First Time Buyer

Get in touch today to discuss your needs and goals.

Read, listen or watch below to learn more.

Dave Atkinson and Harry White explain the mortgage process for First Time Buyers.

Watch and listen to the podcast below.

How can a mortgage broker help if you are a First Time Buyer?

We can give you reassurance. We’re all qualified to do this, we have to take specific exams and have certain qualifications to do it. If you’re talking to the right adviser, we’re whole of the market, so we can look at all the lenders for you all at once – including some exclusive rates..

A mortgage broker would be able to help with their knowledge and experience. All of the circumstances that you think might be a bit too difficult or might be a little bit out of the ordinary, they’ve probably seen and done tens, if not hundreds of times before.

If you’ve got a slightly unique situation they’ll be able to recommend the lender that’s most suitable for you. On the flip side, if everything’s fine, they can just find you the best rate and you know that you’re getting the most suitable product for you.

What is an Agreement in Principle?

An ‘Application in Principle’ (or Agreement in Principle) is effectively a theoretical thumbs up from the lender. It’s where the first lot of credit scoring and affordability checks take place. What it does is give a theoretical thumbs up to say the lender is happy to lend X amount of pounds to you.

When a First Time Buyer is looking for properties, they’ll therefore know somebody is willing to lend, which gives you a bit more comfort when you’re making offers. Typically estate agents will request a Decision in Principle to make sure that the person making the offer is good for the money.

How much can a First Time Buyer borrow and what sort of deposit is needed?

How much a First Time Buyer can borrow is much like anyone else, it’s dependent on their income and their outgoings, as well as whether it’s a single or joint application. Most lenders will combine your household incomes and use an income multiple of around 4.5X that. They would then deduct your commitments such as credit cards, loans, and childcare fees, those types of things and come back to you with a more accurate figure.

In terms of the right amount of deposit, more is obviously better if you can. Realistically if you want to have access to the majority of the market you’re going to be looking at a 10% deposit. There are 5% schemes out there but receiving an Agreement in Principle can be more difficult because it’s considered such high risk. The interest rates really aren’t favourable at 5% either,  so if you can find that extra 5% deposit, you’ll have a lot more options.

Gifted deposits typically come from a close relative, but the odd lender will let a friend gift the deposit. Typically a gifted deposit is a true gift, so the idea is that it’s not to be repaid,  and the gifter will have no rights to the property, or be able to reside in the property. They will have to provide a letter confirming it is a true gift.

When should a First Time Buyer see a Mortgage Broker?

At the start of the process, once the deposit is nearly saved or saved and you’re in a position to do it. Ultimately you can then have a conversation and move as quickly or as slowly as you wish to. This way, people aren’t finding the house of their dreams, realising it’s not affordable and having a very sad couple of days!

How do I know what my credit score is and how do I improve it?

There are a few different ways in which you can check your score. There are three credit reference agencies in the UK that lenders will typically use – Experian, Equifax and TransUnion.

The easiest way to find out where you sit with all three is to go to CheckMyFile.com. You can register with them for free for the first month, and it’s easy to cancel afterwards. That actually provides you with information from four credit reference agencies in the UK, even though the lenders only use those three mentioned.

To improve your score, if somebody has no credit commitments, which younger borrowers are more likely to, it’s sometimes a good idea to take out a credit card and pay for small things that you know you can afford and can pay off straight away – and build up your credit score that way. Basically, be sensible with your money and prove to any potential lenders that you’re reliable.

Speak To An Expert

We can assist you with the whole mortgage process, from buying your first home, to remortgaging, moving home, equity release, buy to let, specialist mortgages and more.

What sort of help is there for First Time Buyers?

Help to Buy scheme

The majority of high street lenders offer some kind of product that will go hand in hand with the Help to Buy scheme. It’s nice and simple, you put down a minimum of 5% deposit and the government will top that up with an extra 20%. This way you only need to borrow 75% of what you need to buy the house from the mortgage lender. Because it’s a 75% Loan to Value, the likelihood of you being approved when we do the Agreement in Principle is slightly higher because it’s lower risk. The interest rate you’re offered is usually slightly more competitive than what you get if you only put down 5% or 10% on your own.

The Help to Buy scheme is ending in 2023, but we wouldn’t be surprised if the government soon introduces an alternative to assist aspiring home buyers.

Please note: The Help to Buy: Equity Loan scheme will close to new applications at 6pm on 31 October 2022.

The Deposit Unlock Scheme 

This is very new and it works similarly to the Help to Buy scheme in that it allows you to put down a minimum deposit, but with this scheme, you won’t get any support from the government. You can put down a minimum of 5% deposit and there are a couple of lenders that will let you buy a new build property at 95% loan to value, whereas typically you’d be looking at 80%. However, there are only a couple of lenders that currently offer it.

What is Shared Ownership?

