First Time Buyer

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First-Time Buyer Mortgages – What you need to know

Are you looking to finally make the transition from tenant to Homeowner? If so, you will need to familiarise yourself with first-time buyer mortgages before stepping onto the property ladder.

As a first-time buyer, you will naturally have several questions that need answering. Our first-time buyer guide should help you plot the next steps in style.

First-Time Buyer Mortgages At A Glance?

The basic definition of a first-time buyer mortgage is self-explanatory. It is the loan used to purchase your first home.

First-time buyer mortgages are available to single applicants and joint applicants. A wide range of banks and lenders will offer them to suitable candidates. Applicants can take advantage of various types of mortgages, such as;

  • Fixed-rate mortgages for first-time buyers.
  • Variable-rate first-time buyer mortgages.
  • Interest-only first-time buyer mortgages.

How Is The Process Different For First-Time Buyers?

As a first-time buyer, you may encounter increased scrutiny from lenders when buying your first home and applying for a mortgage. They have to do this to protect themselves, as well as you, the applicant.

While it is now possible to get a no deposit mortgage, we’d advise most applicants to save a bigger deposit when buying your first home. This is because lenders often use the LTV (loan to value) ratio to determine how much you can borrow. A £200,000 property with an 80% LTV means you can borrow £160,000. So, you’d need a £40,000 deposit.

Lenders also calculate mortgage agreements by multiplying the applicant’s salary. The rate will vary, but you can expect to be offered somewhere between four times and five and a half times your salary. This includes the joint salary of joint applicants.

The process is a little different for first-time buyers because they do not have to sell a property. This can speed up the process and makes you an attractive prospect to sellers.

How To Support Yourself As A First-Time Buyer

Our best advice for prospective first-time buyers is to start preparing at the earliest stage, even before you make your mortgage application. This allows you to assemble a much stronger application. Here’s what you can do:

Check Out The Available Help

Taking the first step onto the property market has been notoriously difficult in recent times. Thankfully, the government is actively trying to help first-time buyers, particularly younger ones.

Help-to-Buy schemes include an ISA, in which you can receive a £50 bonus for each month that you save £200. Another option is to use shared ownership, where you take out a mortgage on as little as 25% of the property. In this case, you can increase your ownership with further borrowing later on.

Aside from government support, our experts can help you consider the help available a little closer to home. A guarantor mortgage or a family springboard mortgage are the best options. However, you must be certain that you can meet your monthly payments.

Consider Your Credit Score

As a first-time buyer, your credit score will have a telling impact on what mortgage products and interest rates are offered. Lenders need to know that you are capable of making the monthly mortgage payments, but do not have a history of paying off a mortgage. Your credit history indicates whether you are good at managing debts and money.

It’s important to start building your credit score ASAP. Visit Clear Score to determine your current score and coaching on how to improve it. The better your score, the more mortgage deals will be available to you.

Know The Alternatives

In addition to looking at shared ownership agreements, we advise looking at property development opportunities. Buying a fixer-upper helps you get more property for your money. Moreover, there are better opportunities to boost your investment.

If you are hoping to buy after living in a council property for several years, the local housing authority may also offer you a Right to Buy agreement. This allows you to buy the rented property, potentially at a discounted rate.

What Fees Are Involved When Buying A House?

When we speak to first-time buyers, they often underestimate the costs involved in moving. First-time buyers should factor in;

  • Stamp Duty – Stamp duty land tax is a tax that is calculated as a percentage of the property value. The percentage you pay is determined by the value band of your home. However, first-time buyers can currently take advantage of a stamp duty holiday, which means paying nothing on properties valued up to £500,000, until the end of march 2021.
  • Survey Fees – Property surveys are required to confirm that the building is safe and in good health. Depending on the size and type of the property, you can expect to pay between £400 and £1,500.
  • Solicitor Fees – Preparing and executing the contracts can cost between £850 and £1,150.
  • Property Insurance – Building’s insurance is essential. Contents insurance is optional but advised.

In addition to these costs, buyers need to pay for van hiring or removal firms. On a brighter note, there are no estate agency fees to pay as you are not selling a property!

How to get your mortgage as a first-time buyer?

As a first-time buyer, the process of becoming a homeowner will involve several steps. They are:

Get Your Mortgage Agreed In Principle

The decision in principle is the stage at which a lender will analyse your application to decide how much they are willing to lend. They will factor in credit scores, job status, salary, and a host of other elements.

Find a Property

This stage requires you to search the market for a property and make an offer to buy it. Once your offer is accepted, a valuation will be required to ensure that the sale price is fair for all parties. Surveys are used too to confirm the valuation and condition of the property.

Make a Formal Offer

Once all documents and valuations are accepted, a formal mortgage offer is made. The lender will confirm that the mortgage is offered, the mortgage rates that apply, and send to your solicitors for execution.

Solicitor Actions

The solicitors will confirm that the contract is watertight. They will also complete local authority searches to confirm that the property won’t come under threat due to nearby construction plans.

Contract Exchange

At this stage, your contracts will be exchanged with the seller, who will have completed their own process. Once this happens, the process is official.

Move In

Following the completion, which will be finalised by your solicitor, you’ll set a date when you can move in and start making mortgage repayments as planned.


Why Spot On Mortgages to this?

Other types of mortgages are available such as Variable, Cashback, Capped, Collared & LIBOR.