Buying your first home? You probably have a lot of questions, and honestly…you’re not alone! First-time home buyers often wonder about mortgage options, deposits, extra costs, and how to find the perfect home. In this guide, we answer the 10 most essential questions a first-time home buyer will likely ask, to make sure that you aren’t going into buying your first home completely blind. If you find the information in this blog useful and you want to discuss a new mortgage in more detail with our experts at Oportfolio mortgages, please feel free to drop us a message or give us a call.
Essential Questions For Any First-Time Home Buyer
How much can I afford to spend on a house?
This is of course the main question that every first-time home buyer has. How much can I borrow and what price can I buy at? We have all been guilty of looking on Rightmove at the £10 million house in the Cotswolds with it’s own drawbridge, right? But realistically, how much can you actually afford? The answer is simple in a lot of ways, yet also complicated. But essentially it comes down to how much you earn, how many credit commitments you already have, and how much deposit you have.
Generally, a mortgage lender will be willing to lend you between 4.49X your annual income. For some cases, you can potentially borrow more than this, the reason being that people with higher incomes can often borrow more. For the average employed borrower, a mortgage lender will generally lend you 4.49X your gross annual salary. For example, someone earning £40,000 a year could potentially borrow around £180,000 subject to a full mortgage application.
If you earn any extras like bonuses or commissions, a lender will potentially be able to take a portion of this per year towards your total income (often around 50 – 60%) which could increase your mortgage affordability.
Other factors can impact how much you can borrow. If you have a loan, or a credit card, or a monthly hire purchase, the mortgage lender will factor this into their calculations and reduce the amount they are willing to lend you. For a full comprehensive mortgage affordability check, you should always contact a mortgage advisor like ourselves who can find out exactly how much mortgage you are eligible for.
To work out how much you can afford, you need to take the maximum loan amount available to you, plus your deposit amount that you will be contributing towards the purchase. For example, a £180,000 mortgage plus a £20,000 deposit could mean that you can afford a £200,000 property potentially.
What credit score do I need to qualify for a mortgage?
This is another question that is very important to know the answer to. Think of it this way, if you were going to lend a large amount of money to a random person on the street, you would want to know that they are likely to pay it back and aren’t getting in over their head if they have struggled with borrowing money in the past. That is essentially exactly how mortgage lenders think. They will not want to lend large amounts of money to anyone who has struggled with credit or finance in the past, as this is a big risk to their money.
Generally, a high-street bank or building society will want someone to have at least a ‘good’ rated credit score. The higher the better! They will also not want any missed payments, defaults, or any other adverse credit showing on your file. That means that if you had a default a few years ago and it is still appearing on your credit file, you will most likely need to wait for this to clear from your file before being able to get a mortgage with a high street bank.
However, there are plenty of mortgage lenders (high street and more specialist) who are much more accepting of credit issues. Some high street banks are ok with missed payment or old defaults that have been settled, and for those people who have had more recent issues that have impacted their credit score, but have maintained good and consistent credit payments since, there are more specialist lenders who will still be able to offer you a mortgage.
When it comes to getting a mortgage, the lender will always run a credit check on you. This is called a decision in principle or an agreement in principle. Your mortgage advisor will run this for you, and as long as you are completely transparent with them about your credit history, they will be able to find the most suitable mortgage lender for your situation.
How much do I need for a house deposit
Generally at the time of writing this blog, the minimum deposit for a house purchase with high street mortgage lenders in the UK is at least 10% of the value of the property you are purchase e.g. £200,000 purchase price, £20,000 deposit minimum needed.
Depending on your maximum mortgage borrowing amount and your credit score, this minimum amount could go up. For example, if the maximum you can borrow is £180,000 but the property is valued at £280,000 then you would need a deposit of at least £100,000.
However, the mortgage market is constantly evolving and there are plenty of irons in the fire to make deposit requirement more achievable for first-time buyers. For example, there are schemes such as the shared ownership scheme, own new, and deposit unlock which can allow people to potentially put down less then 10% deposit. If this is something that you are interested in learning more about, you should always speak with a mortgage advisor to explore your options.
What are the different types of mortgage loans available?
As a first-time buyer, you would probably be buying your first home to live in, which would mean that you would need a residential mortgage loan as opposed to a buy-to-let mortgage. So that narrows the mortgage loans down nicely for you in case you are feeling overwhelmed by which loan to choose!
A residential mortgage loan normally comes in one of two forms, a capital and interest repayment loan or an interest only loan. The capital and interest repayment loan is the most common and most likely the one that you will have on your first property. This type of loan allows you to pay off your mortgage per month plus the interest charged by the bank over a number of years.
An interest only loan is a type of mortgage loan where you ONLY play off the interest charged and don’t pay off any of the actual loan. Normally a first-time buyer would not choose this as most people want to pay down their first home loan. But it is not unheard of and your advisor will be able to talk you through your options.
