Buying your first home is one of the most exciting things you'll ever do. It's also, if we're honest, one of the most confusing. And for most first-time buyers, the mortgage sits right at the centre of that confusion.
The terminology is unfamiliar. The process isn't always clearly explained. And with so much riding on getting it right, it's easy to feel like you're making decisions you don't fully understand.
This guide is here to change that. Whether you're just starting to think about buying your first home or you're already viewing properties, here's what you need to know about getting your first mortgage, and how to give yourself the best possible chance of success.
Getting your finances in shape first
Before you speak to a lender or a mortgage broker, it's worth taking stock of where you stand financially. The stronger your position going in, the more options you'll have.
Start with your credit report. Lenders use it to assess how well you've managed your money in the past, so it's worth checking yours well in advance, ideally six months or more before you plan to apply. Look for any errors, make sure you're on the electoral roll, and avoid applying for new credit in the run-up to your mortgage application.
Your deposit is important, too, not just the size of it, but where it came from. Most lenders want to see a paper trail, so keep records of savings and be prepared to explain any large, one-off payments into your account.
If you're self-employed or have a variable income, it's worth being prepared early. Lenders typically want to see two to three years of accounts or tax returns, so the earlier you can get those in order, the better.
Finally, take a look at your existing debts. Reducing them where you can will improve your affordability picture, while avoiding any major new financial commitments in the months before you apply can also make a meaningful difference.
How much can you borrow?
Lenders assess affordability by looking at your income alongside your outgoings, such as your regular commitments like loans, credit cards and subscriptions, as well as your living costs. Two people earning the same salary can end up with very different borrowing figures depending on their financial circumstances.
It's also worth distinguishing between what a lender is willing to offer and what you can comfortably afford. Those aren't always the same number. So, it's important to look at the full picture, not just your maximum borrowing capacity, but what your monthly payments will feel like alongside your other outgoings.
Getting an early indication from an experienced mortgage broker before you start seriously viewing properties is one of the most useful things you can do. It means you can search in the right price bracket from the start, and you won't fall in love with a property you can't finance.
Understanding the types of mortgages available
Fixed-rate mortgages are the most popular choice for first-time buyers, and it's easy to see why. Your interest rate is locked in for an agreed period, typically two, three or five years, which means your monthly payments stay the same during that time regardless of what happens to wider interest rates. That predictability is valuable when you're getting used to the costs of homeownership for the first time. The trade-off is that you're locked in for that period, so early repayment charges apply if your circumstances change.
Tracker and variable rate mortgages move in line with the Bank of England base rate, which means your payments can go up or down. They can work well in certain conditions, but they come with less certainty, which is something many first-time buyers would rather avoid.
With a repayment mortgage, each monthly payment reduces your loan balance as well as covering the interest, so you'll own your home outright at the end of the term. Interest-only means your payments cover just the interest, leaving the original loan untouched. This option is rarely available for first-time buyers, but it's good to understand the difference.
Mortgage term refers to how long you take to repay the loan. A longer term means lower monthly payments but more interest overall. A shorter term costs more each month but less in the long run. Your broker can help you model different scenarios to find the balance that works for you.
The mortgage application process, step by step
The process of applying for a mortgage for the first time can feel like a lot, but knowing what's coming will make it less stressful.
Getting an Agreement in Principle (AIP) is usually your starting point. Your lender or broker will carry out an initial assessment of your finances and confirm, in principle, how much they'd be willing to lend. It's not a guarantee, but it gives you a credible budget to work with and signals to estate agents that you're a serious buyer.
Once you've seen a property you love and have had your offer accepted, your full mortgage application begins. You'll need to provide payslips or accounts, bank statements, proof of identity, proof of deposit and details of the property you're buying. Your broker will guide you through what's required.
The lender will then carry out a valuation to confirm the property is worth what you're paying for it. This is not a survey. It's carried out for the lender's benefit, not yours. A separate home survey, which assesses the condition of the property, is something you can arrange independently and is worth considering.
Once all the paperwork is in place, the lender's underwriting team will review your application in full. This stage can take time, particularly if they need additional documentation. Once satisfied, they'll issue a formal mortgage offer.
After that, provided everything goes according to plan during conveyancing, the process will complete, contracts will exchange, your lender will transfer the funds to the seller, and the property will be yours.
Common mistakes first-time buyers make
There are a few things worth knowing before you get started, because they catch people out more often than you'd think.
Going direct to your bank without exploring the wider market is one of the most common. Your bank can offer only its own products. A whole-of-market broker, like FG & Cook, has access to thousands of deals across hundreds of lenders, so can often find better rates and more suitable terms.
Underestimating the total cost of buying is another. Beyond your deposit, you'll need to budget for solicitor fees, survey costs, Stamp Duty (depending on the purchase price) and your moving costs. These can add up quickly and come as a shock if you haven't planned for them.
Making significant financial changes mid-application can be a problem. A new job, a large purchase on finance, or even a new credit card can raise questions with a lender at the wrong moment. Stability is what they want to see.
Letting your mortgage roll onto the lender's standard variable rate (SVR) when your initial deal ends is easily avoided but often overlooked. Rates on SVRs are typically higher, so reviewing your options ahead of time can save you a meaningful amount each month.
Finally, protection. It's easy to focus on the mortgage itself and overlook the importance of insuring against what happens if things go wrong, such as illness, injury or death. It's a conversation worth having at the same time as arranging your mortgage, not as an afterthought.
How can FG & Cook help you buy your first home?
If you're taking your first steps on the property ladder soon, it's worth giving FG & Cook a call today.
As a whole-of-market broker, we can access thousands of mortgage products, including deals that aren't available directly from lenders, so your options aren't limited to whoever happens to be on the high street.
Our chief broker, Jason Cook, has spent over 40 years building relationships with lenders and understanding how their decisions get made. Our directors also include RICS-qualified chartered surveyors, which means if your home survey flags a defect or a lender down-values the property you've set your heart on, we have the expertise to understand what's happened and what to do about it.
You'll also receive personal attention from an experienced broker who will see your case through from the first conversation to completion. So, if you're thinking about buying your first home and you'd like to understand your options before you commit to anything, we'd love to have that conversation. Get in touch today to book a consultation.