ensure that you appear on the electoral roll for your current address
  • Correct addresses and other changes in information on all accounts held
  • Try to minimise use of current credit facilities, staying within 50% of credit limits 
  • Make timely payments on bills and credit cards and pay in full, where possible
  • If you have no credit history, look into credit builder credit cards, as they can help prove you’re a responsible borrower

How much deposit do I need?

Your deposit requirement will be based on the type of mortgage product you chose. A Standard Residential mortgage will usually require around 10% deposit, however, 5% deposit mortgages are available through the Mortgage Guarantee Scheme and some of the other home ownership schemes aimed at First Time Buyers.

What help is available for First Time Buyers?

The Mortgage Guarantee Scheme was introduced in April 2021 to encourage lenders to offer higher Loan to Value mortgages, meaning that 95% mortgages are now more widely available to creditworthy applicants looking for a residential home, so long as it’s not a new build. Other schemes include:

The Help to Buy Scheme – which offers a 20% equity loan from the government to top up your 5% deposit. This is only available on new build properties.
The NewBuy Scheme – this also has a 5% deposit requirement. A 95% mortgage is then provided through government borrowing and charged at 75% of the cost of standard interest rates

The Shared ownership Scheme – This allows buyers with lower income to purchase between 25 and 75% of a property and rent the remaining share from a housing association. You can increase ownership over time.

What Fees are involved with buying a home?

Arrangement fees

These vary from lender to lender and are occasionally waived as an incentive, but are mainly charged for the administrative arrangement of your mortgage documentation.

Valuation fees

All lenders require your home to be valued by a surveyor prior to finalising the mortgage offer. Different levels of valuation are available and rates vary based on these.

Stamp duty

First time buyers only pay Stamp Duty on homes valued at £300,000 or above, however, the end of June 2021, however, a Stamp Duty holiday means that only property sales over £500,000 will incur stamp duty.

Legal fees

You will need to pay a solicitor for conveyancing and local authority searches. Fees vary between firms.

How can First Step Mortgages help First Time Buyers?

Here at First Step Mortgages, we specialise in First Time Buyer mortgage advice. We understand that buying your first home is a big step and we will guide you through the process, making sure the type of mortgage that you choose is best suited to your needs and circumstances.

As Mortgage Brokers, we have access to lots of mortgage deals that you won’t find on the high street and this means we can often find more competitive mortgage rates, saving you money and making the whole process of buying a house more accessible.

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