First-time Buyers

Top tips to help first-time buyers get a mortgage

Christina Hoghton
Written By:
Christina Hoghton

Getting a mortgage is a big deal. Here’s some handy hints to get you prepared

Buying a home and getting a mortgage can be complicated, but there’s plenty of help available.

Getting yourself in a strong enough financial position is the first step to getting on your way to securing your first home.

Next, you will need a mortgage, and knowing which kind is best for you can be difficult.

To help you on the way, Brian Murphy, head of lending at Mortgage Advice Bureau, has published his top tips for first-time buyers who are looking to get their first mortgage.

1. Talk to an expert
Speaking to a mortgage adviser can help offer you the relevant guidance on mortgage products available and what deposit savings are needed. An adviser can explain all the options available to you and will look at your income and outgoings to establish how much you can afford to borrow and how much you’re able to save.

2. Help to Buy Equity Loan Scheme
If you’re a first time buyer and interested in a new build, under the Help to Buy equity loan scheme the government will lend you up to 20% of the cost of your new build home. You will need to pay back the loan but not until after five years of being in the property – it’s interest free up until then too.

3. Consider a Lifetime ISA
If you’re a first time buyer, the Lifetime ISA acts as a savings account; with a few added benefits. You can pay up to £4,000 each year into your account and receive a 25% bonus (£1,000 maximum) from the government. The cash must remain in the account until you exchange on your first property – you will need to instruct your solicitor to withdraw the funds but this will all be explained when you’re ready to move in. All you need to do is save, save, save and you could be in for a lucrative bonus.

4. Shared Ownership scheme
Shared Ownership allows first time buyers to buy a proportion of the property they can afford (e.g. 25% or 50%) and pay rent on the rest of it. It means that many people can access properties they would otherwise not be able to afford, due to the location or house size. This way, you’re also getting a foot onto the property ladder and then through a process called ‘staircasing’ can slowly save up to own more of the house until its yours outright.

5. Can you get a 95% mortgage?
If you’ve been trying to buy your next home but haven’t yet saved up a big enough deposit, you could be eligible to apply for a 95% loan to value (LTV) mortgage. This means that you may be able to buy a home with just a 5% deposit.

6. Shop around for the best deal
A mortgage is one of the biggest financial commitments you’ll make, so it’s important to find the right one that suits your circumstances. A mortgage broker can help you find the most suitable deal, factoring in true costs. It’s important to not only think about headline rates, but also assess any additional fees that may be involved.

7. Get your documentation in order
For all mortgage applications, lenders need to verify your income to assess what you can or cannot afford before lending you money. This means providing various documentation to help evidence your financial position. This can include bank statements, proof of income, proof of address, or your latest utility bill. For those who are self-employed, some lenders may ask for further documentation, such as two or more years of certified accounts, tax calculations and tax year overview. Getting everything in order well in advance of your application will help smooth the process.

8. Remember the importance of your credit score
If you were about to lend someone a large amount of money, you’d want to know that they are responsible and capable of paying it back. This is why lenders look at credit ratings to help decide whether or not they should lend to you. Two in three (68%) advisers cite ‘poor credit score’ as a common reason that delays buyers getting their mortgage approval. If you’re looking to purchase a property then understanding what your credit score is, and importantly how to improve it can go along way to avoid any delays. Don’t be spooked by a bad score. There are ways you can improve it over time.

9. Get on the electoral roll
If you’re not already on the electoral register, then it’s vital you apply to be added as soon as possible. Not being on it can impact future finance agreements such as a mortgage offer, lower your credit score, and prevent you from voting. One in five (19%) advisers cite this as a common reason for a mortgage delay, but it’s simple to do and can have a positive impact on your buying position.