How to Get a Mortgage as a First-Time Buyer

As a first-time buyer, understanding the different types of mortgages and the jargon that comes with them can be tricky. This guide presents all the essential information you need to take your first step on the property ladder.

John Ellmore Last updated on 20 January 2021.
How to Get a Mortgage as a First-Time Buyer

Getting a mortgage as a first-time buyer can be daunting. A mortgage represents one of the biggest financial commitments of your life, and making the right decision may save homeowners thousands of pounds over the length of a mortgage term, typically 25+ years.

Making a decision about which type of mortgage to choose will depend on your personal circumstances and preferences.

In this guide we’ll explain the finer points of how mortgages work and bust some of the jargon, so you can comfortably and confidently compare mortgage products on the market, and understand how to get a mortgage as a first-time buyer.

Am I a first-time buyer?

While it seems like a very obvious question to answer, there are some nuances as to whether you count a first-time buyer or not.

A first-time buyer is anyone applying for a mortgage who isn’t already a homeowner, a buy-to-let investor or someone remortgaging their existing property.

To qualify for government first-time buyer tax advantages you cannot have ever owned a property. This applies to property abroad, shared ownership and jointly owned properties.

How does getting my first mortgage work?

As a first-time buyer looking to take out a mortgage you’ll be eager to know how much money you’ll be able to borrow. A quick way to get a ballpark figure of what you might be able to borrow is using our free first-time buyer mortgage calculator. To get a more accurate figure you’ll to start talking to mortgage providers.

As a first-time buyer you may be considered a risky borrower, particularly if you have a limited or negative credit history. You can reduce the amount you need to borrow, and your chances of approval, by saving a larger deposit.

Additionally, the more substantial your deposit, the more competitive mortgage rates you’ll be offered.

Our guide on how to save for a deposit can help you maximise the deposit you are able to save for, and put homeownership within your reach.

How to get your first mortgage:

Step 1: Save a deposit

Step 2: Research the mortgage market

Step 3: Examine your finances to ensure you can afford a mortgage

Step 4: Find a property

Step 5: Understand the different types of mortgages available

Step 6: Decide what type of mortgage suits you and compare mortgages

How much can I borrow for a first time mortgage?

The amount you’ll be able to borrow as a first-time buyer depends upon your financial circumstances, including your income, outgoings and credit rating. Typically mortgage providers offer borrowers between three and five times their salary; for joint mortgages, the total amount lent will take into account each applicant’s salary.

During a mortgage application, a lender will determine how much they are willing to lend to a borrower through a financial affordability assessment. This takes into account all the earnings a borrower takes home, including their salary, earnings from a second job or freelancing, investments and inheritance or government benefits.

If you are employed, you’ll need to prove your working history and income when applying for a mortgage. You can do this by providing recent payslips. This can be harder for some mortgage applicants, like freelancers or small business owners, however lots of lenders still cater to these borrowers.

A lender will also take a close look at any money going out of your bank account on a monthly basis. This could consist of rent payments, grocery bills, transport costs, such as car finance, loan and credit payments and direct debits.

Your credit rating, in effect a signal of your creditworthiness to lenders, significantly impacts the amount you’ll be able to borrow and at what rate.

The lower your credit score, the less likely a lender will be willing to extend to you their best rate, and a poor credit score will make it hard to get a favourable mortgage deal.

How can I improve my credit score?

Your credit score is a summary of your credit history held in your credit report. This is an in-depth overview of your borrowing history, and includes your track record of paying back money you have borrowed on time.

Your credit score is updated every month, so every payment you make towards a larger debt and every bill you pay on time will build up a history highlighting your ability to manage your finances responsibly.

Improve your credit score by:

  • Paying your bills on time
  • Paying off debts reliably
  • Making any payment towards a debt
  • Limiting your credit applications
  • Leaving at least 12 weeks between credit applications
  • Ensure you are registered to vote at your address
  • Keep your address history low

What are the different types of first-time buyer mortgages?

First-time buyer mortgages are designed for the needs of those looking to buy their first home and they have access to a full range of mortgage products.

Fixed rate mortgages

A fixed rate mortgage has an interest rate which doesn’t deviate for an agreed time period, typically between two and five years. This allows first-time buyers to confidently budget for their mortgage payments during the initial period of their mortgage.

Popular fixed rate mortgages are 2-year fixed rate mortgages and 5-year fixed rate mortgages.

Tracker mortgages

A tracker mortgage follows an external rate, this is usually taken from the Bank of England’s base rate. The base rate can go up or down each month, which can impact tracker mortgage customers’ monthly mortgage payments.

Variable rate mortgages

Also referred to as standard variable rate mortgages, this type of mortgage product follows a lender’s standard variable rate (SVR). Each mortgage provider sets their own SVR in line with the Bank of England’s base rate, however a lender’s SVR can be up to five percentage points higher than the base rate.

The provider will adjust your interest rate if the base rate fluctuates. When researching variable rate mortgages, first-time buyers should be aware that the SVR can differ significantly between mortgage providers.

Guarantor mortgages

If you have been turned down for first-time buyer mortgages by various providers, a guarantor mortgage can help you buy a home.

A guarantor mortgage can also help prospective homeowners without a deposit to get on the property ladder. A family member or friend will be named as your guarantor, which means they must cover your mortgage payments, if you cannot. Don’t enter into a guarantor mortgage lightly, as your guarantor could have their property repossessed if neither of you can make the required mortgage payments.

Low deposit mortgages

With only 5% deposit or less required, low deposit mortgages mean first-time buyers don’t have to wait to own their own home until they’ve saved up a sizeable deposit. Low deposit mortgages typically have higher interest rates than other mortgages and are harder to acquire

100% mortgages

It is also possible to take out a mortgage without any deposit. 100% mortgages suit buyers without savings, and will need to be backed by a guarantor.

Can I buy a home on my own?

Yes, there are no limits to taking out a mortgage as a single person, expect those imposed by the borrower’s financial limitations.

What is a joint mortgage?

A joint mortgage is a mortgage application featuring more than one applicant. They are usually taken out by couples, but can also suit families, or a group of friends who would like to live together. Joint mortgages usually allow borrowers to buy a more expensive property by pooling their resources.

How to get mortgage advice

There are two main ways to go about getting mortgage advice. You can engage the services of a mortgage broker or go directly to the lender.

When speaking to your bank, they’ll discuss only their mortgage products with you. They’ll usually provide free advice to first-time buyers, however it’s important to shop around to find the best deal for your circumstances. That’s where comparing mortgages online comes in.

You should consider using a mortgage advisor if you would like more help and advice. There are many independent brokers who will manage your application for you.

About the author:

John Ellmore is a director of NerdWallet UK and is a company spokesperson for consumer finance issues. John is committed to providing clear, accurate and transparent financial information. Read more

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