First Time Buyers: How to Start Your Home Buying Journey with Confidence
Written on 25 February 2025 by
Whether this is the start of your mortgage journey or you’re just looking to improve your understanding, let this blog be your go-to guide for everything you need to know.
A wise man once said: “You never know where you are going until you remember where you've been.” That’s actually from a Will Smith song, but you get the gist.
On that note, let’s start at the beginning.
For any first-time buyer, knowing where to start can be the most challenging part. You may hear family members talking about how high interest rates were in their day and how important it is for you to own a property—no pressure!
Take a moment. First of all, well done! You’re probably thinking about the next steps in life. Maybe you’ve settled into a job, started thinking about a family, or have been renting and decided, “Hey, it’s better I pay my own mortgage than someone else’s.”
Now, let’s walk you through the process. It may feel overwhelming, but don’t worry - we’re here to support you every step of the way.
What to Consider Before Buying Your First Home
Finding the Right Property
This is probably going to be the most expensive purchase you’ll ever make, so you’ll want to be sure it fits your needs. It’s a good idea to explore multiple properties in your desired area to get a clear understanding of prices and what’s available.
Let's use me as an example. I was engaged (to a real partner!) and looking for a property we could grow into together and hopefully start a family. For this reason, a house with three bedrooms was essential—otherwise, it wouldn’t meet our needs. Once you understand why you’re buying, it puts into perspective what you’re looking to achieve.
Once you have an idea, take note of the locations, price trends, and property types available. Broadening your search area slightly might reveal homes that are more affordable or better suited to your long-term goals.
Understanding Loan-to-Value (LTV)
LTV is an important factor that determines how much you’re putting down as a deposit and how much a lender is willing to offer you as a mortgage.
For example, if a property is worth £100,000 and you have a £5,000 deposit, this means you are putting down 5%. As a result, you would need to find a lender offering a 95% mortgage, which in this case would be £95,000.
A 5% deposit is typically the minimum required, but the more you can save, the better your mortgage rate is likely to be. Lenders see a larger deposit as a lower risk, as there is more equity in the property.
At this stage, you’ll either be thinking, “Great, I have enough!” or “This is going to take ages to save.” Either way, don’t worry - there are options to help you get there faster. Keep reading.
Affordability: What Lenders Consider
Now that you have a property in mind and a deposit goal, the next step is ensuring you can afford the mortgage.
Lenders will assess your financial situation to determine what you can borrow. You may have heard the old saying that to get a rough idea of your maximum mortgage, you take your income and multiply it by 4.5. While this can be a useful guide, the best way to get an accurate figure is to speak to a mortgage broker.
If you are employed, lenders will review your basic salary and may also consider bonuses, commission, and overtime. Some benefits, such as car allowance, might not always be included in affordability calculations.
If you are self-employed, lenders will typically require tax returns from the last two years. Some will take an average of the two years, while others will use the most recent year’s earnings. Although some lenders may accept just one year of self-employed income, having two years’ figures will give you access to more mortgage options.
Other income sources, such as benefits or trust funds, may also be considered by certain lenders.
Lenders will also assess your dependants, any outstanding debts or credit agreements, the length of the mortgage term, and how long you want to fix your mortgage rate.
Why a Mortgage Broker is Essential
A mortgage broker isn’t a lender - they work for you and help find the best mortgage option for your circumstances.
They will take the time to understand your financial situation, including your income, expenses, and long-term plans. They will assess your affordability, find lenders suited to your circumstances, and help you secure a Decision in Principle (DIP), which is a statement from a lender confirming they’re willing to lend to you based on initial checks.
It’s crucial to be honest with your broker. If you’ve had financial difficulties in the past, tell them upfront. Lenders will uncover any issues during the application process, and your broker is there to help navigate these challenges, not judge you.
Making an Offer on a Property
Once you have your Decision in Principle, it’s time to find the right property. Remember, until your offer is accepted, you can’t formally apply for a mortgage.
Once an offer is accepted, your broker will review the market to ensure you’re getting the best mortgage deal. They will then guide you through the application process and ensure you have all the necessary documents.
Other Helpful Factors to Remember
Saving Schemes
There are several schemes available to help first-time buyers, including Shared Ownership, government-backed mortgage schemes, and the Deposit Unlock Scheme. Each has different criteria, and a broker can help determine if you qualify.
Term vs Budget
When considering the length of your mortgage term, it’s important to understand how it impacts your payments. A shorter mortgage term means you will pay less interest overall but have higher monthly repayments. A longer term, such as 35 years, will reduce your monthly payments but result in more interest paid overtime.
Fixed or Variable
Choosing between a fixed or variable mortgage rate is another key decision. A variable rate mortgage means your payments could go up or down depending on interest rate changes. This may suit those who want flexibility or who hope to benefit from falling rates. A fixed-rate mortgage gives stability, as your monthly repayments remain the same regardless of market changes. Fixing for two years allows you to review your options sooner, while a five-year fix offers long-term certainty.
Repayment or Interest-Only
A repayment mortgage would mean you’re paying off the mortgage through regular monthly payments, through the term of the loan, and eventually end up debt free.
Interest only is when you’re only paying the interest and the original loan remains outstanding. At the end of the term, you’ll still owe this amount. Interest only is dependant on the LTV, repayment vehicle (how the outstanding balance will be paid at the end of the term) and your income.
Overpayments
Most lenders allow you to make overpayments on your mortgage, typically up to 10% of the outstanding balance per year without penalties. This can be a useful way to reduce your mortgage balance faster.
Lender Fees
Some lenders charge aproduct fee, typically around £999, which can help secure a lower interest rate. This fee can be paid upfront or added to the mortgage, though adding it to the loan means you’ll pay interest on it over time. Speaking to a broker can help you determine whether paying this fee is worthwhile.
How to Start Your Buying Home Buying Journey Conclusion
Whether you’re just researching or ready to start the home-buying process, it’s essential to understand how mortgages work. Speaking to an independent mortgage broker, like John Charcol, gives you access to expert guidance and a mortgage tailored to your needs.
For more information, don’t hesitate to enquire now or speak to an expert on 0808 149 8381.
Category:Nicholas Mendes
