Tips For Getting A Mortgage First-Time Buyer

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Tips For Getting A Mortgage First-Time Buyer

Stephen Hargreaves is here to share his top tips for getting a mortgage as a First Time Buyer.

What qualifies somebody to be a First Time Buyer? What are the First Time Buyer rules?

This relates to both mortgage advice and solicitors – because in most cases First Time Buyers won’t pay stamp duty. You’re not paying stamp duty if you’ve never bought a house before – but there are certain rules regarding the amount.

From a mortgage perspective, some lenders would still register you as a First Time Buyer if you have previously owned a property, but it was several years ago. If you were a complete first timer that’s never bought a property before, in the majority of cases there’s no stamp duty and you would qualify for First Time Buyer products.

But if you’ve owned a property before, you wouldn’t get the preferential deals as far as stamp duty goes.

Should I check my credit score before applying for a mortgage as a First Time Buyer?

Absolutely, 100% yes. That is ordinarily one of the biggest sticking points with a lot of First Time Buyers – especially if they are younger and have a thin credit file.

If you’ve never had credit cards or loans or if you’ve never voted, you will have a very limited credit record. Banks base their lending on how you’ve conducted yourself in the past.

I’ve got a client that’s actually exchanging contracts on a house today and completing early next week. We’ve been chatting for about 18 months. When he first contacted me he was only 19 and at the time didn’t have any credit. He wasn’t on the voter’s roll, had never had a credit card and when I did a Mortgage in Principle for him, it failed. It wasn’t because there were any problems, it was just that the lender had nothing to base their decision on.

So I explained to him that he needed to get some credit. I don’t mean get into debt, but to apply for some credit. So he took a credit card out and all he’s done is paid for his daily Tesco meal deal on it for the last 18 months. A lender suddenly sees you’ve got credit, you’re paying it back, and that actually increases your credit score.

By getting on the voter’s roll, lenders can see you when they do a credit check. This client listened to our advice and even took a small loan out – it was about £12 a month for a bike. It wouldn’t affect how much he could borrow but boosted his credit file.

He unfortunately lost out on a couple of properties while building up that credit, but he’s now found a great property and has left me a lovely review today.

Would it be useful to learn about mortgage rates before I apply for my First Time Buyer mortgage?

When I do a mortgage appointment I would discuss the mortgage rates with a client, whether we’re looking at a fixed rate mortgage or tracker rate mortgage. I’ll explain all that.

Certainly we’ve had some rate increases and decreases this week – the interest rates themselves change on a regular basis. By using a mortgage broker is that the day you apply, you will get the cheapest rate on a suitable mortgage that works for you. That’s the idea.

Should I shop around to find the right mortgage rate for me?

We can do all that for you. That’s what we do. We’re a whole of market mortgage broker with access to lenders from A to Z. We look at all the different rates on our system – so instead of calling Halifax, Nationwide, Natwest and all the other providers, we can look at them on a single screen. We base our recommendations on those findings.

Do I need to get preapproved for a First Time Buyer mortgage?

Being pre approved is often called a Decision in Principle or Mortgage in Principle. It’s where we approach a lender to establish how much you can borrow based on your credit score, income and information on your income and expenditure. It’s quite beneficial.

In the example I gave you a minute ago, we did a Decision in Principle and it failed because of the thin credit file. The client then built up some credit without affecting how much he can borrow.

Before he started looking again, we did another Mortgage in Principle with a different lender, and that passed without any problems. That gives a First Time Buyer the confidence to look at a property, knowing that a lender will actually lend them some money to buy it.

A lot of estate agents insist that you have a Mortgage in Principle before you even start viewing properties.

What benefits do you get as a First Time Buyer?

Lenders often give First Time Buyers better cheaper interest rates. You might get cashback or free basic valuations.

I’ve just done a First Time Buyer mortgage today where the lender has given us a free valuation. That’s purely for First Time Buyers – a second time buyer would have to pay that valuation fee. And last week I arranged a mortgage with £250 cash back to the buyer on completion.

How much can I borrow as a First Time Buyer?

It’s very much down to income and expenditure. We have some complex affordability calculators that compare every single lender and you will be absolutely amazed at the difference in what one lender will lend compared to another.

This week I arranged a First Time Buyer mortgage on a property at £325,000. He was putting a 5% deposit down, so it was quite a large mortgage. We had four or five lenders that would only offer that client £240,000 – but he needed an awful lot more than that.

He was amazed because he’d been to see different lenders and used online calculators and was struggling to get to where he needed to be. But it took me seconds to work out that one lender out there would give him the borrowing he needed – and they offered cheaper interest rates than some of the others. He was incredibly pleased.

What’s the best type of mortgage for First Time Buyers?

Certainly the majority of First Time Buyers I tend to work with want a fixed rate mortgage. As a First Time Buyer you’ve just taken out a large commitment and you’ve got an awful lot of things that you’re not used to yet, like council tax, gas bills, electric bills, etc. What you don’t want is interest rates increasing and your monthly mortgage payment going up.

Around 90% of First Time Buyers will take a fixed rate mortgage, for stability as much as anything.

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What are the current mortgage rates for First Time Buyers in the UK?

