Frequently asked mortgage questions for first-time buyers

Taking the first leap into buying your first home can be a daunting prospect. Here are the most frequently asked questions about the property buying process to ease your concerns.

What do you need for a successful mortgage application?

To make the process easier, you should do some ‘life admin’ prior to making a mortgage application.

Make sure your passport is in date, and update your driving licence, wage slips, bank statements and credit agreements (for example, credit cards, loans or car finance) with the correct name and address. Making sure you’re on the electoral register also helps.

Lenders will also want to do a credit check and there are some things to consider before they do this:

Check your credit report, and flag any errors with the provider immediately
Keep payments up to date
No credit isn’t necessarily good credit – lenders want to know that you can manage credit. It's a good idea to get a credit card and put a small amount onto it, then pay this off every month.
Don't have too much available credit (i.e. big credit limits), as this can cause a lender concern.
Keep out of your overdraft, as some lenders view this as a lack of financial resilience, and a risk to their loan.

How long does it take to buy your first house or flat?

This is one of the most common questions asked by first-time buyers. No case is the same but below is a rough guide to how long the process will take.

When you have decided you would definitely like to buy a house, the first step is to speak to a mortgage adviser. They will discuss your circumstances and potential eligibility for a mortgage, taking into account your income, any debt commitments and deposit size, amongst other factors.

Once you have provided this information, your mortgage advisor will advise you about potential options, repayments and types of mortgages you may wish to consider.

With your agreement, they would then transfer this information onto a chosen mortgage lender to apply for an agreement in principle.

This can typically be done within a week of collecting your personal details. An agreement in principle can last for anything up to 90 days, depending on the chosen mortgage lender.

Once you have an agreement in principle and a nominated solicitor, you have everything you need to go and make an offer on your preferred properties, based on the budget agreed with your mortgage adviser.

When you have an offer accepted, you should contact your mortgage adviser who will gather all the purchase details, advise you about documents to prepare and take you to a meeting to apply for the full mortgage.

The time taken from this application to an actual mortgage offer being accepted can vary. It can take up to three weeks (if everything goes smoothly) to get your mortgage officially approved – however, at ESPC Mortgages, we aim for one to two weeks if circumstances allow.

Factoring in the length it takes to get the mortgage approved coupled with the fact that your chosen solicitor will still need to take care of the legal side of things, the ideal timescale from a verbal offer acceptance to actually receiving the house keys is typically five to six weeks.

How much can I afford to borrow?

Historically, how much you were able to borrow was set by income multipliers of approximately four to four and a half your income. Nowadays, different lenders will lend different amounts, based on your individual circumstances.

How much you can borrow is based on your income minus your monthly commitments, such as regular loan repayments, car finance, credit card balances, maintenance and with most providers, childcare costs will be factored in.

All of these factors can then reduce your borrowing potential against someone with the same income who does not have these commitments, as there is less surplus available for a mortgage repayment.

Lenders will also factor in how much deposit you are able to pay. The bigger the deposit, the lower the loan to value which will give you a lower interest rate.

How can you boost your mortgage deposit?

A bigger deposit for your first home can help your budget stretch further, or secure lower interest rates and monthly repayments.

If you’re in a financial position to save money, then save as much as you can. Try calculating a monthly budget to work out what you can afford to save each month, then set up a standing order to transfer this money to your savings when you get paid.

It is worth getting independent mortgage advice. An independent mortgage adviser, like those at ESPC Mortgages, can offer advice on how much you need to save, and how to reach your target. They can also examine the mortgage market to find the most suitable deal, and highlight different options which may mean you don’t need to save as much as you think.

What government help is available?

Help is available for first-time buyers who want to get on the housing ladder.

The LIFT – or the Low-cost Initiative for First Time Buyers – is a Scottish Government shared equity arrangement, which has helped more than 12,000 people to buy a home.

There are two LIFT schemes: Open Market Shared Equity (OMSE), and New Supply Shared Equity (NSSE).

The OMSE scheme is for people who cannot afford the full price of a home in the open market. The NSSE scheme allows buyers to purchase a new-build home from a housing association or local council.

Both schemes are open to first-time buyers and certain priority groups across Scotland, with low to medium incomes.

Buyers purchase the bigger share of the property (usually between 60-90%), and the Scottish Government contributes the remaining cost. For example, if you pay 75%, the Scottish Government will pay the remaining 25% and hold this under a shared equity agreement with you. You will need a minimum 5% deposit, to add to the mortgage and Government share.

You will have complete ownership and have the same responsibilities as any other homeowner, including paying the mortgage, council tax and insurances, as well as any costs associated with the purchase.

The application process is different for both schemes, but all of the information can be found on the Scottish Government website.

What if you are self-employed?

Mortgages for the self-employed are becoming more readily available. Most lenders will want at least two years’ self-assessment tax returns showing level of income, along with an up-to-date tax summary overview. The main figure they’ll refer to here is the Net Profit Figure, and lenders will, in most cases, work from the average of the last two years to determine your level of borrowing.

Lenders will also likely request the last three months of business bank statements to confirm strong trading, consistent with the figures provided.

Get in touch with ESPC Mortgages

ESPC Mortgages is a team of independent mortgage advisers with a wealth of experience. Get in touch on fsenquiries@espc.com or 0131 253 2920.

The initial consultation with an ESPC Mortgages adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £395 (£345 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.

The information contained within this website is subject to the UK regulatory regime and therefore restricted to consumers based in the UK.

The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk.

ESPC (UK) Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is authorised and regulated by the Financial Conduct Authority.