First Time Buyer Mortgage Advice

First time buyer Mortgage Advice guide:

Saving for a deposit of at least 5% of the properties value (£200,000 X 5% = £10,000), has proved increasingly more difficult for first time buyers.

So, if you have the minimum deposit of 5% saved already, congratulations the hardest part is over, providing you meet the rest of the lenders criteria. But if you don’t, it’s not the end of the world, there are still plenty of options out there providing you have the income to support the amount you are looking to borrow. These are listed in greater detail below, under alternative to deposits.

Once our guide has hopefully provided you with the basics. It will be time to choose a whole of market Mortgage Broker which specialises in First Time Buyer Mortgage Advice.

We of course can, and would be happy to put you in touch with a reputable Specialist Mortgage Advisor which can help.

If you’d rather find your own, we would recommend finding someone local to you who comes highly recommended and/or someone with lots of reviews on google, Trustpilot, Facebook etc…

And remember to make sure they can provide you with expert First Time Buyer Mortgage Advice.

Mortgage, Decision or Agreement in principle. Whatever you want to call it, they all mean the same thing. Essentially its where the lender will request details about you, your income and your outgoings and will then complete a credit check on you. Based on all these things the lender will then return the verdict on whether they are prepared to lend to you or not. And if they are, exactly how much they are willing to lend you. Your Mortgage Advisor will be able to recommend the cheapest lender available that’s best for your circumstances and then apply directly to them on your behalf.

Every lender has their own way of Credit Scoring applicants. Some lenders are stricter than others and just because you don’t have any adverse/bad credit on your Credit Report. It doesn’t necessarily mean you will be accepted by every lender. Don’t take it to heart, some lenders are just much stricter than others, when it comes to who they will accept.

Always obtain a copy of your Credit Report before applying for a Mortgage. Credit Reports show a detailed 6 year history about you and your finances and Mortgage Lenders like complete accuracy when it comes to this. Non-disclosure, whether intentional or by accident is a Mortgage Lenders pet peeve so obtaining a Credit Report proves invaluable during the Application process. And it really helps your Mortgage Advisor show a true reflection to the lender about you and your finances.

• Experian
• Equifax
• TransUnion 

Most lenders will check only one of these. Some will check two or all three. And strangely enough, your Credit Score and overall Report will look different to each one of these.

Only one Credit Reporter displays the data that each of the above Credit Bureaus hold on you. So, we recommend obtaining a copy of your Report with them:

• www.checkmyfile.com – sign up and get a free 30-day trial – so obtain a copy of your report and then cancel it within this time

This is the number one question that first time buyers want to know and one of our Mortgage Advisors will be able to give you the exact figures. It’s dependent on a number of factors including the lender, the size of your deposit and of course your income and regular outgoings. But to give a rough idea, lenders will take the income of the applicant or joint applicants and allow them to borrow up to around 4 and a half times their income (dependent on their monthly outgoings).

For example, Mr has a basic employed salary of £20,000 per year and Miss earns £25,000 and have no regular monthly credit commitments or dependents. £45,000 per year times by 4.5 = £202,500. This is a rough average and of course all lenders are different. As mentioned above, regular monthly expenditure such as, but not limited to; Student loans, Car Finance, number of dependents could, depending on the amount, reduce the maximum you are able to borrow.

Outgoings that lenders will consider when assessing your affordability are, but not limited to:

• Maintenance payments & Childcare
• Number of dependents 
• Credit and Store Card Balances
• Loans and Finance agreements. For example, on a Vehicle
• Student Loans
• Council tax
• Travel and living costs including utility bills

Any future changes to your income and expenditure which are likely to affect your ability to repay your Mortgage

The absolute minimum deposit required by lenders is 5% of the properties market value. This is of course subject to you meeting the rest of the lenders Criteria. The higher the deposit you put down, the more lenders that are going to be available to you.

This is because, not all lenders are prepared to lend on a 5% deposit and also due to the lenders credit scoring being much tougher for applicants with this level of deposit. In addition, the larger the deposit you have the cheaper the rate you will be eligible for.

So, with the same Lender, you are much more likely to be accepted if you have a low credit score if you put down a 15% deposit when compared to a 5% deposit. This is all down to risk. The higher the deposit, the less risky to the lender.