Also commonly known as Part Rent, Part Buy, this scheme allows you to buy a share of a property and only need to put down a minimum deposit of 5-10% of the share you’re buying, then get a mortgage for the remainder of that. The remaining share is owned by the housing association that you’re buying it from and they would expect you to pay rent for that amount.

You’re able to do ‘Staircasing’, which is where you can increase your ownership, in some instances staircasing your way to owning up to 100% of the property. A lot of associations do like to keep a share of the property, but it’s an option for you to get onto the property ladder and maybe buy something that might be outside of your price range otherwise. The fact that you’re paying a mortgage and rent at the same time must be considered and both need to be affordable.

Joint Borrower Sole Proprietor

We’re seeing more and more of this over the last six years and more lenders are offering this type of mortgage. It allows you and a close relative to get a mortgage together. You get all the benefits of their income and it allows you to combine your income with theirs so you can potentially borrow more. That will then allow you to buy a property that might be outside of your price range otherwise.

The relatives that help you out don’t go on the title deeds of the property, which means you’re still a First Time Buyer when it comes to the likes of stamp duty.

There are downsides to take into consideration, such as the joint borrower’s financial commitments will be deducted from their income, much like with a standard mortgage application. They are also responsible for this debt as much as the buyer is, and that could impact what they wish to borrow in the future.

When we look at this as an option, we try to build a future plan for everyone going forward, just to make sure that everyone goes into this with their eyes open. Lenders will insist on them taking independent legal advice so they know that they are signing up to this commitment and what it could entail in the future.

What sort of fees are involved when buying a house? 

Stamp duty

This is essentially the tax that you pay when you buy a property. The good news is First Time Buyers get stamp duty relief up to the first £300,000 on any purchase they make. So, as an example, if you did buy a house for £300,000, you wouldn’t pay any tax on it. If, however, you bought it for £300,001, you’d pay tax on that £1.

Arrangement fees

Mortgage lenders will typically have two types of products within their range. They will have a fee-free range and also products that have an arrangement fee, which tends to be between £1000 and £1500.

The benefit of paying that fee is usually a more competitive rate of interest than in their fee-free range. First Time Buyers can typically add the fee onto their loan rather than pay it upfront if they chose to.

Searches and Surveys

You’re going to need solicitors to help with the purchase of your property. They will typically request some initial money to carry out searches on the property to make sure that the title ownership is clear, that there are no issues with whether it’s freehold or leasehold if there are any covenants that could potentially cause you an issue in the future, etc. Search fees typically cost around about £300, but a solicitor’s overall fee can be anywhere between £1,000 – £2,000, including the searches. Always discuss options with your adviser before adding fees, which will accrue interest over the term of the mortgage.

Mortgage Protection

Unfortunately, bad things can happen to us. When obtaining finance for your home, all you need to do is have a conversation with a broker to make sure that in the event of the worst happening to you, suitable protection for your family, property and lifestyle are in place. That could be to clear the debt completely, it could be to help you in the event of a serious illness such as Cancer, or if you’re unable to work due to accident or sickness. It’s just about making sure that you can stay in your home, protect your investment and loved ones (and hard work!) and enjoy it really.

What other services do you provide as a mortgage broker that First Time Buyers would find helpful? 

We’ve got an approved panel of solicitors that we work closely with, so if you can’t find your own solicitor or you like the idea of us having an existing relationship with them, we can get you a competitive quote for their services. Because we’ve got that existing relationship, we’ve got points of contact, so if you’re not happy with the level of communication we can use whatever influence we have to try and get that response that you need.

If clients are really concerned about their credit score or credit rating, we recommend they make sure they are updating all of their active credit accounts to the correct address. This can knock your score up a couple of points, but also lenders are going to need to see proof of address and one of the easiest things you can provide is a bank statement or council tax statement. We also suggest that everyone who is eligible to do so gets themselves on the electoral roll at their current address, because that’s a big one when it comes to your credit profile.

Make the most of our Free Home Setup Service

We’re partnered with Just Move In, to provide a complimentary Home Setup Service for everyone who completes their mortgage with us – usually £290 if you went direct!

They take the hassle of out moving home but handling the research, paper work and phone calls required to set up the likes of broadband, energy, council tax and more. Not only do they do the hard work for you, they find you some great deals too.

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

Frequently Asked Questions

Call us today on 0800 170 7021 to discuss your borrowing potential and eligiability.

Typically, the mortgage process will take 2-6 weeks to reach approval.

A mortgage offer is usually valid for 6 months.

Please be aware, the process is currently taking longer due to Covid-19. Please see question ‘How has Covid-19 affected the mortgage market?’.

Whilst you are not required to take out a life cover, our job is to ensure your mortgage is affordable, no matter what. It may not be nice to talk about, but if something were to happen to you, you want to know your family and investment are safe.

We will advise on all the options available and provide a no obligation quote from our partner providers.

You may need a solicitor, depending on the circumstance. Your adviser will discuss this with you, and should you need one we can put you in touch with our trusted partners, or you can use you own.