They change weekly, or even daily. We’ve had a funny year – we’re currently at the end of May 2024 and we had a lot of rate cuts in January and early February which was very encouraging. The last three or four months have been quite stable, then rates increased a little bit and then a couple of weeks ago they came down.

But broadly speaking they’re actually quite attractive. The majority of First Time Buyers I speak to are pleasantly surprised when we start talking about how much the mortgage will cost per month. There’s very few that can’t afford it.

It’s probably a double-edged sword, because rents are so expensive at the moment. But the interest rates are actually pretty good, certainly in comparison to where we were at the back end of 2023.

But it could all change tomorrow. It could change next week. We’ll take a snapshot once you are actually looking for a property.

Is it difficult for First Time Buyers to get a mortgage?

I hear that a lot of First Time Buyers are struggling – and in a lot of cases it’s down to preparation. You need to get your ducks in a row.

To give you an example, a lender is going to look at your driving licence, passport, bank statements and pay slips, plus you will need proof of deposit.

Very often, a client has gone to university and been in halls of residences or shared accommodation. Bank statements are all going to mum and dad’s address. They aren’t living there but they don’t want secure mail or driving licences and passports going to shared accommodation as things go missing.

But as a First Time Buyer your addresses need to be correct, your bank statements and pay slips need to be going to the right address. I’ve had one client recently where his pay slips were at mum and dad’s address but he’s had three jobs and three addresses since he last lived there.

From a lender’s perspective, that is very much a red flag. Your employer is meant to know where you live, and your driving licence is meant to be registered at your current address.
Your bank statements are proof of your address.

So it isn’t any more difficult for a First Time Buyer than a second time buyer, as long as you have everything in order. Normally at our first appointment I will make sure everything’s at the right address because it’s something that can slow you down. I think DVLA currently says it will take up to two weeks to change the address on your licence. It can be dealt with before you find a house – and that will make it an awful lot easier.

Is it better to buy a flat or a house as a First Time Buyer?

There’s no right or wrong. If you’re buying a flat, you have no garden in the majority of cases, which makes the maintenance much easier. But the value of a flat is very much based on the quality of the lease. So if there was only 50 years left on the lease, a lender would take a grave view on that and probably would not lend.

You would also tend to pay a ground rent and a service charge on a flat, which are things you wouldn’t have with a freehold property. This gets taken into account in affordability calculations.

It’s not necessarily any better or any worse to buy a flat or house, there are just different things to take into account. Equally, when you’re buying a freehold property like a house there can be other issues – an old terraced house might need work on it and you’ll need to assess the quality of the roof, for example. Both have their benefits and drawbacks.

How long until you are classed as a First Time Buyer?

If you haven’t had a residential mortgage for a certain number of years, some lenders will treat you as a First Time Buyer. But ultimately, there’s not an awful lot of difference between a First Time Buyers mortgage and one for somebody that has bought before.

What is the average deposit for a First Time Buyer in the UK?

Essentially, what you’ve got is what’s important. If you’re a First Time Buyer and you have £10,000 saved up, that’s your deposit. So whether that works out as a 5% or a 10% deposit, it doesn’t matter – it’s what you’ve got.

You would need a minimum of 5% for a mortgage – although there is currently a lender out there offering a 1% deposit [podcast recorded in May 2024]. It’s just one lender and it is very much criteria led.

For the majority of high street lenders you need a minimum of 5% deposit. Putting a 5% deposit down will give you the most expensive interest rates from a lender, because of the risk. If you put a 10% deposit down, it’s a lot cheaper because the risk to the lender goes down. A 15%, 20% or 25% deposit will put you in a different Loan to Value bracket, each time with cheaper interest rates.

How do banks know if you are a First Time Buyer?

When they do a credit check, your file shows whether you’ve had a mortgage, whether you’ve got a home, credit cards, hire purchase etc. All the lenders use credit scoring to assess an application.

Do house sellers prefer First Time Buyers?

If there are a number of offers on a property, it’s a little bit like Top Trumps where a cash buyer would tend to trump everybody, because there’s no need for a mortgage, valuation or surveys, plus they’ve got the cash in the bank.

If there’s no cash buyer, a seller will absolutely want a First Time Buyer because of the lack of chain. You don’t need to sell a property, so you can move fairly quickly which can speed up the whole chain.

A First Time Buyer is very important in the housing market and you shouldn’t underestimate your ability to negotiate quite hard with a seller because of those circumstances.

How can a mortgage advisor help a First Time Buyer?

We’re here to chat everything through with you – you’ll soon find out whether you get on with us. In that case I explained right at the outset, the First Time Buyer couldn’t get a mortgage initially, and we’ve now got a relationship that’s gone on for 18 months.

The service that I offer a client is very much a hand-holding exercise from start to finish. It isn’t just about getting you a mortgage. It’s talking you through how to go about it, to viewing properties, finding a property, making an offer, arranging a mortgage, getting a survey, going through that survey together and then working through all the legal side before you get the keys to the house.

A good mortgage broker will take you through everything. It’s a journey and we will go through that journey with you. It’s not a case of arranging the cheapest mortgage – there’s a lot more to our services.


Some products are only available when purchasing directly from the Lender and not a Broker