First Time Buyer

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Top Tips for First Time Buyers

Am I a First Time Buyer?

A First Time Buyer is anyone looking to buy their first home, which they intend to use as their primary residence. Whilst the economy and Coronavirus have contributed to an increased difficulty for First Time Buyers trying to get onto the property ladder, it’s still perfectly attainable. With prior knowledge of the mortgage process and a little preparation, First Time Buyers can still find a competitive mortgage deal.

Do I need an Agreement in Principle?

Whilst obtaining an Agreement in Principle, sometimes known as a decision in principle, is not essential, it can be very beneficial for First Time Buyers.

An Agreement in Principle is a conditional mortgage offer from a lender, prior to making your full application. It is not binding, as you can still choose to go with another lender. It’s also not an actual mortgage offer, as you still need to satisfy the lenders’ affordability criteria with your proof of income and circumstances.

As well as giving you a good idea of what properties you could afford, it can help to persuade sellers that you are a credible buyer when you come to make an offer.

How much can I borrow as a First Time Buyer?

Mortgage loans are calculated based on your financial circumstances and credit score, regardless of whether you are a First Time Buyer or not.

The amount you can borrow varies between lenders, but will generally be between three and five times your annual income. An agreement in principle can be a good way to determine this to prevent you from falling in love with a house that you can’t afford.

How can improving my credit score help?

Before approaching lenders, it’s important to look at your credit report and, where necessary, take steps to improve it, before you apply for a mortgage. This can both help your overall chance of acceptance and increase your chances of a competitive deal.

How to improve your credit score

  • Ensure your address is accurate on all accounts in your name
  • Check that your current name and address are on the electoral roll
  • Stay within 50% of any credit limits on existing credit agreements
  • Make all payments on time and in full for a year before the application
  • A special credit builder credit card can be helpful to show yourself as a responsible borrower if your low score is a result of never having credit.

How much deposit do I need?

In order to buy a property, you will ordinarily need a deposit of between 10% and 20%, although Coronavirus has had an impact on this and some lenders are currently asking for a minimum of 15%. 

What help is available for First Time Buyers?

If saving for a large deposit is out of reach for you, then the Help to Buy Equity Loan Scheme and NewBuy Schemes both require just a 5% deposit. This makes it easier for those on a lower income or those who have larger expenditures to get onto the property ladder.

The Help to Buy scheme allows you to borrow up to 20% of the property (40% in London) from the Government towards your deposit, meaning you only need to borrow 75% as a mortgage. The NewBuy scheme gives you access to a 95% mortgage at an interest rate at around 75% of the market price.

Another potentially helpful scheme is the Shared Ownership Scheme, which makes it possible for you to buy a share of your property, rather than the whole thing. This results in the property costing much less and therefore the deposit and monthly payments are much more affordable. You should note that rent will be due on the remaining share of the property, usually owned by a housing association.

What fees are involved with buying a home?

Arrangement fees

An administrative fee for the arrangement of the mortgage, known as the arrangement fee will be charged by most lenders and vary from one lender to the next.

Valuation fees

During the mortgage application process, the property is independently valued. You are accountable for these fees, which vary depending on the firm and level of valuation chosen.

Legal fees

A solicitor will arrange conveyancing and local authority searches on your new home, which you will also need to pay for.

Stamp duty

Stamp duty is usually due on the purchase of properties above £300,000, however there is currently a stamp duty holiday in the UK. This means you will pay no stamp duty if you purchase any property under £500,000 before 30th June 2021.

How can Vivid Mortgages Brokers help First Time Buyers?

It’s a huge step to buy your first home. Trying to determine which type of mortgage is right for you can be daunting. Our Mortgage Brokers at Vivid Mortgages can both help you to find a lender offering competitive mortgage rates to First Time Buyers as well as providing assurance and guidance throughout the process.

Many brokers have access to both high street and independent mortgages, this means that they can both find you more competitive offers and but direct your applications towards lenders most likely to accept your application

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.  

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