Buying your first home is exciting, but it can also feel complicated. Before you start viewing properties, you may need to work out how much you can borrow, how much deposit you need, what your monthly repayments could be and which mortgage lenders are likely to consider your circumstances.
For first-time buyers, getting these answers early can help you set a realistic property budget and avoid spending time looking at homes that don’t fit your mortgage affordability.
In this guide, Oportfolio answers some of the most common first-time buyer mortgage questions we hear from clients across London and the UK.
Quick Answer: What Should a First-Time Buyer Do Before Looking for a Property?
Before seriously searching for your first home, it can be useful to:
- Work out how much deposit you have available
- Get an initial indication of how much you could borrow
- Check your credit reports and financial commitments
- Allow for the additional costs of buying a property
- Obtain an Agreement in Principle when appropriate
- Understand the monthly mortgage payments you may be taking on
Your mortgage borrowing plus your available deposit will help determine your potential property budget.
Want to know what your budget could look like? Use our mortgage affordability calculator for an initial estimate or speak to an Oportfolio mortgage adviser about your circumstances.
How Much Can I Borrow as a First-Time Buyer?
The amount you can borrow will depend on your income and the mortgage lender’s affordability assessment.
As a simple starting illustration, borrowing based on different income multiples could look like this:
| Annual Income | 4x Income | 4.5x Income | 5x Income |
|---|---|---|---|
| £40,000 | £160,000 | £180,000 | £200,000 |
| £50,000 | £200,000 | £225,000 | £250,000 |
| £60,000 | £240,000 | £270,000 | £300,000 |
| £75,000 | £300,000 | £337,500 | £375,000 |
| £100,000 | £400,000 | £450,000 | £500,000 |
| £150,000 | £600,000 | £675,000 | £750,000 |
These figures are illustrations rather than guaranteed borrowing amounts.
Mortgage lenders don’t simply multiply your salary by a fixed number. They can also consider your debts, regular expenditure, dependants, deposit, mortgage term, credit profile and the type of income you receive.
Some eligible borrowers may be able to access higher income multiples, while affordability could restrict other applicants to a lower amount.
This is why two first-time buyers earning exactly the same salary won’t necessarily be able to borrow the same mortgage amount.
How Much Deposit Do I Need as a First-Time Buyer?
Some first-time buyers can obtain mortgages with a 5% deposit, meaning they borrow up to 95% of the property’s value.
Putting down a larger deposit can reduce the amount you need to borrow and may give you access to different mortgage products and rates.
For a £400,000 property, for example:
| Deposit | Mortgage Required | Loan-to-value (LTV) |
|---|---|---|
| £20,000 | £380,000 | 95% |
| £40,000 | £360,000 | 90% |
| £60,000 | £340,000 | 85% |
| £80,000 | £320,000 | 80% |
| £100,000 | £300,000 | 75% |
Having a larger deposit doesn’t automatically mean your mortgage will be approved. The amount you want to borrow must still be affordable under the lender’s assessment and you will need to meet its wider eligibility and property criteria.
What Property Can I Afford as a First-Time Buyer?
Your potential property budget is broadly made up of the mortgage available to you plus your deposit.
For example:
| Potential Mortgage | Deposit | Illustrative property budget |
|---|---|---|
| £225,000 | £25,000 | £250,000 |
| £270,000 | £30,000 | £300,000 |
| £360,000 | £40,000 | £400,000 |
| £450,000 | £50,000 | £500,000 |
| £540,000 | £60,000 | £600,000 |
These are simple illustrations. Your mortgage will be subject to affordability and lender criteria, and you should keep enough money aside for the other costs involved in buying and moving home rather than assuming all of your savings can be used as a deposit.
For first-time buyers in London, the gap between borrowing capacity and property prices can be particularly important. Establishing your realistic mortgage and property budget before beginning your search can save a significant amount of time.
How Do Lenders Assess First-Time Buyer Mortgage Affordability?
Mortgage lenders need to assess whether the mortgage you’re applying for is affordable.
They can consider factors including:
- Basic salary
- Bonus, commission and overtime
- Self-employed income
- Loans and credit commitments
- Credit card balances
- Childcare and dependants
- Regular expenditure
- Deposit and LTV
- Mortgage term
- Credit history
Different lenders use different affordability models and can also treat income differently.
For example, one lender may be more suitable for an applicant receiving a significant annual bonus, while another could have criteria that work better for a contractor or self-employed first-time buyer.
This is one reason why the maximum mortgage shown by a generic calculator shouldn’t be treated as a mortgage offer.
What Is an Agreement in Principle?
