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How do I get a mortgage as a first-time buyer?
Getting onto the property ladder can be difficult, but the sooner you can make the leap, the closer you are to financial freedom. As a first time buyer, getting a full understanding of the help available will make the process a lot easier.
There are many first-time buyer schemes to consider, most which offer incentives to make it easier for borrowers to be accepted for a mortgage. Some will allow a smaller percentage of the deposit to be paid – often as little as 5% - because they understand your savings will be limited and you do not hold any equity in an existing property.
Most lenders consider it riskier to give a mortgage to a first-time buyer as they are unable to see how likely you are to keep on top of the repayments. As you have no experience holding a mortgage, leaders need to be cautious with who they accept. Therefore, you will need to provide enough evidence to convince the lender that you are able to handle the monthly repayments and pay any up-front fees.
Although you’re a first-time buyer, you can still apply for most types of mortgage. However, you will find it easier to look at those set up for inexperienced borrowers and who accept a smaller deposit.
FAQs about first time buyers
What is a mortgage?
A mortgage is a loan from a bank or building society to help buy a property. Over a certain term you’ll pay back the loan, plus interest.
What type of mortgage is right for me?
Having a good understanding of the various types of mortgages will help you find the best one. It is important to carefully consider all of the options to see which type of mortgage you can afford. There are many schemes to help first-time buyers get onto the property ladder, with many accepting a smaller deposit.
How much of a deposit will I have to pay?
All lenders will require you to pay for part of the property yourself, known as the deposit. As a first time buyer, you may be able to pay as little as 5% of the property value upfront.
Aside from the deposit, what other up-front fees will I be expected to pay?
Buying a house requires various up-front payments, as well as the deposit. You should budget for a valuation fee, surveyor’s fees and legal fees.
Am I eligible for a first-time buyer scheme?
As long as you have never previously owned a home, you can apply for a first-time buyer mortgage.
Does it matter if I have a bad credit score?
Yes, a bad credit score will affect the likelihood of being accepted for a mortgage. You can check your credit report to see a snapshot of your score and the steps you may be able to take to improve it.
What is loan to value?
Loan to value (LTV) represents the ratio of the loan being made to the value of the property. The higher the deposit you can put in, the lower the loan you will have to take out. Loan to value is one of the main factors that lenders look into when deciding whether you qualify for a mortgage.
How much can I borrow?
The amount you are able to borrow will vary depending on the amount of deposit you are able to put in, your salary and the value of the property. Some first-time buyer schemes apply a cap on the maximum amount you’re allowed to lend.
What kind of documentation will the lender want to see?
When assessing whether you qualify for a mortgage, the lender will want to see copies of your bank statements, proof of income, your credit rating and any loans or savings you have.
What happens if I fail to pay my mortgage off?
If you are unable to pay back the mortgage, the lender could repossess your house.