How to find, apply and get approved for a mortgage as a first-time buyer

Buying your first home is an exciting experience, but it can also be a daunting one.

Working out the finances and getting a mortgage can seem like a tricky process to navigate, especially for those who have never done it before.

From making sure your credit score is in good shape, to calculating how much you could afford to borrow and what your monthly mortgage payments will be, there are plenty of things to think about.

In this guide, we explain everything you need to know about getting a mortgage as a first-time buyer.

how to, how to find, apply and get approved for a mortgage as a first-time buyer

Steps to take: Navigating the mortgage process can be challenging for first-time buyers

Boost your credit score

Before finding your dream property, you need to ensure that you are in prime position to get the mortgage that you want.

To ensure you can borrow the amount you need, and at the best rate you can get, it is wide to make sure your credit score is in the best shape possible.

If yours isn't where you want it to be, there are plenty of things you can do to improve it, but this can take some time - so it is a good idea to start thinking about your credit profile well before you start searching for properties.

With a bad score, lenders are unlikely to accept your application due to the risk associated with them lending you money.

Your credit score is likely to suffer if you have outstanding debt, or have previously struggled to pay off credit. Either way, a lender needs to know that you can pay off your mortgage, so they use your credit score to see if you have a good track record.

The higher your credit score, the more likely a lender will look upon you favourably. And while there is no precise level your credit score needs to be at, you can't lose out by pushing it a little higher.

First things first, joining the electoral register is the easiest way to boost your credit score. This is the first port of call for a lender to confirm your identity for a credit application.

What else you could do depends on your circumstances. If you rely heavily on credit cards, overdrafts and buy now, pay later services, reducing your use of those could show that you can manage your money and are not living beyond your means.

Alternatively, if you haven't borrowed much in the past, taking out a credit card and using it sensibly can help prove that you can manage debt.

Any late payments, including on credit cards but also things like car finance, utility bills and mobile phone contracts, will damage your record.

You can check your credit score for free using services such as Experian and Equifax.

Get your bank statements on track

Much like with your credit score, your bank statements can reveal a lot about your ability to manage your money. As a result, most lenders will request three months' worth of bank statements when you apply for a mortgage.

Using these documents, they can assess your spending habits, the consistency of your income and the normal balance of your account.

A healthy bank statement will show that you have a steady income each month, recurring monthly bills that are paid on time, and purchases that still leave you with reasonable cash reserves, showing that you will be able to afford mortgage payments without any problem.

On the other hand, having overdrafts will raise flags for lenders, as it could indicate that you can't manage your money. Spending significant amounts on things lenders deem risky, such as gambling, can cause similar concerns.

Returned direct debits, which occur when you don't have sufficient funds in your account, can also suggest to lenders that you cannot be relied on to make payments on time.

how to, how to find, apply and get approved for a mortgage as a first-time buyer

Health check: Mortgage lenders are more likely to accept your application if your bank statements show your ability to manage your money

Build a deposit

At the same time as building your credit profile, you will want to be saving towards a deposit.

Generally, you will need to stump up at least five per cent of the value of the property. However, many mortgage lenders will ask that first-time buyers have at least a 10 per cent deposit.

Lenders speak about deposits in terms of loan-to-value. For example, if you were buying a home for £300,000 and had a £30,000 deposit, that would be 90 per cent loan-to-value. If you had £60,000 it would be 80 per cent loan-to-value, and so on.

The higher your deposit, the better. Not only will you have less debt to repay, but those who put down larger deposits as a percentage of the property's value will usually get better interest rates.

Still, you should avoid throwing everything at the deposit, as it wise to keep an emergency fund on hand, and you will need extra money for other costs associated with home buying.

Nathan Emerson, chief executive of Propertymark, told This is Money: 'Once you've got your figure in mind, which can sometimes be as little as five per cent with some mortgage lenders, setting up a regular direct debit or standing order will help in maintaining the amount being saved every month in order for you to reach your goal.

'If you're also looking to save for a longer period of time, a Lifetime Isa or an account that pays a good amount of interest will make you more money, on top of your savings.'

Setting out a savings plan can help you to ensure that you regularly contribute to your savings, especially if you are buying a house alongside a partner, in which case it can help you to both build your deposit together.

