Buying your first home is one of life’s biggest financial steps, and one of the most confusing. Deposits, decisions in principle, credit scores, fees you didn’t know existed. This guide walks through the journey in plain English, so you know what to expect and where a mortgage broker fits in.
Your home may be repossessed: Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Please note that some mortgages such as commercial buy-to-lets are not regulated by the FCA.
1. Work out what you can genuinely afford
Before looking at homes, look at your own numbers. Lenders assess your income, your outgoings and your existing commitments, not just the headline salary. As a rough starting point, many lenders may offer around 4 to 4.5 times your annual income, but the real figure depends on your circumstances and differs between lenders. Remember to budget beyond the purchase price too: solicitor’s fees, survey costs, moving costs and, in some cases, Stamp Duty Land Tax.
2. Build your deposit, and know what it changes
Most first-time buyers put down at least 5% of the purchase price, and a bigger deposit usually unlocks a wider choice of mortgages and better rates, because you are borrowing a smaller share of the property’s value (a lower “loan-to-value”). Schemes exist that may help, for example a Lifetime ISA can add a government bonus to your savings, and some lenders offer family-assisted mortgages. Which, if any, suits you depends on your situation.
3. Get your credit record mortgage-ready
Lenders check your credit history, so it pays to tidy it up early: get on the electoral roll, avoid missed payments, keep credit card balances modest, and check your file with the main credit reference agencies for errors. Small fixes months in advance can make a real difference to what you may be offered.
4. Get a decision in principle
A decision in principle (sometimes called an agreement in principle) is a lender’s indication of how much they may be willing to lend you, based on initial checks. It is not a guarantee, but it shows estate agents you are a serious buyer and helps you house-hunt within a realistic budget.
5. Understand the types of mortgage
The two big choices are how the interest is set and how you repay. A fixed rate keeps your payments the same for a set period, giving certainty; a variable or tracker rate can move up or down. A repayment mortgage pays off the loan and interest together over the term, the usual route for first-time buyers. Each option has trade-offs, and the right one for you depends on your circumstances and how you feel about payments changing.
6. Where a mortgage broker earns their keep
You can go directly to a lender, but a whole-of-market broker can compare deals from across many lenders, including some not available on the high street, and match your circumstances to lenders’ criteria before you apply. That matters, because a declined application can leave a mark on your credit file. A broker also handles the paperwork and chases the application through to completion. At The Wealth Manager, mortgage enquiries are looked after by Kealy Ball, our mortgage specialist. Please note that we do not advise on products only available direct from lenders.
7. From offer to keys
Once a lender issues your mortgage offer, your solicitor or conveyancer handles the legal side: searches, contracts and the exchange. Between exchange and completion you are legally committed, so buildings insurance usually needs to be in place from exchange. Then it’s completion day, and the keys are yours.
Frequently asked questions
How much deposit do I need as a first-time buyer?
Usually at least 5% of the purchase price, though a larger deposit typically means a wider choice of deals and lower rates. The right amount depends on the property price and your circumstances.
What is a decision in principle?
An indication from a lender of how much they may lend you, based on initial checks. It is not a guarantee of a mortgage, but it helps you set a budget and shows sellers you are serious.
Do I have to pay Stamp Duty as a first-time buyer?
First-time buyers currently benefit from relief on properties up to certain thresholds, so many pay no Stamp Duty Land Tax at all. The rules and thresholds can change, and tax treatment depends on your individual circumstances.
Should I use a mortgage broker or go direct?
Going direct limits you to that lender’s products. A whole-of-market broker compares deals across many lenders and matches your circumstances to the right criteria before you apply, which may save time, money and declined applications.
Thinking about your first home?
Kealy Ball, our mortgage broker, offers a free, no-obligation first chat, a straightforward conversation about where you are and what your options may be. There will be a fee for mortgage advice; the precise amount will depend on your circumstances and will always be agreed with you before any work begins.
Book a chat with KealyImportant: This article is general information, not personal financial or mortgage advice. What is right for you depends on your individual circumstances. Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Please note that some mortgages such as commercial buy-to-lets are not regulated by the FCA. For advice tailored to you, please get in touch. [DRAFT, financial promotion to be approved by Julian Harris Adviser Network compliance before publishing.]