How to Improve Your Prospects as a First-Time Buyer
Step one is to pay off as much of your outstanding debt as possible, primarily focusing on higher-cost short-term debt such as credit cards and loans. Why? Because a first-time buyer lender will look at your debt-to-income ratio when deciding whether to lend.
Saving a first-time buyer deposit is incredibly difficult when you're also making debt repayments, so making a conscious effort to pay off debts as quickly as you can will free up your income to start saving seriously towards a deposit.
Lenders will normally offer up to a maximum of 90% on first-time buyer homes, so the size of your deposit can influence the number of first-time buyer mortgages and the lenders you can choose between.
Next, we’ll work through a few other recommendations to get you on track to becoming a successful first-time buyer.
Boosting Your First-Time Buyer Credit Rating
Every first-time buyer should access a copy of their credit report, ideally from each of the major credit reference bureaus. This helps you understand what a lender will see when they evaluate your first-time buyer mortgage application.
It is possible there are errors on your credit report, in which case you can contact the relevant lender and request they update the records, improving your position as a first-time buyer straight away.
Otherwise, you can look at options such as registering to vote, closing unused credit accounts, reducing your overdraft facility and paying down residual amounts of debt to enhance your first-time buyer profile for a mortgage lender.
Focus on First-Time Buyer Income Stability
The amount you earn is important when applying for a mortgage to buy first-time buyer homes, but the nature of your employment is also a key factor during an affordability assessment.
Lenders prefer first-time home buyers in permanent employment with a contract because they know what you earn and how often and have the assurance that you are unlikely to experience a sudden and dramatic change in your finances.
In contrast, first-time home buyers in self-employment present a risk because there is a greater likelihood their income will fluctuate significantly, affecting their ability to maintain mortgage payments.
First-time buyer applicants in employment can request a contract or wait until they have been in employment for at least six months or two-three years in self-employment to shore up their stability as a first-time buyer mortgage applicant.
Maximising Your Deposit as a First-Time Buyer
As a first-time buyer, the larger your deposit, the better. There are several schemes for first-time buyers that can boost your savings, such as a Lifetime ISA. A higher first-time buyer deposit means you are more likely to be approved but also more likely to be offered the most competitive interest rates.
Many first-time home buyers find it impossible to save a significant enough deposit, and there are still plenty of options alongside schemes for first-time buyers to improve their down payment.
First-time home buyer programmes such as Shared Ownership allow a first-time buyer to purchase a proportion of a property from a housing association, paying a nominal rent on the balance and increasing their ownership share over time.
You can also be proactive about improving your prospects as a first-time buyer by asking a family member to act as a guarantor, purchasing in partnership with a friend or partner, or using a gifted deposit to top up your savings.
Accessing First-Time Home Buyer Programmes
First-time home buyers can use varied schemes and support structures to help them buy a first property, but not all schemes for first-time buyers will be relevant to every individual.
We often suggest first-time home buyers investigate the potential of first-time home buyer programmes such as the 95% government-backed mortgage guarantee scheme.
This initiative supports a first-time buyer by providing a guarantee of 95% to the lender, whereas the first-time buyer only needs a more achievable 5% deposit to move ahead. The average first-time buyer needs a deposit of £11,000 and above, a large amount to save, so this first-time buyer scheme is often very useful.
Lifetime ISAs are saving schemes first-time home buyers can use, provided they are between 18 and 39. You can deposit savings of up to £4,000 annually and earn 25% interest – bumping your savings up by £1,000 for every £4,000 you manage to save.
This first-time buyer scheme can be used over the long term to grow your savings but note that it is only intended for use towards retirement or buying a property as a first-time buyer.
Professional Assistance With Purchasing First-Time Buyer Homes
Finding the right mortgage as a first-time buyer can be complex, and if you are concerned about your deposit, eligibility, or amount you can borrow on a mortgage first-time buyer, please contact the Revolution Finance Brokers team at your convenience.
As a whole-of-market, independent broker, we work with thousands of clients looking to secure first-time buyer homes who need help to pinpoint the optimal lender and mortgage product to apply for.
First-time home buyer programmes can also be leveraged to improve your chances, increase your deposit, and lessen the risk a prospective lender associates with your application, and there are often ample options to secure a mortgage first-time buyer and move forward.
