Looking for a first time buyers mortgage? Here's what you need to know

Close-up of real estate agent giving new house keys to a couple.

Getting the right mortgage is key - Credit: Getty Images/iStockphoto

Buying your first home as a first time buyer can be a daunting experience, but also a very exciting one.

With no prior experience, it can be hard to know where to start or to even get approved for a mortgage in the first place. After all, only around 20% or 1 in 5 of all first time buyers get approved on their first attempt.

Today we speak to David Beard, the founder of price comparison and mortgage broker Lending Expert, to understand what options are available for first time buyers and how to boost your chances of getting approved.

You Will Need a 10% Deposit

“A 10% deposit of the overall property price is pretty much your starting point for a first time mortgage,” explains Beard.

“With the average first time buyer’s home in London sold for around £450,000 and £166,000 in the most cost-effective parts of the country, you are looking at a deposit of around £16,000 to £45,000 and this should give you access to the lowest mortgage rates around 2% per month. If you can pay a deposit higher than this, this will only help.”

“Some buyers will use their own personal savings for this deposit, use inheritance or help from their parents - or a combination.”

What Schemes Are Available?

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“95% mortgages are making a comeback,” confirms Beards.

“This is where you are only required to pay a 5% deposit and it is a government backed scheme. You will just need to check the terms and conditions since your property may need to be under £600,000 and there are other rules such as no new builds and it must be your main residential home.”

“Another popular scheme is the Help to Buy, which also includes a 5% deposit, gives you up to 20% of the property value as equity and is interest-free for five years. This is designed to help people with limited deposits to get on the property ladder and it must be a new build. Be sure to check the terms if property prices change and what happens upon resale.”


How to Boost Your Chances of Getting a Mortgage

“Getting a mortgage is not always straightforward. Lenders need to see a stable and regular income and a good credit history. If you do not have any credit history, you need to start building this up by getting yourself on the electoral register, using credit builder cards and making an effort to complete all repayments on time.”

“Every lender has a different criteria,” explains Beard. “Some are more flexible and open to different circumstances and backgrounds. It might be worth speaking to a broker who can assess your options and get multiple quotes for you at once, rather than settling with just one provider.”

Consider What Type of Mortgage You Want

“There are several types of mortgages available, from interest-only, fixed, variable, offset and current account - and you can choose whether you want your mortgage to be anywhere from 2 years to 35 years.”

“This might be a good thing to discuss with your mortgage broker and to also consider your personal circumstances and situation. Consider whether you are looking to live at your next property for a long time or just a few years - or do you have any savings to include as well? There are also economic considerations and what offers are available at the current time. These are key things to think about.”

“A lot of mortgages come with introductory offers with low rates of 2% to 3% and this can increase to the standard variable rate of 5% or higher at the end of the introductory offer - so you may wish to switch after a certain period.”

What Are Your Options if You Are Self-Employed?

“Being self-employed is not an issue, but mortgage lenders are notoriously more strict with freelancers, sole traders and contractors because their income may be less stable and subject to change each month and year.”

“However, you could also argue the same for people who are employed full-time - after all, how secure is anyone’s employment?”

“So if you are self-employed, you may require a minimum of two years' accounts and be able to demonstrate future earnings. There are a number of lenders, building societies and challenger banks who will consider your application.”

Are You Making a Joint Application With Someone Else?

“If you are acting as a first time buyer with a spouse, partner or friend, this could be very advantageous or detrimental - depending on their income and credit history. Combining your incomes could certainly help to borrow money and if one party has a great career e.g doctor, nurse, accountant or dentist, this will look great on an application.”

“But if the one party has unstable employment and poor credit, this could bring the entire application down - and this is something that should be considered and discussed with your broker.”

To check your eligibility as a first time buyer including how much you can borrow and at what rates, you can get a free quote with Lending Expert here or speak to an advisor on 0161 820 8099. 


 

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