Work out how much you can borrow

Once your finances are looking good and you are ready to start looking at homes to buy, one of the first things to consider is how much you can spend on a home.

That is governed by three things - the size of your deposit, the amount a bank will be willing to lend you as a mortgage, and the size of monthly payments you will be comfortable with.

What kind of mortgage do you need? 

Things you need to consider when deciding what mortgage is right for you:

Term: How long you have to pay off the mortgage in full, usually between 25 and 35 years. A longer term means cheaper monthly payments, but you pay more interest overall

Fixed or variable? Fixed rates are most popular with first-time buyers and mean you lock in the same interest rate for a fixed term - usually two or five years. Variable rates, such as trackers and standard variable rates are often more expensive and can change at any time. However, they are more flexible and usually don't charge fees if you need to exit the deal early

Two or five year fix? The two options will have different rates. A five-year fix means you pay the costs associated with remortgaging less often, but bear in mind that if you need to sell before the fixed period is up, you may have to pay fees. Also consider whether you think interest rates might be cheaper or more expensive by the time you need to remortgage

Arrangement fees: Some mortgage deals charge fees of up to £2,000, though these can often be rolled into the mortgage. Expensive fees may make a low rate less appealing, and a higher rate with lower fees may work out cheaper overall

This is Money's mortgage search tool can help you work out what mortgage rates you could get and how much a mortgage would cost you each month, based on the size of your deposit and the property's value.

Emerson says: 'To work out your price range, there are lots of handy tools online that calculate your expenditure and available deposit and offers an estimated loan value for your future potential mortgage.

'This should, be taken as a rough idea, and not as a definite value as this is subject to an individual bank's criteria, but as a start, it can certainly provide you with insight.

'For first-time buyers, the current economic climate may seem daunting, but as house prices start to drop, and with better mortgage deals coming to the market, many will now find their affordability improving.'

Find a broker

When looking for a mortgage, you can either approach a bank or building society directly or use a mortgage broker.

A good broker can guide you through the mortgage process, look at deals from lots of lenders and help you decide which one is best for you.

They may also have access to special rates that banks don't offer to the general public.

Some brokers charge customers a fee for their services, but others take a commission from the lender they take their mortgage with instead meaning that you don't have to pay anything.

'Mortgage brokers exist because of the information they hold and their ability to ensure you're using the best lender for your personal circumstances,' says Emerson.

'Banks sometimes offer incentives for first-time buyers which may only be accessed via a professional broker,' Emerson said. 'In this instance, using a mortgage broker is worth its weight in gold as this could, in some cases, save you thousands of pounds.'

It is worth checking that your mortgage adviser is 'whole of market'. This means that they look at all of the mortgages available across many lenders, instead of being paid fees by a select few to only offer buyers their deals.

Get a mortgage in principle

Once you have saved your deposit and are hunting for a home, it is wise to get a mortgage in principle.

This is a document which shows estate agents how much you are likely to be able to borrow, and proves that you are able to make an offer.

You can get one via either a broker or a bank or building society, and will need to have information about your earnings, outgoings and deposit.

how to, how to find, apply and get approved for a mortgage as a first-time buyer

Home loan: Borrowers will need to provide financial information and pass affordability checks before their mortgage application can be approved

A mortgage in principle does not guarantee you a full mortgage on the same terms, but it will give you an estimate of what a lender will agree to lend you.

Getting an agreement in principle allows you to begin looking for a property, and will also help you to avoid applying for a mortgage that you can't afford, and in that case a rejection.

Apply for a mortgage 

Once you have found the right property for you and had an offer accepted, it is time to approach your broker or lender and get started on your full mortgage application.

There are a number of documents that you'll need to submit for your application, including your passport or driving license, utility bills in your name, bank statements, payslips and evidence of the deposit you are going to make.

The lender will carry out a credit check, which is where your preparation comes in handy, in order to ensure that you can be trusted.

Assuming you pass these affordability checks, the lender will make a formal offer. This should take place within four weeks of your application, but could take longer if the lender requires more information or there is a problem with the valuation of the property.

Your formal mortgage offer will be valid for six months. On average, the home-buying process after the mortgage offer takes between one and three months, so you should have plenty of time to complete the purchase.

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