It’s no surprise that owning a home is a very attractive prospect to many people, it offers some security and an opportunity for investment.
At Mortgage Buddy we’re asked all the time about mortgages for first time buyers. Understandably, trying to obtain your first mortgage can feel (and sometimes be) very complex, so let Mortgage Buddy help.
In our guide to first time buyers’ mortgages we’ll go through the key features and details of mortgages and what you should look out for if you’re a first time buyer.Skip the Guide, Find Your Mortgage Buddy
- Introduction & FAQs
- The Process Of Buying A Home
- Deposits & Affordability
- Mortgage Products & Need-To-Knows
- Special Circumstances
Can I get a first time buyers’ mortgage?
That really is the BIG question! And the answer to this question is the same whether or not you’re a first-time buyer: it depends entirely on your circumstances.
By this, we mean that lenders assess a range of details about you.
There are plenty of mortgage calculators online that will help you assess affordability – but they’re rubbish. Even ours. – (You can find out why here.)
Every lender has their own criteria by which they judge applications for mortgages. If you’re unlucky with one lender, that doesn’t mean there isn’t an alternative lender out there that will be able to accept your mortgage application.
What A Calculator Doesn’t Tell You…
It is not (and we can’t stress this enough) an accurate picture of the current market.
When you decide to proceed, we always recommend that you speak to an advisor because you’ll find that most calculators you do yourself won’t take the following into account: –
- Your income
- Mortgage product availability
- The current interest rate
- Any additional benefits you may get
- Children or family commitments
- Specialist Schemes (Like Help-To-Buy)
- Any debts such as defaults, CCJs or IVA
- Specialist circumstances like self-employment
- Joint or sole applicant
- Finance on things like cars
- Your credit score
- + loads more.
And it’s no surprise – the formula for that would be impossible!
Which is why mortgage advisors, like our whole-of-market partner brokers, are invaluable in this process (and why we help thousands of people every year!)
Can I get a joint first time buyers’ mortgage?
Absolutely! A lot of first-time mortgages are for more than one person. Don’t be alarmed though if you’re thinking of getting a first-time buyers’ mortgage on your own – there are lots of options for that too. People often get a joint mortgage with their partner but you can also get one with friends or family members.
The Mortgage Process (How To Get A Mortgage)
Stage 1: Saving A Deposit
After you’ve decided if it’s a joint or sole application, it’s time to save up.
Most lenders will require a minimum 10% deposit unless it is through a Government scheme.
Stage 2: Your Advisor
Now you get matched with your advisor! They’ll look at literally thousands of mortgage products and see which suit you.
Then they’ll find you the best deal and help you get a Decision in Principle (DIP) so that you can start making offers.
Stage 3: Finding A House
Next is the fun bit.
Your advisor has taken all of the hard work out of your hands so you can take your DIP and find the perfect house.
You might even find that having a DIP makes your offer more appealing to the seller, particularly if there are multiple bids on your dream home.
Stage 4: Applying & Completing
Your Mortgage Buddy advisor submits your formal application.
This is where the waiting game starts (and your advisor provides an extra advantage). They’re able to chase up anything holding up your application through separate intermediary channels.
They will tell you when a conveyancer can be instructed and this is where all the legal stuff happens.
This can include searches, deposit transfer, exchanging contracts and eventually completion (this is where you get the keys).
How much do I need as a deposit on a first time buyers’ mortgage?
The size of deposit you’ll need for your first time buyers’ mortgage will depend on the value of the property you’re planning to buy and it’s loan to value (LTV). LTV is the size of the loan you need to borrow compared to the value of the property you want to buy.
Generally speaking, the bigger your deposit, the better deal you’re likely to get on your first time buyers’ mortgage. There are some really handy government schemes designed to help people get onto the housing ladder. These mean that sometimes you’ll only need a deposit of around 5% to get your mortgage. But even so, if you are able to save a sizeable amount for your deposit then you should absolutely do that.
How much can I borrow with a first time buyers’ mortgage?
There are no hard and fast rules dictating how much you’ll be able to borrow with a first time buyers’ mortgage. It really depends on your income and expenditure. As a general guide, many lenders can offer you up to 4x your annual salary, although there are some lenders that will stretch that to 4.5 or 5x your salary.
Lenders will also focus heavily on the affordability of the first time buyers’ mortgage. Affordability is just what it sounds like: how likely you are to be able to afford the mortgage. To reach a decision on the mortgage’s affordability, lenders will assess your income and your outgoings to work out if you have enough money to keep up the mortgage payments.
Your credit history is also a really important factor, and one of the major reasons some people can’t get the first time buyers’ mortgage they want. To build up a healthy credit profile, it’s a good idea to establish your profile as a trustworthy person who’s likely to be able to repay any finance. Your mobile phone bill is a good example of a regular bill which, when paid on time, can strengthen your credit score.
