A Step-by-Step Guide to Getting Your First Mortgage in the UK

Stepping onto the property ladder for the first time is one of the most exciting decisions you’ll ever make. It’s a significant financial investment that can seem overwhelming, especially when navigating mortgage finance and eligibility. Once added to saving for a deposit, and understanding how lenders approve affordability, the process can seem overwhelming.

But worry not! The following guide breaks down each hurdle into manageable steps, helping first-time buyers know what to expect.

Eligibility and Affordability Checks

When getting a first-time buyer mortgage, the first step is to check if you qualify. You also need to know how much you can borrow. Mortgage calculators can show you possible loan amounts before you apply. However, lenders will check your eligibility and affordability to confirm how much they are willing to lend you.

Influencing eligibility checks include:

• Age: Most lenders require applicants to be at least 18 years old.
• Employment status: A stable employment or a consistent source of income is crucial to lenders.
• Good credit history: A good credit score indicates to lenders that you are responsible with debt. They use your credit history to gauge your reliability as a borrower.

When getting on the property ladder, it’s important to remember that affordability checks extend beyond your income. Lenders will look at your finances as a whole. They will check your spending, debts, and regular costs. This helps them decide how much you can pay back each month. Additionally, lenders will also stress-test your finances to ensure you could still make the required payments if interest rates rise.

Tip: Check your credit score and address any issues before making an application. Credit reference agencies such as Experian, Equifax or TransUnion can provide you with access to your credit score free of charge. Making sure you’re on the electoral roll, reducing existing debts, and fixing any errors on your credit report can help to improve your chances of approval.

Deposit Requirements

Saving for a deposit can be one of the biggest challenges for first-time buyers. Typically, lenders require a minimum of 10% of the property’s value. However, an increasing number of lenders are recognising the challenges of saving large amounts of money for a deposit and therefore offer new mortgage products that require as little as 5%.

Why does a mortgage deposit matter?

• Large deposit = lower perceived risk for lenders: When you have a bigger deposit, it means you’re borrowing less and making you a lower risk in the eyes of the lender.
• Competitive mortgage deals: Larger deposits can result in lower interest rates for first time homebuyers, subsequently reducing monthly repayments.

UK Government schemes:
First-time buyers in the UK may be eligible for various government schemes that help support your first property purchase. These include the First Homes scheme, a Lifetime ISA, or Shared Ownership, which can help boost your deposit and make entering the housing market easier.

How Can I Improve My Chances of Mortgage Approval?

If you’re wondering how to arrange a first-time buyers mortgage, preparation is key. Here are some top tips for a compelling application.

• Strong credit profile: To demonstrate you’re a credible borrower, pay your bills on time, avoid payday loans, and avoid applying for multiple forms of credit at the same time. These actions can significantly impact your credit score.
• Increase your deposit: Where possible, try to save as much as you can for your deposit. The bigger your deposit, the more attractive you are to lenders.
• Reduce outstanding debt: Mortgage lenders want to see that you can successfully manage your finances. If you have outstanding debts, pay down credit cards and loans before completing your mortgage application.
• Steady employment: Having a stable, consistent job history reassures lenders. If you’re self-employed, it’s slightly more complicated in that you’ll be asked to provide at least two years’ worth of accounts. Although lenders prefer steady employment, being self-employed does not put you at an advantage. There are even some lenders in the market who have specific first time buyer mortgages aimed at self-employed people. Talking to a specialist advisor will help you to discover the right product for your circumstance.
• Gather documentation: Lenders will request to see copies of your payslips, bank statements, proof of address, and ID ready.
• Consider a mortgage broker: A broker can help you find the most suitable UK first-time buyer mortgage deals, guiding you through the paperwork.

Common Mortgage Mistakes to Avoid

Upon deciding to put down roots, first-time buyers often fall into a few common traps. Here, Exe Mortgages highlight what you should watch out for:

Not checking your credit report early enough
Issues, errors or missed payments on your credit history can hurt your application. Check your credit report in advance of applying and be sure to resolve any issues you spot.

Overstretching your budget
We know it can be tempting to borrow the most money a lender offers. However, remember to include all the costs of owning a home in your budget. Additional payments include legal fees and ongoing maintenance. They may also include stamp duty based on the final sale price of the property.

Don’t forget about additional costs!
Beyond saving for the deposit, make sure you also budget for survey fees, mortgage arrangement fees (if applicable), and the moving costs, then allow a little extra in case you encounter any unforeseen expenses.

Refrain from making big financial changes before completion
In the run up to completion, avoid taking out new loans or switching jobs during the mortgage process. This can disrupt your application and may not see you complete on in the timeframe as expected.

Get an agreement in principle
An agreement in principle (AIP) shows sellers you’re a serious buyer. It is preliminary confirmation from a lender that you are a suitable borrower for mortgage finance. Having an AIP in place can speed up the process when you find a property that you’re keen to make an offer on.

How to secure a first-time mortgage

For those who have never owned property before, buying your first home can feel daunting, especially when making such a significant commitment to financing it.

To help prepare you in good time, understanding each stage of the process can make it far more manageable. Start by checking your mortgage eligibility and affordability by assessing your personal finances.  Save diligently for your deposit and make sure you take proactive steps to improve your financial position where possible. To avoid common mistakes, seeking professional guidance is one way to overcome any challenges.

At Exe Mortgages, our team of first-time buying advisors are experts in first homebuying applications, including what to expect and how to prepare. To understand more about your personal situation and how that will affect your mortgage application, our friendly advisors are on hand to help. Give us a call and we’ll put you in good stead to owning your first home!