A Comprehensive Guide for First-Time Buyers

Getting a mortgage for the first time can be overwhelming. To help, we’ve created a step-by-step guide for you to follow.

What's Included?

1. Budgeting

Before searching for your new home, it’s important to determine your monthly mortgage budget. Review your monthly bank statement to understand your incoming and outgoing finances and current financial obligations.

The mortgage amount you can borrow varies between lenders as they have different criteria. However, the Credibble Home app can calculate an estimated mortgage amount based on income.

2. Check your credit history

When you request a mortgage, the lenders will check your credit report from one of the credit reference agencies like Transunion, Experian or Equifax to ensure that you have handled any previous debts responsibly.

Before submitting your mortgage application, you should check your credit history for any potential issues that may hinder your chances of approval.

If you have any credit card accounts you no longer use, closing them is better, as it can negatively impact your credit score. Even small things like not being registered on the electoral roll can harm your rating.

3. How big is your deposit?

To qualify for a mortgage, you must have a minimum of 5% of the property value as a deposit. It’s important to remember that you’ll also have to cover additional costs like stamp duty and conveyancing fees.

Saving a larger deposit will increase the variety of mortgages you can be approved for and result in better interest rates. Therefore, it is advisable to save as much as you can.

4. Get a mortgage agreement in principle

Requesting a decision in principle or an ‘agreement in principle’ from a lender before submitting a full mortgage application is recommended. By doing so, you will better understand the size of the mortgage they may be willing to offer you. To receive this agreement, you must provide basic information such as your income and requested borrowing amount. The lender will then contact a credit reference agency to perform a credit search on you.

Please be aware that an agreement, in principle, for a mortgage does not guarantee you will receive a mortgage. However, it can demonstrate to sellers that you are committed to purchasing their property.

5. What kind of mortgage do you want?

To apply for a mortgage, consider the type of deal you want. If your priority is to have a stable monthly payment even when the interest rates increase, then a fixed rate mortgage is suitable. On the other hand, if you want to make large overpayments, a flexible deal may be preferred.

A mortgage broker can assist you in exploring your choices and determining the most suitable deal for your situation. They can also help you navigate the entire application process from beginning to end.

6. Prepare your paperwork

To expedite your mortgage application, gathering all the required paperwork is helpful. This includes proof of your income and expenses, such as childcare costs and utility bills. To do so, collect recent payslips, annual accounts (if self-employed) and bank statements that show your monthly spending.

To satisfy lenders, you must provide identification that confirms your identity and residency. This will include a valid form of photo identification, such as a passport or driving license, as well as recent utility or council tax bills indicating your address.

If you have any doubts or questions regarding the mortgage process, seek help from professionals. Our expert mortgage advisers can guide you and provide solutions that match your requirements. Getting a mortgage might be difficult, but you can find the right one with their knowledge and assistance.

Frequently Asked Questions

1. What is a mortgage?

A mortgage is a loan that you take out to buy a property. The loan is secured against the property, which means that if you don’t keep up with your repayments, the lender can repossess your home¹.

2. How much can I borrow?

The amount you can borrow depends on several factors such as your income, credit score, and deposit amount. Most lenders will lend up to four times your annual salary or three times your joint salary if you’re buying with someone else¹.

3. What are the eligibility criteria for a mortgage?

To be eligible for a mortgage, you must have permanent full-time employment, meaning that freelancers and the self-employed have slimmer chances of being approved due to the lack of job security. The mortgage process in the UK is speedier for those who have lower monthly expenses or no dependents¹.

4. What documents do I need to apply for a mortgage?

You’ll need to provide several documents such as payslips from the last three months, proof of your UK residency status (if applicable), a P60 (annual UK tax summary) form from your employer, three to six months of bank statements, proof of any UK pension or insurance benefits received, two to three years of accounts if you’re self-employed².

5. How do I apply for a mortgage?

You can apply for a mortgage through a lender’s website or by contacting their customer service teams directly. You’ll need to provide several documents such as payslips from the last three months, proof of your UK residency status (if applicable), a P60 (annual UK tax summary) form from your employer, three to six months of bank statements, proof of any UK pension or insurance benefits received, two to three years of accounts if you’re self-employed².

6. What is an agreement in principle?

An agreement in principle is a document that shows how much money a lender is willing to lend you based on your income and credit score. It’s not legally binding but can help you understand how much you can afford to borrow³.

7. What is an interest rate?

An interest rate is the amount of money that you’ll pay on top of your loan amount over time. It’s usually expressed as an annual percentage rate (APR). The interest rate depends on several factors such as the type of mortgage you choose and your credit score⁴.

8. What is a fixed-rate mortgage?

A fixed-rate mortgage is a type of mortgage where the interest rate stays the same for an agreed period (usually two to five years). This means that your monthly repayments will stay the same during this period regardless of any changes in interest rates⁴.

9. What is a variable-rate mortgage?

A variable-rate mortgage is a type of mortgage where the interest rate can change over time depending on market conditions. This means that your monthly repayments can go up or down depending on any changes in interest rates⁴.

10. What are mortgage brokers?

Mortgage brokers are professionals who help people find and apply for mortgages. They work with several lenders and can help you find the best deal based on your circumstances⁵.

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