First-Time Buyer Mortgage

What documents do I need to get pre-approved for a mortgage as a first-time buyer?

The key part in getting a mortgage is proof of your deposit. If that’s a gift, a gift declaration letter will be needed. We can support you with that – it can be dependent on the lender. We might need bank statements going back for a certain period.

Then it’s your proof of income. If you’re employed, we need your payslips. If you receive bonuses or commission and want to use these as part of the income, we might be looking a bit further back to prove how much you’ve received.

If you’re self-employed, we need your tax computation and tax year overviews that show the income you received in that period of time. Or, it could be the accounts from your business. Those are the critical things almost every application will require.

Another area is credit. Often first-time buyers don’t necessarily know what condition their credit file is in. Getting a copy of your credit report gives you an indication – and can be really helpful for your adviser. It means that if there are any issues, we can navigate those early on in the process.

What are the steps to apply for a mortgage as a first-time buyer?

It’s really important to know what you can actually borrow, and what is feasible, so it’s best to have that chat early with a broker.

Once you have an offer accepted on a property, we’ll find the most appropriate deal for your circumstances, and start work on the ‘packaging’. This involves identifying the documents we need for the lender – payslips or self-employed income proof, bank statements, proof of deposit and ID.

When applying for that mortgage, we take the information verified by those documents and input that into a lender’s system. They then do a credit check on you to see if there are any blips. Assuming that all passes, the lender instructs a valuation on the property and starts underwriting you. Here, they look at those documents and check they match the information we’ve given.

As long as that and the valuation come back fine, the lender produces a Mortgage Offer, stating that they are prepared to lend you a certain amount of money at a certain rate.

What are the most common mistakes to avoid when applying for a mortgage as a first-time buyer?

We always recommend that you avoid applying for credit at the same time as going for a mortgage. If you apply for a credit card or other borrowing at the same time, it can impact how the lenders perceive your creditworthiness. It could even impact whether you pass their credit checks.

Another mistake can be checking affordability too late. You might go and find a property and fall in love with it, but you haven’t spoken to an adviser to see whether you can actually get that borrowing.

Another one is that you have to prove where your deposit came from, normally with a few months’ bank statements. If you’ve got that money in an account, leave it there so we can prove where that money is.

If you start moving that money from bank to bank, we have to go through every bank statement to show the lender where it’s gone and where it’s come from. It’s best to keep things as simple as possible.

Can I qualify for a mortgage as a first-time buyer with bad credit?

Yes. You can absolutely qualify for a mortgage as a first-time buyer with bad credit, but it is really going to depend on the severity.

As a first-time buyer, it’s quite unlikely your bad credit will be on a secured asset because you don’t have one yet – so it’s probably not going to be too bad. There can’t have been any repossessions, for example.

But any missed payments on credit cards and loans will have an impact. The more blips there are, the more we need to overcome to meet lenders’ requirements. We might have a smaller pool of lenders to go to, which normally means rates end up higher.

You might have fewer lenders willing to offer you a mortgage, and this typically means the rates you’re offered will be higher. High street lenders tend to focus on applicants with clean credit histories, so you’re less likely to qualify for their best rates.

Getting your credit file in to see what’s on there is key too. Often if a small blip has been sorted for three months, you’d fit with lenders offering better rates. If you get advice early, you can get that sorted now and in a couple of months be mortgage ready.

What happens if I miss a mortgage payment as a first-time buyer?

There’s a reason for all the disclaimers you see on social media posts or websites from mortgage lenders – that your property may be repossessed if you do not maintain the payments on the mortgage.

But it’s very unlikely to be the first step that they would take. The key part is communicating appropriately. If you think you’re going to miss a payment, give your adviser a call and we’ll give you some guidance. You might need to talk to the lender – and they do have a duty to work with you on that.

Seek support and advice as soon as possible. Don’t wait until it’s happened. But if you missed a payment by accident, address it as quickly as possible. The lender will want that cleared as quickly as you can.

Just communicate – one of the worst things you can do is try and hide, as then things just get worse and worse.

Can I get a Buy to Let mortgage as a first-time buyer?

Yes, but there are some complexities to it. Not too many Buy to Let lenders accept first-time buyers – you can probably count them on one hand. It can be easier if you’re buying via a limited company.

A lot of lenders will assess you as if you’re buying a residential property. They will run full affordability checks as if this were your first home. It’s a risk-based approach, where they assume that people may plan to live in the property and are not being truthful.

Of course, you’re not supposed to live in a property under a Buy to Let mortgage – it’s not legal. But the lenders look to mitigate the risk of that happening, so you can expect some extra questions on that.

It is an unusual first move, especially when it comes to stamp duty, so you will need to have a clear explanation for why you’re choosing this route. We’ve certainly seen it, though, and it’s completely fine – just expect those extra checks and questions.

How can a mortgage broker help me with my first-time buyer mortgage application?

Your mortgage adviser is your main point of contact throughout the process of buying your first home. We’re there to hold your hand, help you with any questions and give you guidance. Sometimes we might just point you in the right direction, if you have a question that’s better answered by your conveyancer, for example.

We help all the way through, not just getting you the mortgage. At the beginning we help you with affordability, then make sure you know where you’re going and understand the process.

Once you’ve got the mortgage offer, we support you through to completion.

Even after you have moved into your first home, we’ll be there. When your mortgage comes around in two, three or five years’ time, we’ll help you find the next deal – and keep in touch long beyond that.

Key Takeaways:

• First-time buyers need to understand their maximum affordability based on income and outgoings, and the deposit they can put down. The standard minimum deposit is 5%, though some options may require as little as 1%, or no deposit.
• The borrowing limit is generally 4.5 times income, with some lenders offering up to 5.5 or 6 times for certain professionals (e.g., accountants or doctors).
• Most first-time buyers (over 95%) choose a fixed rate (2, 3, or 5 years) for the security of knowing their exact monthly payment.
• Government schemes available to first-time buyers include the First Home scheme (30-50% discount for eligible buyers), Shared Ownership and Right to Buy.
• Avoid applying for new credit at the same time as a mortgage, and moving your deposit money between bank accounts. Also, always communicate with your lender if you anticipate a missed payment.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.