Q&A's First Time Buyers.
Are you a first time buyer with lots of questions about mortgages? You are not alone. Take a look at our most commonly asked questions by our first time buyer clients.
First Time Buyer Questions and Answers
What is a First Time Buyer?
A first-time buyer is someone who has never owned a property before, either in the UK or abroad.
How old does a first-time buyer need to be?
You can apply for a mortgage any time after your 18th Birthday. However, there will be almost nothing on your credit file. This can create problems when lenders do their initial checks as you will have a lower credit score.
How much deposit does a first-time buyer need?
You will normally need to save a minimum deposit of 5% of the purchase price. So on a purchase of £150,000 you would need at least £7,500. The more deposit you have the better the potential interest rate that will be available, every additional 5% tends to unlock more attractive rates up to about 40%.
How much can a first-time buyer borrow?
Most lenders will be prepared to lend somewhere between 4 & 4.5 times your gross salary, there are some lenders that will go a little higher depending on your circumstances.
As a first-time buyer what will my monthly payments be?
Well, there’s a million-dollar question!
There are several factors to consider and it’s impossible to say without the following information:
- Mortgage required & deposit available – The larger the deposit, the lower the mortgage required. The lower your mortgage is the lower your monthly payment will be.
- Term of mortgage – the lower the term the higher the monthly payment.
- Interest rate available – The higher the rate, the higher the monthly payment.
- Credit Information – The better your credit score, the more competitive the rate will be. The better your rate the cheaper the monthly payment.
The above information will always be required in order to establish monthly payments.
Should a first- time buyer get a decision in principle or get a mortgage approved, before placing an offer on a property?
It’s always a good idea to get your mortgage approved prior to placing an offer on a property, many estate agents will not even let you view a property unless you can prove you can get a mortgage. A decision in principle can normally be obtained in less than an hour with most major lenders, at most it should be no more than 48 hours.
How long will it take a first-time buyer to get a mortgage offer?
After having an offer accepted anywhere from a few days to six weeks would be the normal turnaround time to get a formal mortgage offer. The offer is granted after the lender chosen has checked and approved all information provided.
What Information does a first-time buyer normally require?
The information normally required to obtain a mortgage offer is as follows:
• Proof of ID – Passport, Driving License.
• Proof of address – Utility Bills, Banks statements (dated in the last 3 months).
• Proof of Income – Last 3 payslips and sometimes you may need a P60.
• Bank Statements – 3 months.
• Proof of deposit – Some lenders will want to see a bank statement showing available funds for mortgage deposit
As a first-time buyer what fees do I need to pay?
Prior to obtaining the mortgage the most common fees that need to be considered are:
• Mortgage valuation and survey costs depending on lending criteria.
• Mortgage application and arrangement fee again depending on lending criteria.
• Solicitor fees including disbursements.
• Buildings insurance.
• Contents, Life, Critical Illness, and Income Protection Insurance – all recommended depending on budget but optional.
• Stamp Duty – depending on property price and whether a first-time buyer.
Costs to consider after purchase include new furniture, potential maintenance and decoration.
Does a first-time buyer need a solicitor?
In short, the answer is no. Legally, you don’t need a solicitor to buy a house in the UK. You can manage the process to buy a property without a solicitor. However, conveyancing is a complex process and proceeding without a solicitor is not recommended by experts.
Unless you’re an expert in conveyancing and you know what, you’re doing, it’s best to hire a solicitor to help manage the process for you.
Does a first-time buyer have to pay stamp duty?
From September 2022, First Time Buyers became exempt from Stamp Duty on properties up to £425,000 and pay 5% on the portion between £425,001 and £625,000. In other words, First Time Buyers who buy a property up to £625,000 will pay no Stamp Duty on the first £425,000 and only pay 5% on the remaining amount, which would be £10,000.
Can mum and dad guarantee a first-time buyer mortgage?
Yes – Some lenders will allow mortgage applications to be submitted on a joint borrower, sole proprietor basis where a member of family or in some instances even a friend’s income can be added to the application. This will increase the amount that a buyer could afford. Only the buyer will own the property and all borrowers on the mortgage would be liable to pay the mortgage.
Can a first-time buyer buy a property form a member of family at a discounted market price?
A first-time buyer can buy a property from a member of family at a discounted rate normally know as a concessionary purchase, so if the value of the house was £150,000 and the discount was 10%, there would be a £15,000 discount, meaning the mortgage would be for £135,000, in effect no deposit would actually be put down due to the discount.
How long does a first time buyer need to be employed to get a mortgage?
Most lenders like between 3 to 6 months employment history, there are some that will insist on 12 months and a select few that would be happy with a letter from a new employer stating that employment was to start sometime in the next 3 months.
Can a first-time buyer get a mortgage on benefits?
Getting a mortgage will not be easy if you’re not employed/self-employed, however there are a limited number of lenders that may consider income from other sources, such as benefits and maintenance.
Can a first-time buyer be a subcontractor working on the CIS scheme?
Yes, a first-time buyer can get a mortgage if there on the CIS scheme, some lenders will deem them as self-employed and require last 2 years SA302 Tax Calculations and corresponding Tax Overviews, there are a select few that deem CIS income as employed, providing tax is deducted at source, this normally works out better for the CIS contractor.
Can a first-time buyer be self-employed?
A first-time buyer can be self-employed, providing certain criteria are met. Most lenders will want a minimum of 2 years self-employment, a select few may use 1 years self-employed income. The interest rate is normally higher with only 1 years self-employed income.
Income documents normally asked for:
- SA302 Tax Calculations and corresponding Tax Overviews.
- Some lenders may want an accountant reference.
- Certain lenders still ask to see actual accounts.
Can a first-time buyer get a mortgage if they have pre settled status?
There are lenders that require permanent rights to reside, however a selection will accept pre settled status and depending on amount of deposit even allow mortgages on a tier 2 work visa.
Does a first-time buyer need life cover?
There is no legal requirement to have life cover, however it would always be prudent to take it, the cost is negligible for the peace of mind it provides.
Can a first time buyer get a buy to let mortgage?
Normally lenders require you to have a residential mortgage, there’s a limited number that will allow first time buyers to take a buy to let.
