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How First-Time Buyers Can Get Mortgage-Ready

First-time buyers are inundated with information during the home buying process. Here, we break down the mortgage basics so you can get your financial ducks in a row.

Dec 20, 2021

How First-Time Buyers Can Get Mortgage-Ready

The lure of first-time homeownership is powerful. Whether you finally want a place to call your own or are focused on creating generational wealth, there are quite a few steps from where you are now to the moment you can kick back and enjoy it. Along with first-time buyer tips, here’s how you can prepare to step onto the property ladder with a mortgage in tow.

Prepare for a mortgage

Be sure you’re ready to commit to a loan

The no. 1 tip for first-time home buyers that we can offer is to be sure you’re ready. The average mortgage term is 25 years, and although you don’t need to stay in that one home for a quarter of a century, buying a property is still a major commitment.

Consider your financial future and whether you have any events on the horizon that could affect your location, income or expenses. These could be reasons to pump the brakes.

Get yourself on the electoral roll

This is a key part of life admin as it’s one way in which banks check your address. Also, make sure at least one utility bill at your current address is in your name.

Know how much you can borrow

It can be tempting to jump right into hunting for the perfect house, especially if it’s your first time. However, viewing homes without first determining your budget only leads to heartbreak.

Most mortgage lenders will cap the loan-to-income ratio at 4½ times your income. That means if you earn an annual salary of £30,000, you could be offered a loan of £135,000.

Most mortgages are repaid over 25 to 40 years in monthly instalments. The bank charges you interest on your loan, so you’ll pay back more than you borrowed. Keep an eye out for interest rates as some mortgage lenders offer better deals than others.

Maintain your credit

Now is not the time to open a new line of credit, buy a car or miss monthly debt payments. When you apply for a mortgage, lenders will pull your credit report. If they see that your debt has increased or you’ve started to make late payments, it could risk your approval. Your lender will perform what’s known as a ‘stress test’ before deciding on your application. They’ll analyse your income and regular outgoings to work out how much you can afford to borrow.

Check there aren’t any errors on your credit report. If there are any mistakes or anomalies, make sure you find them and correct them before the lender sees.

Save for a deposit

Most lenders will ask you to have at least a 10% deposit (with a 90% mortgage). Generally, the larger your deposit, the better deals are available to you. With a larger deposit, you may be offered lower interest rates and longer-lasting deals.

However, there are some mortgage schemes that will accept as low as a 5% deposit.

Prepare the paperwork

You may need to show the following outgoings:

  • Rent
  • Council tax
  • Utility bills
  • Travel costs
  • Entertainment
  • Debt repayments

Gather the following documents:

  • Passport or driving license
  • Your last 3 – 12 months of payslips
  • Your most recent P60
  • Bank statements of your current account for the last 3 – 6 months
  • Utility bills
  • Proof of any other income
  • Proof of your deposit
  • Proof of any benefits received
  • Statement of 2 – 3 years of accounts from an accountant if you’re self-employed
  • Tax return SA302 if you have earnings from multiple sources or are self-employed
  • Additional financial documentation if self-employed
Look into schemes

There are lots of schemes to help first-time buyers, such as the Lifetime ISA, Help to Buy ISA, Help to Buy Equity Loan, the new Shared Ownership, Mortgage Guarantee Scheme, and more.

To prepare for the process, take a look at the different schemes and mortgage types.

Don’t forget associated costs

Don’t assume that your deposit is the only thing you need to hop onto the property ladder. You’ll also need to cover the upfront costs of buying a house, from survey fees to solicitor expenses to stamp duty (only over properties costing more than £300,000). Find out more about the costs of buying a house, both upfront and ongoing.

Mortgage FAQs

  • Who qualifies as a first-time buyer?

In the UK, a first-time buyer is considered someone who hasn’t owned any residential property anywhere in the world. This means you won’t have owned your own home, a buy-to-let property or inherited a property either. The good news is that commercial property doesn’t count, so even if you’ve owned a shop, warehouse or office, you still qualify as a first-time home buyer.

  • When should I apply for a mortgage as a first-time buyer?

You can apply for a mortgage at any time during the home buying process – before or after you’ve viewed homes. Some Estate Agents will prefer you to have an agreement in principle showing that you can afford the house you’re viewing. 

  • Will I pay stamp duty as a first-time buyer?

A great perk of buying your first home is that you’re exempt from paying stamp duty. Sort of. You only pay stamp duty when the property price exceeds £300,000.

  • Should I use a mortgage broker?

A mortgage broker is a person (or company) that has an in-depth knowledge of the market. They seek out the best deals for you (so you don’t have to trawl through comparison figures) and help arrange a mortgage between you and the lender. If you find the many types of mortgages difficult to understand or are self-employed with more hoops to jump through, a broker may offer peace of mind.

Start looking for your first home

Buying a home is no small feat, but at Boomin, we’re here to help. We have extensive guides that make home buying make sense. We work with a wide range of Estate Agents that help you navigate your first – and, likely, largest – purchase that will leave you feeling content in your new abode.

Our property site is a smarter place to browse houses and book viewings online, 24/7 so you can get excited about some dates in the diary. Boomin gives you a wider buying experience. Search our vast range of properties for sale today.