The best kind of mortgage for a first-time buyer is the one that fits your unique situation. Working with a mortgage broker like Habito can help you figure out what’s right for you.

The journey to buying your first home can feel like a rollercoaster. One minute, it’s exciting. The next, it's feeling pretty daunting. So, to help keep you on track, here’s everything you need to know about first-time buyer mortgages.

First, are you considered a first-time buyer?

Some lenders have different definitions of a first-time buyer. Generally speaking, you’ll be considered one if you’ve never owned a home before, either in the UK or abroad. 

On the other hand, even if this is your first time buying a home, you probably won’t qualify for first-time buyer status if: 

  • You’re buying with someone else who already owns (or has previously owned) a home.
  • The property is being bought for you by someone who already owns their own home, like a parent or family member.
  • You’ve previously inherited a property – even if you never lived in it. 

However, even if you fall into the second category, there’s still a chance you could be treated as a first-time buyer by certain lenders. 

Speaking to a mortgage broker, like Habito, can help you find the lenders whose definitions of ‘first-time buyer’ match your particular situation. There are lots of excellent mortgage deals out there for first-time buyers, so asking a broker to help you to track them down could save you a hell of a lot of time.

What’s the best type of mortgage for a first-time homebuyer?

There’s no one-size-fits-all approach for first-time buyer mortgages. The best deal for you will depend on: 

  • Your employment status
  • Your monthly income and outgoings 
  • How much you’ve got saved for a deposit

But before you choose a mortgage, there are a few things you need to do:

  • Start by working out how much you can afford to borrow. Our handy mortgage calculator can help you do this.
  • Next, you can start viewing properties priced in that ballpark. It’s also a good idea to get a mortgage in principle (MIP) at this stage. While an MIP isn’t a promise from a lender that they will let you borrow, it does show estate agents that you’re a serious buyer. Get yours from Habito – it’s free!
  • Once you’ve found a property you like, it’s time to make an offer. If it’s accepted, now it’s time to apply for a mortgage. 

Applying for a first-time mortgage

When you apply for a mortgage loan, a mortgage lender will put your finances and credit score under the microscope to work out your ‘affordability’ – in other words, how much you can afford to borrow for your mortgage loan.

First, they’ll look at your annual salary, any other income you earn (like rental income or benefits) and whether you’re employed or self-employed.

If you’re self-employed, things can be a little stricter than if you’re an employee. For starters, you’ll need to provide two to three years of accounts instead of just three months of payslips. 

Learn more here: Buying a home when you're self-employed.

Next, the lender will review your outgoings, such as household bills, loans, credit cards, and childcare costs. And they’ll also check your credit history to see if you’re a reliable and responsible borrower (or if you’ve got a history of missed payments).

Once they’ve collected all the necessary information, the mortgage lender will decide whether they’re willing to lend to you, and if they are, the total amount you can borrow.  

Here’s a detailed look at the mortgage application process.

What are the different types of mortgages?

As a first-time buyer, you’ll come across a lot of different mortgage types. Here are the main ones you need to know:

  • Fixed rate mortgages: this means your interest rate stays the same for a fixed amount of time.
  • Variable rate mortgages: your interest rate could go up or down from month to month.
  • Repayment mortgages: this is when you pay back both the money you’ve borrowed, and the interest on that amount, each month. At the end of the mortgage term, you’ll have paid off the entire mortgage, provided you keep up with your monthly repayments.
  • Interest only mortgages: your monthly payments only cover the interest and not the mortgage itself. That means your monthly payments tend to be lower than with a repayment mortgage, but at the end of your mortgage term, you’ll need to pay the entire loan back in one go.

Read more about the different types of mortgages here.

Are there government schemes to help first-time buyers?

Good news: there are a few schemes designed to help you put that first foot firmly on the property ladder. These include:

  • The mortgage guarantee scheme: in April 2021, the government launched the mortgage guarantee scheme to encourage more lenders to offer low deposit mortgages. The scheme lets you borrow 95% of a property’s value, meaning that you only need to save up a 5% deposit.

    Some of the biggest UK lenders have committed to the scheme, including Lloyds, NatWest, Santander, Barclays, and HSBC. 
  • Help to Buy equity loans: you’ll only need a 5% deposit for Help to Buy loan. Then the government will loan you up to 20% of the property’s value. That’s a loan that stays interest free for 5 years. A conventional mortgage then covers the remaining 75%. 
  • Shared ownership schemes: This is where you buy a portion of a property and pay rent on the remaining share, usually to a developer or local housing authority. That means you only need a mortgage to cover the share that’s yours. Just remember, you’ll still need to afford the rent on top of the mortgage repayment.

Our top tips for first-time buyers

Finally, here are some of our top tips to make the first-time buyer experience less of a rollercoaster.

  • Factor in the extra costs: It can be tempting to put every last penny towards your deposit, but there are lots of extra costs involved in buying a home for the first time – legal costs, valuation fees, lender fees, buildings insurance, stamp duty, furniture, and hiring a moving company to name but a few. If you can afford it, keep back some of the money from your deposit to cover these.
  • Be prepared: To apply for your mortgage, you’ll have to prove your identity, income and outgoings, and current address. So, you’ll need high-res scans of important documents, like your passport, bank statements, and utility bills. Here’s everything you’ll need.
  • Take your time: Your home is probably the biggest purchase you’ll ever make, and there are lots of moving parts to the house-buying process. Try not to rush through the application process or go with the first lender you speak to. Instead, make sure you find the best deal for your situation.

Above all else, the expert advice of a mortgage broker (like Habito) can make applying for a mortgage for the first time even easier. And the best bit? It’s totally free. Get started here.