First-time buyer’s guide – your questions answered

A first-time buyer is someone who’s never owned property before – anywhere. That means property both in and outside the UK. To be a first-time buyer, you’ll need to have never inherited property, even if you never lived in it and just sold it on. If you’re applying for a joint mortgage with someone who has owned a home before, you’ll no longer count as a first-time buyer – something to keep in mind when picking your purchasing partner.

A mortgage in principle, a decision in principle, and agreement in principle – they’re all referring to the same thing. It’s an estimate or indication from a lender of how much you can borrow in order to buy a house. Keep in mind, it’s based off the brief information you provide on your income, outgoings, and any debts, so it’s not a sure thing.

If you do decide to move forward with a mortgage, your chosen lender will ask for much more detail including bank statements and credit checks, so the amount you can borrow and the amount given in your decision in principle (DIP) could be different.

Our mortgage advisors have access to thousands of deals, and a solid know-how of which lenders have which terms when offering their mortgage deals. Get in touch to discuss your options.

Loan to value, often shortened to LTV, is the ratio of the amount you’re borrowing to the value of the asset. So for a house – it’s the amount of the loan you’re taking out on your mortgage compared to the full value of the house it’s intended for.

For example, if you had a 90% LTV:

• 10% of the value of the property is covered right away, by your deposit,

• The other 90% is covered by your mortgage loan, making that your LTV.

The lower your loan to value, the less you’ll need to borrow from your mortgage lender. This can put you in good stead to unlock more competitive mortgage rates from a range of lenders.  

If you’re not sure what mortgage rates are available to you – get in touch with one of our knowledgeable mortgage advisors who will be happy to help you understand what you can comfortably afford.

If a property is being sold as a freehold, it means you’ll own it outright, including the land that it’s built on. You also own it for as long as you’d like to keep the property. You’re not beholden to stipulations within a lease, or subject to fees like ground rent and maintenance.

A leasehold is different in that it is usually purchased from the existing freeholder. By purchasing a leasehold, you’re buying the property for a set amount of time. There are often terms added to the leasehold about what you can and can’t do with the home, and you won’t own the land and the building. So, if you’re thinking of buying a leasehold, it’s important to consider how many years are left on the lease, and to make sure you have enough pennies in your pocket for extra charges spelled out in the leasehold contract.

Conveyancing is the legal process behind transferring the ownership – or legal title – of a property from the seller to the buyer. When you hire a conveyancing solicitor, they’ll deal with the legal aspects of the mortgage, making way for exchange of contracts and completion. That’s when a house really becomes your forever home!

A house survey means a qualified surveyor takes a look around and reviews the state of your prospective property. They’ll look out for potential defects and will flag any issues with the house, or problems that are handy to know about before deciding to dive in head-first and buy it.

There are different levels of survey available, with higher cost offerings covering a more in-depth inspection of the property. Generally, the surveyor will look at things like the ceiling, walls, flooring, woodwork, and fittings in the home, and will provide a lengthy report on whether they’re up to scratch.

You don’t always have to get a house survey, but it’s a smart choice. Otherwise, you could end up forking out a fortune down the line to fix issues with your home that you didn’t spot on your viewings. Some lenders will also require a survey as a condition of your mortgage, in which case it’s a must.

A house which has no chain or is ‘chain-free’ means the seller is not purchasing another house at the same time as selling their current one. It’s good news if you’re buying, as you don’t need to wait for the seller to complete on their new home. It can mean there are less holdups or chances of their purchase (and their sale to you) falling through.

But don’t let the prospect of a chain hold you back from offering on your dream home – people buy and sell successfully within a chain all the time. You just might need to be a little more patient.

The deposit you’ll need as a first-time buyer generally starts at 5%. You can unlock cheaper deals in increments of 5%. So – if you have an 8% deposit saved, you’re better off saving longer for a 10% lumpsum to unlock more attractive deals. A higher deposit can help lower your LTV and open up more competitive mortgage deals.

Around the 20% mark and above is where you’ll start to see a wider range of cheaper mortgage deals and lower interest rates. It’s food for thought if you’re in a position to save for a larger deposit.

The amount you can afford to borrow from a lender depends on a range of factors like your income, deposit amount, and credit score. However, as a general rule of thumb, lenders tend to offer you a loan amount four to five times the amount of your income – often with options to combine incomes if you’re making a joint application.

Another factor to consider when thinking about borrowing is your employment type. For example, self-employed people have to jump through a few more hoops to prove their income and secure a loan. Lenders will also look at any bonuses if you’re employed, and other income streams. There’s also your age – if you’re looking at a mortgage term beyond your retirement date, this can impact what you’re allowed to borrow.

The amount you can borrow varies from lender to lender, with some offering higher amounts and some sitting on the lower end of the threshold.

A 100% mortgage – also known as a zero-deposit mortgage – means taking out a loan for the entire amount needed to buy a property. They’re a handy option if you’re not in a position to save for a deposit, and they’re often geared towards first-time buyers.

They’re much less widely available than they have been in the past, and they can be tricky to secure. Although a select few lenders do offer them, they’re likely to be in the form of a family deposit mortgage or guarantor mortgage. There are some downsides too. They tend to be pricier than a repayment mortgage, and you’re at a higher risk of falling into negative equity on your home if the value dips even a little.

Another factor to consider is that a deposit isn’t the only cost involved in buying a house – there are other fees like stamp duty, mortgage fees, and the cost of a solicitor.

If you’re still mulling through which mortgage option is best for you, chat to one of our expert mortgage advisors. We can help you understand which mortgage type best suits your unique set of circumstances.

The higher your credit score, the higher your chances are of securing a better deal on your mortgage. But there’s no specific number all lenders are looking for. Different credit referencing sites will categorise different numbers as ‘bad’, ‘good’, ‘excellent’, and so on. Similarly, the exact score you need to secure a mortgage varies from lender to lender.

If you’re looking to improve your credit score ahead of buying a house, it’s a good idea to start prepping around 6 months before you’re planning to purchase. Check out our guide to buying your first home for some tips on bettering your credit score.

Putting an offer on a house can be as simple as calling or emailing your estate agent with a number in mind. Read more about the process.

Under-offering on a seller’s asking price can be a bit of a balancing act. You need to come across as a genuine buyer with real interest in the property, whilst still making an offer that suits your budget. As a general rule, people tend to offer between 5% and 10% under the asking price.

Keeping this figure in mind can be useful as it opens up your options when viewing properties. You don’t need to just look at homes exactly within your price range, and can widen your search parameters slightly.

This all, of course, depends on the area and the state of the market. If it’s a competitive market or a very desirable home, it may be better to over offer to make sure The One doesn’t become the one that got away.