An Agreement in Principle (AIP), sometimes called a Mortgage in Principle or Decision in Principle, is an initial indication of how much a lender may be prepared to lend based on the information provided.
It is not a formal mortgage offer and doesn’t guarantee that your mortgage application or chosen property will be accepted.
However, an AIP can help you understand your potential budget before making an offer on a property. An estate agent may also ask whether you have one when discussing an offer.
Depending on the lender, obtaining an AIP may involve a soft or hard credit search, so it’s worth understanding how the lender approaches this before proceeding.
When Should I Get an Agreement in Principle?
You don’t necessarily need an AIP before browsing properties, but it can be useful once you’re seriously considering buying.
Ideally, you want to understand your mortgage position before committing to a property.
An AIP can help demonstrate that you’ve investigated your finances, but remember that it remains subject to the lender’s full assessment when you make a mortgage application.
If your income, debts or circumstances change after obtaining the AIP, your potential borrowing could also change.
What Costs Should First-Time Buyers Budget For?
Your deposit isn’t the only cost involved in buying your first home.
Depending on the purchase, you may need to budget for:
- Solicitor or conveyancing fees
- Survey costs
- Mortgage product or arrangement fees
- Mortgage broker fees, where applicable
- Valuation fees, where applicable
- Stamp Duty Land Tax or the relevant property tax
- Buildings insurance
- Moving costs
- Initial repairs, furnishings and other costs after completion
Don’t automatically use every pound of savings for your deposit. Keeping an appropriate financial buffer after completion can be valuable when you become responsible for the property.
Do First-Time Buyers Pay Stamp Duty?
In England and Northern Ireland, eligible first-time buyers currently pay no Stamp Duty Land Tax on the first £300,000 of a property costing no more than £500,000, with 5% charged on the portion between £300,001 and £500,000.
If the property costs more than £500,000, first-time buyer relief does not apply and the normal residential Stamp Duty rates are used.
Different property taxes and rules apply in Scotland and Wales.
Tax rules can change, so check the current position for your purchase rather than relying on an old online calculation.
Can My Family Help With My First Home?
Yes. Family support doesn’t necessarily have to mean applying for a standard joint mortgage together.
Depending on your circumstances, options could include:
Gifted Deposit
A family member may be able to gift some or all of your deposit. The lender will normally want confirmation that the money is a genuine gift rather than an undisclosed loan and may require documentation showing the source of the funds.
Joint Borrower Sole Proprietor Mortgage
A Joint Borrower Sole Proprietor (JBSP) mortgage can allow another person, often a parent, to be included in the mortgage affordability assessment without necessarily being named as an owner of the property.
The supporting borrower is still legally responsible for the mortgage, and lender criteria vary.
Family-Assisted Mortgages
Some lenders offer products designed to help buyers using family savings or other forms of support.
The right structure depends on the circumstances of everyone involved, so family-assisted purchases should be considered carefully before an application is submitted.
Can I Get a First-Time Buyer Mortgage If I’m Self-Employed?
Yes. Being self-employed doesn’t prevent you from getting a first-time buyer mortgage.
However, lenders will need to establish an acceptable income figure and can have different requirements depending on how you work.
For example, they may assess:
- Sole trader profits
- Salary and dividends for company directors
- Salary and a share of company profits
- Partnership or LLP income
- Contract income
The length of your trading history can also affect which lenders are available.
If you’re self-employed, it can therefore be useful to investigate your mortgage position before you start making offers on properties.
Can I Get a Mortgage If I Have Bonus or Commission Income?
Potentially.
If part of your income comes from bonus, commission, overtime or another variable source, different lenders can treat it differently.
They may consider factors such as your track record, frequency of payment and evidence available.
This can make a significant difference where your basic salary alone doesn’t provide the mortgage you need.
What Credit Score Do I Need for a First-Time Buyer Mortgage?
There isn’t one universal credit score that guarantees mortgage approval.
Mortgage lenders have their own credit policies and can consider the information contained in your credit report alongside the rest of your application.
Before applying, it can be sensible to check your credit reports for errors and make sure important information such as your current address is accurate.
Existing debts, missed payments and other credit-history issues don’t automatically mean that a mortgage is impossible, but they can affect the lenders and products available.
Avoid taking out credit purely to try to manufacture a particular credit score. What matters is demonstrating responsible management of your finances and meeting the lender’s overall criteria.
What Type of Mortgage Can a First-Time Buyer Get?
First-time buyers can potentially access many of the same mortgage types as other residential buyers.
These can include:
- Fixed-rate mortgages
- Tracker mortgages
- Higher-LTV mortgages
- Family-assisted mortgages
- JBSP mortgages
- Shared Ownership mortgages
There may also be lender products specifically aimed at first-time buyers.
