How to Get a Mortgage: First-Time Buyer Mortgage Advice
Whether you’re moving on from a rental, leaving your childhood home or getting yourself set up after graduating from university, first-time buyer anxiety is bound to be catching up with you. There are so many things you’ll need to learn about, and fast: How do you hire a solicitor? What is stamp duty? How much haggling is normal, and how much will lose you a good deal?
All of these are normal questions for a first time buyer to ask, but none of them is as complex (and daunting) as the ultimate question: How do you get a mortgage? Luckily, it’s not quite as scary as it sounds - here’s everything you need to know.
What is a mortgage?
A mortgage is a loan. Your mortgage provider will lend you the funds to purchase a home, and you’ll sign a legal agreement to pay them back in monthly instalments. The rest of the agreement is bespoke: how long you’ll be paying your loan off for, how much interest you’ll accrue and how much you can pay back every month are all determined by you and your financial situation.
How hard is it to get your first mortgage?
It can be more difficult to get your first mortgage. You won’t have a previous mortgage to use as assurance for the bank, or a home to sell for a large deposit; you’ll also need to prove your finances for the first time, and provide documentation that you may never have needed before.
That said, it isn’t an impossible feat - you’ll have access to additional buyers’ assistance programs as a first time buyer, and most lenders, solicitors and mortgage advisers understand the struggle. If you take steps to prepare yourself properly, it may even be a breeze!
The process of getting a mortgage: a step-by-step guide
So you’ve decided to dip your toes into the housing market. You’re monitoring your finances, saving up your money and taking virtual tours in advance of viewings - but what about the mortgage? You can’t make your purchase without one, but nobody told you how to do it. If that’s why you’re here, you’re in luck - we’ve laid out all of the steps to getting a mortgage, from saving a deposit to picking the best repayment plan.
1. Save up your deposit
Putting down a decently-sized deposit can help to cut down your monthly repayments (and your total debt) significantly. A larger deposit is always better, but what classifies as a ‘good’ deposit is directly proportional to the property value. If you’ve saved up £50,000 to put down on a £250,000 home, you’ll only have £200,000 to pay back before interest, while a £500,000 home will leave you with £450,000 of initial debt.
2. Update your documentation
In order to get a mortgage, your bank will need to do background checks on both you and your credit score. That means it’s time to get your documents in order! If you aren’t registered to vote, you’ll need to get your name on the register; if you’ve never travelled, you’ll need to apply for your very first passport.
The bank will also need proof of your earnings. For this reason, you should be saving bank statements and ensuring that your finances look stable before submitting your application. If you have a steady job, you shouldn’t have a problem - if you’ve been employed for under a year or self-employed for less than two, you may need to wait a little longer to ensure that your records show consistency.
3. Get a mortgage in principle
These days, most sellers require a mortgage in principle before you can view or offer on a home. You can apply for a MIP directly from the bank, or you can speak to a mortgage adviser to compare offers on your behalf. This is an excellent indicator of the price range you can afford, and it’ll also open doors for you in the housing market. It’s important to remember that a mortgage in principle is not a mortgage offer, simply an estimate that can fortify your application.
4. Research mortgage types
Mortgages come in many different forms. These change how much you pay every month, how often your payments change, and how long your mortgage repayment will last. It’s important to choose the right mortgage type to match your financial capability, or you may struggle to keep on top of your debt. If you hire a mortgage adviser, they’ll help you to make the correct decision for you.
- Fixed-rate mortgages: A fixed rate mortgage keeps your repayments stable for a set period of time. You’ll be paying a fixed rate for either two, three, or five years depending on the plan you choose, but stability comes with caveats: the longer your fixed term is, the higher that rate will be. You may also see a significant jump in your mortgage repayments after the fixed term is over.
- Tracker mortgages: Tracker mortgages are tied to the base rate of the Bank of England. This is the percentage that the BoE charges other banks for loans, and it fluctuates as the economy does. While tracker mortgages carry the risk of unpredictable peaks, your repayments have the chance to lower if the base rate goes down.
- Standard variable rate mortgages: A standard variable rate mortgage fluctuates in a similar way to a tracker mortgage, but it isn’t tied to the base rate of the Bank of England. That means that your bank sets the rate independently, which can cause higher-than-usual repayments. These mortgages are usually the ‘default’ that your plan will revert to once a fixed rate runs out.
- Discounted mortgages: A discounted mortgage is an initial deal on a standard variable rate plan. This will keep your first payments lower, but the price will rise to the standard variable rate when your discount runs out.
5. Compare mortgage providers
When it comes to mortgage providers, you have the freedom to choose the most favourable offer. Take advantage of it! You can use websites like Compare the Market, Money Supermarket and GoCompare to choose the best mortgage offer available. Always read the terms and conditions and consult an Independent Financial Adviser (an IFA) before you make your final decision.
4 tips for getting a good mortgage
1. Choose your property carefully
One of the key elements of getting a good mortgage is convincing the bank that you’re going to make a decent investment. That’s why, if you’re buying a second-hand property, you must ensure everything is in good repair! You should always choose your new home with due care and attention, and buying a new build home is a great way to bypass all these worries. New builds are always built up to code and will help convince your lender that their money is being put to good use.
2. Put down a larger deposit
The larger your deposit, the lower your debt. You’ll be paying it back over a shorter period of time and you’ll accrue less interest as a result. You’re also more likely to be viewed favourably by the bank, and you have the potential to receive better offers - especially if your deposit is 25% or more.
3. Take advantage of first time buyer status
Your status as a first time buyer will provide you with some benefits when it comes to purchasing a home. You can use money saved up in a Lifetime ISA to put down a deposit on your first home, and some banks will also offer better interest rates for first time buyers. One of our biggest tips for first time buyers is to take advantage of all of the support available to you.
4. Improve your credit score
If you’re aiming to get a mortgage, it’s good practice to improve your credit score first. This can be done in a variety of ways, from paying rent consistently to avoiding your overdraft with the bank. You should avoid taking out any additional loans if you’re aiming to get a mortgage, as this can count against you when it comes to your financial history. You can also talk to an IFA to go through your score and identify areas you can work on and improve
Taking your first steps towards getting a mortgage?
A mortgage is as big a financial commitment as your brand new home is. You should use every resource available to you to ensure that you’re making the right decision and getting the best deal. When buying a house with Anwyl, you’ll have access to one of our experienced Homes Advisers, who will support you and answer all your questions along the way.
