A Guide in Navigating the Residential Mortgage Market for First-Time Buyers

The Lending Channel
Date Published:25/10/2023

So, you're thinking about taking the plunge into homeownership? Congratulations! Becoming a first-time homeowner is an exciting journey, but it can also feel like a rollercoaster ride. One minute, it’s exciting. The next, it can feel a bit daunting. Especially when it comes to navigating the residential mortgage market for the first time. However, working with a mortgage broker like The Lending Channel can help you figure out what’s right for you. 

To help you feel at ease in this journey, here’s a guide to everything you need to know as a first-time mortgage buyer. 


Do you classify as a first-time buyer? 

It's important to note that different lenders may have varying criteria for this classification. Generally speaking, you'll be recognised as a first-time buyer if you've never owned a home, whether in the UK or abroad. 

On the other hand, even if you're a first-time homebuyer, there’s a chance that you may still not meet the criteria for first-time buyer status if: 

  • You're purchasing the property with someone who already owns a home or has previously owned one. 

  • You've inherited a property, irrespective of whether you resided in it. 

  • If someone who already owns a home, like a parent or family member, is buying the property for you. 

Working with an experienced mortgage broker, such as The Lending Channel, can be a valuable step in identifying lenders whose criteria for 'first-time buyers' align with your unique circumstances.  

The market offers numerous fantastic mortgage deals tailored to first-time buyers, and having a broker assist you in pinpointing these options could save you a substantial amount of time and effort. 


Types of Mortgages Available for First-Time Buyers 

When it comes to first-time buyer mortgages, there isn't a one-size-fits-all solution.  

The ideal deal for you depends on the following: 

  • Your employment status 

  • Your monthly income and expenses 

  • The amount you have saved for a deposit 

Before you dive in headfirst into the first mortgage deal you find, it’s important to take stock of the above. You should also go through the necessary steps to ensure you are in the best possible situation to purchase the mortgage deal that’s right for you 

We recommend following these essential steps before you make any big decisions: 

  1. Begin by determining how much you can afford to borrow. The Lending Channel's easy-to-use mortgage calculator can assist you in this process. 

  1. Once you have an idea of your budget, start exploring properties that fall within that price range. Additionally, consider obtaining a Mortgage in Principle (MIP) at this stage.  

  1. When you've found a property that suits your liking and your offer gets accepted, it's time to proceed with the mortgage application

residential mortgage

Applying For a First-Time Mortgage 

When you start the process of applying for a mortgage loan, the lender will take a close look at your financial situation and credit score. Their goal is to determine your "affordability," which means figuring out how much you can comfortably borrow for your mortgage. 

First, the lender examines your annual salary, any additional income you receive (such as rental income or benefits), and your employment status—whether you're employed by someone else or self-employed. 

Now, if you happen to be self-employed, be prepared for a bit more scrutiny compared to employed individuals. To start, you'll need to provide two to three years' worth of financial accounts instead of merely submitting three months' worth of payslips. 

Afterward, the lender will then examine your expenditures, including items like household bills, existing loans, credit card balances, and childcare expenses. Additionally, they check your credit history to gauge your track record as a borrower – they're essentially looking to see if you've been responsible with your financial commitments or if there's a history of missed payments. 

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


Types of Mortgages Available for First-Time Buyers 

Being a first-time buyer, you'll encounter a variety of mortgage types.  

Let's walk through the key ones you should be familiar with: 

  1. Fixed Rate Mortgages: With this type, your interest rate remains constant throughout the entire loan term, typically 2, 3, 5, or even 10 years. Fixed-rate mortgages are perfect for those who value stability and want to budget predictably. 

  2. Variable Rate Mortgages: These mortgages come with interest rates that can go up and down from month to month. It's a bit like riding the financial waves, where your payments could rise or fall depending on market conditions.  If you're comfortable with a bit of uncertainty and believe rates will stay low, variable rate mortgages might be for you. 

  3. Repayment Mortgages: Here, you're not only repaying the money you borrowed but also covering the interest each month. Stick to your monthly repayments, and by the end of your mortgage term, you'll have paid off the entire loan. 

  1. Interest-Only Mortgages: In this scenario, your monthly payments exclusively cover the interest portion, not the principal amount borrowed. This results in lower monthly payments but requires you to repay the full loan amount at the end of the mortgage term. It's like deferring the principal repayment until the finish line. 


Our Top Tips for First Time Mortgage Buyers 

  1. Consider Extra Costs: While it's tempting to allocate every penny to your deposit, remember that there are numerous additional expenses when buying your first home – from legal fees, valuation charges, lender costs, buildings insurance, stamp duty, furniture, to even hiring a moving company, to name a few. As much as possible, reserve some of your deposit money to cover these unexpected costs. 

  2. Be prepared: To apply for your mortgage, you'll need to provide proof of identity, income, expenditures, and your current address. Ensure you have high-quality scans of essential documents like your passport, bank statements, and utility bills to ensure swift process. 

  3. Take Your Time: Purchasing a home is one of life's significant investments, and there are a lot of processes when buying houses. Resist the urge to rush through the application process or settle for the first lender you come across. Instead, invest the effort in finding the best deal that aligns with your unique situation. 

Above all else, consider the invaluable assistance of a mortgage broker, such as The Lending Channel. Their expertise can significantly simplify the first-time mortgage application process for you.  

Remember, it's not just about getting the keys; it's about stepping into a new chapter of your life and purchasing a house that you will call home for many years. 

So, go ahead, explore your options, and when you’re ready to unlock the door to your very new home, get in touch with the The Lending Channel– we'll be more than happy to offer our no-obligation advice, no matter what requirements you have and regardless of your current financial circumstances. 

Category Tags Mortgage Guides
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