Getting a mortgage as a first-time buyer can be a daunting experience. The process may seem complex, but with the right knowledge, you can get through it more easily. This step-by-step guide will walk you through everything you need to know—from saving for a deposit to getting approved and securing your first home.
What is a mortgage and how does it work?
A mortgage is a type of loan that allows you to buy a home. In exchange for lending you the money, the lender (usually a bank or building society) will ask for your home as security. This means that if you fail to keep up with the monthly repayments, the lender could take possession of your home.
Mortgages are typically repaid in monthly instalments, which cover both the amount you borrowed and the interest on the loan. The length of the mortgage can vary, but most are repaid over a period of 25 years.
How much deposit do you need as a first-time buyer?
One of the first things you need to consider when applying for a mortgage is the deposit. The deposit is the upfront payment you need to make towards the purchase of your home. The larger the deposit, the better the mortgage deal you’re likely to get.
Most lenders require a deposit of at least 5% of the property’s value. However, the more you can put down, the better your mortgage rate will be. For example, if you’re purchasing a house worth £200,000, a 5% deposit would be £10,000. The more deposit you can afford, the more likely you are to secure a better interest rate.
What mortgage options are available for first-time buyers?
There are different types of mortgages available for first-time buyers. The right one for you will depend on your financial situation, preferences, and long-term goals.
- Fixed-rate mortgages: These mortgages offer a fixed interest rate for a set period, usually between 2-5 years. This gives you predictable monthly payments and helps protect you from interest rate increases.
- Variable-rate mortgages: With a variable-rate mortgage, the interest rate can change over time, which means your monthly payments could go up or down. While this can result in lower payments if rates fall, it can also mean higher payments if rates increase.
- Help to Buy (Only available in Wales): If you’re struggling to save a large deposit, the government’s Help to Buy scheme might be worth considering. This allows you to borrow up to 20% of the property’s value as an equity loan. This means you only need a 5% deposit.
How to get a mortgage agreement in principle
Before you start searching for your dream home, it’s a good idea to get a mortgage agreement in principle (AIP). This is a statement from a lender saying that they are willing to lend you a certain amount, based on your financial situation.
Getting an AIP can give you a clear idea of how much you can borrow, which can help narrow down your home search. It also shows sellers that you’re serious about buying, which can make your offer more attractive.
The role of mortgage brokers and how they can help
A mortgage broker can help you navigate the mortgage market by comparing different lenders and mortgage deals on your behalf. They will assess your financial situation and recommend the best options for you. Brokers also deal with the paperwork and liaise with lenders, making the whole process smoother.
While you can apply for a mortgage directly with a lender, a broker can help you find deals that you might not have access to otherwise, particularly if you’re a first-time buyer with specific needs.
What documents do you need for a mortgage application?
When you apply for a mortgage, you’ll need to provide various documents to show the lender that you can afford the repayments. These may include:
- Proof of income: This can include payslips, bank statements, or tax returns if you’re self-employed.
- Proof of identity: A passport or driving license.
- Proof of address: A utility bill or bank statement showing your current address.
- Deposit proof: Evidence of your deposit, such as a bank statement or gift letter if it’s coming from a family member.
The more organised you are, the faster your mortgage application is likely to be processed.
How long does it take to get a mortgage offer?
The time it takes to get a mortgage offer can vary, but typically it takes around 4-6 weeks from the application submission to receiving your mortgage offer. Factors that influence this timeline include how quickly you submit your documents, the complexity of your financial situation, and the lender’s processing time.
Once your application is approved, the lender will send you an official mortgage offer, outlining the terms of the loan.
Final steps: exchanging contracts and completing your purchase
Once you’ve received your mortgage offer, it’s time to move onto the final steps:
- Exchange contracts: After a survey and final checks, you’ll sign a legal document (the contract) committing you to buy the property.
- Completion: On the completion date, the lender will release the funds, and you will officially become the owner of your home.
If you’re unsure about the process or need more help, speaking with a mortgage broker can guide you through these final stages with less hassle.
Conclusion
Getting a mortgage as a first-time buyer can seem complicated, but with the right preparation and knowledge, you can get through the process with confidence. Start by saving for a deposit, check your credit score, and research the mortgage options available to you. Whether you choose a fixed-rate or variable-rate mortgage, the key is to choose what fits your needs and budget.
Check out our First Home Mortgage page for more information on first-time buyer mortgages and how to get started. If you need help or advice, find a mortgage broker to assist you!