What types of mortgage are available for first time buyers?
The types of mortgage you can get as a first time buyer are essentially the same as what’s available for anyone else. Here are the two types of mortgage available:
- Fixed rate mortgage
- This does what it says on the tin (initially) – the interest rate is set at the beginning of the mortgage and stays ‘fixed’ until the initial term is over (after the initial term, most mortgages tend to switch to a variable rate). A lot of people like fixed rate mortgages because they have certainty about how much they’ll be paying each month.
- Tracker / variable rate mortgage
- On a tracker / variable rate mortgage, the interest rate you’ll pay is decided by the Bank of England’s base interest rate. There’s some risk attached to a tracker mortgage because the rate of interest can go up as well as down. This does make it preferable to some people, as you might end up saving if the rate goes down.
How much will a first time buyers’ mortgage cost me?
Mortgages are expensive. In addition to the mortgage itself, there are lots of other fees and costs to bear in mind, and they can mount up:
- Mortgage fees
- These vary from lender to lender. Some lenders cover all the fees themselves, but then they might charge more overall meaning that you don’t necessarily save anything. Other lenders can charge you for things like a booking fee, arrangement fee or to get the property surveyed. Your buddy will explain each so you know exactly what you are paying.
- Legal and solicitors fees
- This is one cost you can’t really get out of. At some point in your first time buyers mortgage application you’ll need a solicitor to work on the contract. There’s no flat amount charged by solicitors – they choose how much they charge. It’s wise to get quotes from a few solicitors before committing to one. Again, we can provide quotes.
- Midterm mortgage fees
- This is something you should find out about before you commit to a particular mortgage. Some lenders charge fees if you miss any payments or if you switch to a different mortgage before your original term ends. Although these are extremely rare.
- Stamp duty
- There is some good news for you if you’re a first time buyer! You won’t have to pay stamp duty on your property up to £300,000. If your property is worth more than that, you’ll pay 5% stamp duty on its value above £300,000.
Having your very own Mortgage Buddy is a real help here. We’ll let you know about all of the fees that you might have to pay on your first-time buyers’ mortgage before you commit to proceeding and it’s free.
Do I need a solicitor for a first time buyers’ mortgage?
Yes. You’ll need a solicitor to work on the legal elements of your first time buyers’ mortgage. Although our experts here at Mortgage Buddy will guide you through the whole process of getting your mortgage, you will still need to pay for a solicitor to do their essential work with your contract.
Are there any government schemes to help first time buyers?
Yes! The government wants people to get onto the housing ladder and has introduced schemes designed to help them do just that. Some of the schemes are quite complex but with the right guidance you should be on top of them in no time:
- Help to buy
- Help to Buy can refer to the Help to Buy Equity Loan. Through this scheme the government can lend you up to 20% of the cost of your newly built home, and you’d only need to provide a cash deposit of 5%. The remaining 75% would be made up with the standard first time buyers’ mortgage.
- It might also refer to the Help to Buy ISA scheme, which the government launched in 2015. The Help to Buy ISA was a way for people to boost the amount they had saved for their deposit. The idea was that you would regularly put money into the ISA and the government would top it up by 25% up to a maximum top-up amount of £3,000. The Help to Buy ISA scheme ended on 30 November 2019 and you can no longer apply for a new account through the scheme. If you had opened a Help to Buy ISA before the deadline, you’ll be able to continue saving into it and getting your bonus until November 2029.
- Lifetime ISA
- The Lifetime ISA is more or less the same as the Help to Buy ISA, but you can still open a new Lifetime ISA. The amounts differ slightly from the Help to Buy ISA but it works in almost the same way: you put money into the account and the government will top it up by 25%. It’s designed to either help you grow a deposit for your first time buyers’ mortgage or to use later in life.
- Right to Buy
- Right to Buy is a scheme that allows people who’ve been renting a council property to buy it for themselves at a discounted price. One of the great things about Right to Buy is that you can use it to take out a 100% mortgage if you need to – bear in mind that doing this will lock you into a 5-year contract and you won’t be able to sell or borrow against the property in that time.
Can I get a first time buyers’ mortgage if I have bad credit?
There’s no doubt that having a poor credit history can make a mortgage application of any kind more difficult. It certainly doesn’t make it impossible though!
Where you may benefit here is that Mortgage Buddy advisors are whole-of-market. What this means is that as well as the high street lenders, they will have access to specialist lenders that are only available through a mortgage broker.
So you’re winning in a number of ways…
- Your advisor can explain every aspect of your mortgage to you to help you understand the process
- They’re searching thousands of products to find the right one
- They manage the process for you
- They have access to specialist lenders
- The advisors are all regulated by the FCA and checked by Mortgage Buddy too! – In other words, they’re really great!
Let’s make it simple. ???
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