If you have a low deposit it is worth considering ways for you to boost your Deposit.

• Help to buy ISA’s and Lifetime ISA’s: Government will add a 25% bonus to what you save up to set limits
• Gifted deposit – you may have a relative who is prepared to gift you some funds to assist in getting you on the property ladder
• Help to buy equity loans – available on new build properties, the government can provide you with an Equity loan of up to 20% of the property’s value (40% in London)

Family loan in the form of a second charge or family trust arrangement – contrary to the above, this is where a family member provides you with a loan which will be secured against your property, in addition to your Mortgage. A few lenders will offer this option 

Guarantor/100% Mortgages – family members either use the equity in their home or put their savings into a bank account with the Mortgage lender. For example, for 10% of the value of the property you are purchasing. Providing you keep up with repayments on your Mortgage, the family members monies are returned after 3-5 years, dependent on the scheme.

An unsecured loan from a Bank or other authorised finance company – a couple of lenders will allow this.

Concessionary purchase – purchasing a property from someone below the market value. Difference between the market value and the amount they sell to you can be used as the deposit. This can usually only be between close family members.

Builders deposit – when purchasing a new build from a Builder/developer. The builder/developer may offer to pay up to 5% of the deposit for you.

Mortgage Valuation – the most basic Valuation which the lender will complete. It’s important to stress that this is the lenders report for their purposes and it’s to assess whether they will be able to lend and if so, how much. This will cost between £0-£250. But with Specialist lenders, it could be quite a bit more.

Homebuyers report – this is if you decide you wish to obtain your own, more detailed report. This will highlight any potential defects of the property and provide advice for these. Cost of these will be between £300-£500.

Full Building Survey – this is the most detailed and comprehensive report which will provide a full structural overview of the property. This probably isn’t needed unless your property is older (over 50 years) or in a visibly poor condition. Cost of this will be in excess of £600

Joint Mortgage ownership types

There are two ways to own a jointly:

Joint tenants – this is the default option and both owners will have equal rights to the whole property.

Tenants in common – you both own a defined share in the property. For example, 70% to one and 30% to another

The best thing to do is to obtain a copy of your credit report and speak to one of our Mortgage Advisors, which specialise in this area.

For more general information please see the Bad Credit section on our website.

Repayment methods:

• Capital and interest repayment Mortgage: this where you repay the loan as well as paying the interest charged by the lender.
• Interest only mortgage: this is where you do not repay any of the Mortgage and instead just make monthly payments on the interest charged by the lender.

Different interest rate options:

• Fixed – by far the most common and advisable for most. Ultimately means for a set period of time, usually 2-5 years, your Interest is guaranteed not to change. Thus meaning your monthly repayment will not change. 
• Standard Variable Rate – this is the lenders interest rate that you will move onto following the end of your initial fixed rate, if you do not change to a new fixed rate either by moving lenders or completing a product transfer with your existing lender.
• Discount – during a set period of around 2-5 years, the lender will provide you with an interest rate that’s discounted from their Standard Variable Rate. When the lenders standard variable rate changes, so will your interest rate
• Tracker – during a set period of around 2-5 years, you will have an interest rate that will track, usually slightly above, the bank of England base rate. So, when the Bank of England base rate changes, so will the interest you pay on your Mortgage.
• Offset – you deposit into an Offset savings account that is linked to your Mortgage. You’ll only pay interest on the balance of your Mortgage minus the savings that are in your Offset savings account
• Cashback – it’s quite common these days for lenders to provide you with cashback for simply choosing to take out a Mortgage with them. On average this will be between £250-£500 and usually applies to Fixed Rate Mortgages (mentioned above)

Speak to one of our qualified, regulated and highly rated Mortgage Advisors, which specialise in First Time Buyer Mortgage Advice. Simply complete our short enquiry form below and we will get one Mortgage Advisor that is local to you and which specialises in your case, to give you a call. They can answer any other questions you have, provide you with a free non-obligatory quote and/or talk you through the process in greater detail.

If you’re self-employed or have had bad credit in the past, don’t worry, we can help. As a specialist in these areas, we have access to all Specialist Mortgage Lenders. 

All our Mortgage Advisors hold the CeMap qualification (Certificate of Mortgage Advice & Practice) and are Regulated by the Financial Conduct Authority.