Mortgages for First Time Buyers Explained

As a first time buyer, you’ll probably have spent a while saving up for a deposit to try and secure your first home and may now be at the point where you need to find a mortgage to complete the sale.

There are lots of different options to consider though, including variations on first time buyer mortgages, government schemes that can offer you further support and even external advice from third-parties. Read on to find out more.

Your initial deposit

To cover the basics first, a first time buyer will need to have money for a deposit before they’ll even be considered for a mortgage. Typically you’ll need to put down 10% as a first time buyer, but this can vary from lender to lender. Equally, the more you can put down the more favourably the provider will view your application as there’s less risk involved for them.

To give you an idea of the types of costs you’re looking at, the average house price in England is currently £256,000, so here are some example deposit amounts for this:

  • 5% - £12,800
  • 10% - £25,600
  • 15% - £38,400

Applying for an ‘Agreement in Principle’ (AIP)

You may want to apply for an AIP – sometimes known as a ‘Mortgage in Principle’ –with a lender first to help you get a better understanding of how much you can borrow for your first property. These can be done online and only involve you providing a few details and the provider running a ‘soft credit check’. If approved, the AIP is valid for up to 90 days.

Not only can this help you in your search for a new home (as you can see what you can/can’t afford) it can also tell you if you need to reassess your finances first before you look to buy. Additionally, the seller may look at your AIP as a positive indication you’re able to make the purchase.

However, an AIP is not a guarantee of approval for an actual mortgage with a lender, you’ll still need to go through the full approval process when you properly apply at a later stage.

You can use our Mortgage Calculator to work out how much you can afford and to see how much the monthly payments would be for your dream property.

Mortgage Calculator

Types of first time buyer mortgages

People often want to know what the best first time buyer mortgages are, but the simple answer is it depends on what you feel is the right match for you and your circumstances. The lender should always run through the options with you to help inform your decision, but here are some examples of first time buyer mortgages you might be offered:

  • Fixed-rate – these see the interest rates on the mortgage ‘fixed’ – meaning they won’t change – for a period of time agreed with the lender. This can range between 2 to 15 years and are a popular choice for buyers who want to monitor their monthly incomings and outgoings. When the fixed period ends you are moved onto the bank’s standard variable rate mortgage.
  • Standard variable rate – these mortgages (also known as SVRs) can see the rates fluctuate depending on general market conditions and the decision making of the lender. These can be risTilia Homesthan fixed-rate mortgages in that the rates can of course go up, however, many prefer these because the rates can also be much lower.
  • Tracker – these also have variable rates but will follow external rates and not those of the lender.
  • Guarantor – while not strictly a mortgage product, having a guarantor for one of the above options can help you secure an offer from a lender. These see a third-party (usually a family member) included in the mortgage to ‘guarantee’ payment if you’re unable to keep up with them.

Other schemes and considerations

In order to help secure a first time buyer mortgage you will need to demonstrate to the provider you’re in a stable financial position and that the risk of lending to you is low. So in addition to having a deposit it can help to:

  • Have a good credit score and credit history. You can check your credit score using sites such as Credit Score or Experian.
  • Have evidence that you’re able to make repayments (e.g. existing monthly bills or standing orders).
  • Have a credit card and show you make regular repayments.
  • Have additional savings.
  • Be in full time employment.

Support from Independent Financial Advisors (IFA)

Here at Tilia Homes we also work with specialist IFAs who can help you secure the right mortgage for you.

We ask that all our potential customers are qualified by The New Homes Group so both parties get a clear understanding of your financial situation and we can provide better guidance on the right home for you. You can then of course proceed with The New Homes Group or use a provider of your choice. For more information about The New Homes Group, click here.

If you’d like to know more about this or you have an enquiry about our developments of quality new build properties, don’t hesitate to get in touch. You can find our contact details on this page.

First Time Home Buyers Guide

Check out another of the guides in our series looking at Additional Fees When Buying your First Home. Alternatively, you can read the next guide in the series looking at how your financial situation can impact home buying.