Within the two main types of mortgage loan there are different mortgage schemes that could be used too such as a guarantor mortgage or a shared ownership mortgage, but again, your mortgage advisor can help you to explore these options.
What additional costs should I expect beyond the deposit?
Now, this is something that we at Oportfolio are constantly trying to make our clients aware of, as many first-time home buyer clients are not aware of potential extra costs that come with buying your first home. As we have mentioned in the previous question, you will need to provide a deposit for a home purchase form your own resources, but there are potentially other things that you need to budget for. Here is a brief list of some example costs associated with buying your first home:
- Solicitor fee: When you buy a property, you will always need legal representation from a solicitor. If you hire your own solicitor you will be charged and they can charge anything from around £1,000 upwards. Sometimes a mortgage lender will provide ‘free legals’ as a benefit for choosing a mortgage with them, so if this is a concern for you, then your mortgage advisor can explore this option with you.
- Mortgage advice fee: A good, experienced mortgage advisor will charge a fee for setting up your mortgage for you and ensuring that everything goes through smoothly until move in date. To know more about Oportfolio’s fees, all you need to do is drop us a message.
- Moving costs: You may be lucky enough to have family or friends who are willing to help you move your stuff from your old place to the new one…which is great! But if you don’t, you may need to hire a moving van or even movers to give you a hand.
- Property valuation fee: Every property that is mortgaged will need to be valued by the bank’s panel valuer, to make sure that it is worth what you are paying for it and that there aren’t any major issues with the property. This not only benefits the bank but also benefits you! Again, some lenders will have a free valuation option, but generally this will cost between £100 and £200 to be carried out.
- Stamp duty: Stamp duty is a tax that is charged on property purchases by the government. There is a property value threshold for first-time buyers purchasing property, so to find out exactly how much you will need to pay, you can either speak to our mortgage advisors or use an online stamp duty calculator.
This list is not exhaustive, but your mortgage advisor will run through all costs with you at the earliest possible stage.
Should I get pre-approved for a mortgage before house hunting?
Yes. It is always advisable to get pre-approved before you go house hunting. Knowing exactly how much you can borrow and knowing that your credit score isn’t going to cause any issues further down the line is essential. Not only will it give you an indication of what is possible, but will also eliminate and hiccups later down the line. You can go through a pre-approval process with our team of mortgage advisors by giving us a quick call.
How do I choose the right neighbourhood?
If you are potentially looking to move to a new neighbourhood that you have never lived in before, of course you want to know that you are choosing the right area! There are a couple of things that you can do to learn more about the area:
- Use a mortgage advisor who is an expert in the area that you are looking in e.g. we are South West London mortgage brokers, so we know everything there is to know about this area!
- Speak to a local estate agent. They live and breath property in their specific area and they will know everything there is to know.
- Do your own research into community groups in the area, national statistics for schools, shops, council, crime and things like that.
What should I look for during a home inspection?
If this refers to viewing a property with the intention of potentially buying it, then you should look for a few things.
- Structural integrity of the building to make sure that there aren’t any obvious issues with the way it has been built
- Make sure that it is everything that you need space wise and isn’t going to be restrictive to your life.
- Electric and water. Makes sure that everything is modern and working and water pressure and things like that are what you need.
- Look for potential areas of improvement or upgrade and consider how much that would cost you to fix and if you are willing to do it.
If this question refers to a valuation inspection when you are already progressing with a mortgage application for the property, then you don’t need to do any of the inspecting yourself. The qualified surveyor will check over every element of the property for you and the bank.
How long does the home-buying process take?
This depends on how quickly each process of the purchase takes, but generally 2 to 3 months is a good measure. A mortgage application, as long as there are no issues along the way, can take as little as 1 day to be approved and offered in some cases, but generally takes a few weeks. Then it is down to the solicitors for yourself and the property sellers to work together to get all legalities set up for the purchase which takes longer to do.
What are closing costs, and how much should I expect to pay?
You typically pay your house deposit, usually 10% of the purchase price, to your solicitor just before or on the day of the exchange of contracts, which is when the sale becomes legally binding. The full mortgage balance is then paid by your solicitor to the sellers solicitor who then transfers this to the seller on completion day which is normally a few weeks later. All of this is arranged between the solicitors and the mortgage lender, so you will not be expected to arrange these dates yourself.
Speak To A First-Time Buyer Mortgage Advisor
Buying your first home is an exciting journey, but it can also feel overwhelming. By understanding these key questions, you’re already on the right track. But you don’t have to go through it alone!
At Oportfolio Mortgages, our expert advisors specialise in helping first-time buyers like you to find the right mortgage deals, understand your options, and secure your dream home with confidence. Contact our friendly team today for a fee free, no obligation initial first-time home buyer mortgage chat. We are here to help!
