Mortgage guide for first-time buyers

Buying your very first home is both an exciting and for many, also a slightly daunting process. There are many different stages when it comes to property buying, and we understand how stressful that can sometimes end up being.  To help make the mortgage preparation and application process easier, we have compiled a guide to help you to get your very first home.

Who is a first-time buyer?

For clarification, we define first-time buyers as anyone who is purchasing their only (and main) residence. This person has not owned a residential property either in the UK or abroad (in either a freehold or leasehold capacity).

The information mortgage lenders consider for first-time buyers

In order to prepare as much as possible for your mortgage application, it is best to start off with knowing more or less the criteria mortgage lenders (your bank or building society) will be scrutinizing to determine whether to accept or decline your mortgage application. However, please note that this list is not exhaustive but rather a broad outline of what lenders will be assessing. Depending on the lender, they may also look at other criteria in order to determine your eligibility.

  • Your credit report and overall score
  • Your salary
  • Your current employment status
  • Their own mortgage policy rules
  • Your monthly outgoings
  • Savings that you have
  • The amount you have asked to borrow
  • Your overall spending habits
  • Deposit size required

Saving for a deposit

As we have mentioned above, one of the main things mortgage lenders consider is how much you have already saved for the deposit. The more you have saved, the greater the chance you will have a broader range of mortgages to choose from and at lower interest rates. Therefore, taking time to save as much as you possibly can is definitely worthwhile.

How much do I need to save?

Generally speaking, it is recommended to save at least 5% to 20% for a deposit on a home.

What other costs do I need to consider as a first-time buyer?

It isn’t just the deposit that you need to factor in as a first-time buyer. There are other costs that you have to consider too, such as:

  • Stamp duty (you can calculate how much you would need to pay using one of the many stamp duty calculators available online) remember that first-time buyers are exempt from paying Stamp Duty on the first £300,000 up to the value of £500,000
  • Surveying costs
  • Removal costs
  • Buildings insurance
  • Valuation fees
  • Arrangement fees
  • Furnishing costs
  • Decorating costs
  • Solicitor’s fees

Are there home-buyer schemes?

Yes, there are a number of government backed-schemes aimed at helping people across the country to get onto the property ladder.

The main three are:

Prepare for your application

Checking your credit report is a very important step to take when preparing for a mortgage application as a first-time buyer. We recommend that you check your credit file with all three credit reference agencies in the UK: Callcredit, Experian and Equifax. Why all three? They all take into account slightly different criteria in order to determine your credit score, and discovering any inaccurate or out-of-date information on your file with any of the agencies could affect your chances of being accepted for a mortgage. If you do find inaccuracies, contact the relevant lender or the credit reference agency in question.

Spend time researching mortgages

There are a number of different mortgages (and types) available on the market. It would be wise to take a little time to thoroughly research what is available in order that you can determine which will best suit your circumstances as a first-time buyer. You can do this by going online and looking at comparison websites, as well as the online mortgage calculators available which can break down mortgage types and average rates. You could also speak to your broker or mortgage adviser who can provide guidance.

Look at your spending habits

Taking time to also sit down and go through your spending habits over the last three to four months in order to see what exactly you are spending is definitely worth doing at least six months to a year prior to making a mortgage application. This will enable you to see if there are ways you can save more than you currently are. Whilst addressing your spending habits, you should also try to prioritise putting aside money to settle any outstanding debt you have before applying for a mortgage.

Documents you need for the mortgage application

If you feel you have done all the preparation work in order to apply for a mortgage as a first-time buyer, here are  the following documents are what you will need for the actual application:

  • Current account bank statements for at least the last 3 months
  • P60 form from your employer
  • Passport or driving licence
  • If you are self-employed, a statement of accounts dating at least two years’
  • Your last 3 months’ payslips
  • Utility bills
  • A SA302 tax return form if you are self-employed, or receive earnings from more than one source
  • It is also common to be asked to provide council tax bills and insurance policy statement