The most suitable option won’t necessarily be the mortgage with the lowest headline interest rate. Product fees, incentives, early repayment charges, affordability and your future plans can all affect the overall value of a deal.
Should a First-Time Buyer Choose a 2-Year or 5-Year Fixed Mortgage?
There isn’t one fixed period that’s automatically better for every first-time buyer.
A 2-year fix gives you an earlier opportunity to review your mortgage, while a 5-year fix provides certainty over your mortgage rate and payments for longer.
When deciding, consider the rates and fees available, early repayment charges, whether you might move, your attitude to future rate changes and how important longer-term payment certainty is to you.
What Happens After I Find a Property?
Once you’ve found a property and had an offer accepted, the mortgage process will normally include:
- Mortgage application – your broker or lender submits the full application.
- Documents and underwriting – the lender assesses your income, expenditure, credit profile and supporting documents.
- Mortgage valuation – the lender assesses whether the property provides acceptable security for the mortgage.
- Conveyancing – your solicitor carries out the legal work required for the purchase.
- Mortgage offer – if the lender is satisfied, it can issue a formal mortgage offer.
- Exchange of contracts – once the legal work is complete and everyone is ready, contracts can be exchanged.
- Completion – the mortgage funds are released and you become the owner of the property.
The precise process and timescale can vary depending on the lender, property and legal work involved.
What Documents Do I Need for a First-Time Buyer Mortgage?
Requirements vary, but it is useful to have your financial documents organised before applying.
Depending on your circumstances, you may need:
- Proof of identity
- Proof of address
- Recent payslips
- Recent bank statements
- Evidence of your deposit
- Evidence explaining the source of gifted deposit funds
- Details of existing loans and financial commitments
- Accounts or tax documents if you’re self-employed
- Evidence of bonus, commission or other variable income where relevant
Your mortgage adviser can tell you what is required for the lender being considered rather than submitting unnecessary documents to multiple lenders.
What First-Time Buyer Mistakes Should I Avoid?
Looking at properties before understanding your budget
It’s easy to start on Rightmove before knowing what you can realistically borrow. Establishing your mortgage position first can make your property search much more focused.
Assuming every lender will offer the same amount
Affordability calculations vary. The maximum mortgage offered by one lender may be different from another.
Using all your savings for the deposit
Remember to allow for legal costs, surveys, moving expenses and other costs of buying and owning the property.
Making significant financial changes during the application
Taking out new borrowing or making other major changes to your finances during a mortgage application could affect affordability or the lender’s assessment.
Assuming an Agreement in Principle guarantees the mortgage
An AIP is only an initial indication. The lender still needs to assess the full application and the property.
Choosing a mortgage based only on the headline rate
Fees, incentives, early repayment charges and the overall cost of the mortgage also matter.
Can a First-Time Buyer Get a Mortgage on Any Property?
Not necessarily.
Mortgage lenders also assess the property you’re buying because it acts as security for the loan.
Properties with unusual construction, short leases, significant defects or certain types of commercial premises nearby can require additional consideration and may not be acceptable to every lender.
For example, if you’re considering a flat above a shop, lender appetite can depend on the commercial use below, access, lease, valuation and future resaleability.
Checking unusual property features with your mortgage adviser before submitting an application can help avoid approaching a lender whose property criteria are unsuitable.
Why Use a Mortgage Broker as a First-Time Buyer?
Buying your first home involves more than finding the lowest advertised mortgage rate.
A mortgage broker can help you understand how much you may be able to borrow, compare suitable mortgage products, consider lender criteria and manage the mortgage application through to offer.
This can be particularly useful if:
- You’re unsure how much you can borrow
- You have bonus or commission income
- You’re self-employed or a contractor
- Your family is helping with the purchase
- You need a higher income multiple
- You have a smaller deposit
- You’re buying an unusual property
- You simply want guidance through your first mortgage application
At Oportfolio Mortgages, we help first-time buyers across London and the UK understand their options and navigate the mortgage process from initial affordability through to mortgage offer and completion.
Ready to Work Out Your First-Home Budget?
You don’t need to have found a property before speaking to us.
If you’re planning to buy your first home, Oportfolio can assess your income, deposit and commitments to help you understand your potential borrowing and property budget before you start making offers.
We can then compare mortgage options and lender criteria based on your circumstances and help manage the application when you find the right property.
Speak to an Oportfolio mortgage adviser about buying your first home
Not ready to speak to an adviser? Try our mortgage affordability calculator for an initial estimate.
