First-Time Buyer Mortgage FAQs
Answers to Common Questions About Buying Your First Home
Buying your first home is exciting, but it can also come with a lot of questions.
How much can you borrow? How much deposit will you need? When should you get an Agreement in Principle? What documents will a lender ask for? Should you make an offer before arranging a mortgage? What happens after your offer is accepted?
At Cambs Ely Mortgages, we regularly help first-time buyers understand the mortgage process and prepare for buying their first home.
We've brought together answers to some of the most common questions first-time buyers ask us.
Every mortgage application is different. Your borrowing options will depend on your income, deposit, existing commitments, credit history, property and individual circumstances, so the information below should be treated as general guidance rather than personalised mortgage advice.
Getting Started
When should I speak to a mortgage adviser?
You don't need to wait until you've found a property.
In many cases, speaking to a mortgage adviser before you start seriously viewing homes can be useful. It allows you to understand your potential borrowing, deposit position, likely monthly payments and some of the costs involved in buying a property.
This can give you a more realistic property budget before you begin making offers.
Do I need an Agreement in Principle before viewing properties?
Not necessarily, but having an Agreement in Principle can be useful when you're actively looking to buy.
It provides an initial indication of how much a lender may be prepared to lend based on the information provided. Estate agents may also ask whether you have an Agreement in Principle when discussing an offer.
However, an Agreement in Principle isn't a mortgage offer and doesn't guarantee that a full mortgage application will subsequently be approved.
What is an Agreement in Principle?
An Agreement in Principle is an initial assessment carried out by a mortgage lender.
You may also hear it called an AIP, Decision in Principle or DIP.
The lender uses information about your circumstances to indicate whether it may be prepared to lend and, depending on the lender, approximately how much.
A full mortgage application involves further checks, including verification of your income and circumstances, credit assessment and an assessment of the property.
How long does an Agreement in Principle last?
This depends on the lender.
Agreements in Principle are normally valid for a limited period. If yours expires before you find a property, it may be possible to obtain another one, subject to your circumstances and the lender's criteria at that time.
Does an Agreement in Principle guarantee my mortgage?
No.
An Agreement in Principle is not a mortgage offer.
A lender can still decline or change its decision following the full mortgage application if information changes, additional information comes to light or the property doesn't meet its lending requirements.
This is one reason it is important not to make significant changes to your financial circumstances during the buying process without considering how they could affect your mortgage.
Mortgage Affordability
How much can I borrow as a first-time buyer?
There isn't a single calculation that applies to every borrower.
Mortgage lenders have their own affordability models and can consider your income alongside existing loans, credit cards, finance agreements, dependants, regular commitments, mortgage term and other expenditure.
Some lenders may also treat bonuses, overtime, commission and other variable income differently.
This means two people with the same salary don't necessarily have the same mortgage borrowing capacity.
Is mortgage borrowing simply based on a multiple of my salary?
Not entirely.
Income multiples can form part of mortgage lending, but affordability is more complicated than multiplying your salary by a single number.
Lenders also assess your expenditure and financial commitments and apply their own affordability calculations. The amount you may be able to borrow can therefore vary between lenders.
Can bonuses, overtime or commission count towards my mortgage?
Potentially.
Some lenders may consider additional income such as regular overtime, bonuses or commission, but the amount they accept and the evidence required can vary.
The history and consistency of that income may also be relevant.
Can benefits or other income be included?
Potentially.
Different lenders have different approaches to additional sources of income.
Whether a particular source of income can be used, and how much of it a lender will accept, depends on the lender's criteria and your wider circumstances.
Does having debt reduce how much I can borrow?
It can.
Personal loans, car finance, credit cards and other financial commitments can affect mortgage affordability because lenders need to consider the payments you already have to make.
The effect depends on the type and amount of borrowing and the lender's affordability calculation.
Your Deposit
How much deposit do I need as a first-time buyer?
The deposit required depends on the mortgage products available, the property and your circumstances.
Mortgages can be available at different Loan to Value levels, so there isn't one deposit requirement that applies to every first-time buyer.
Generally, providing a larger deposit reduces the Loan to Value and may provide access to a wider selection of mortgage products.
What does Loan to Value mean?
Loan to Value, usually shortened to LTV, compares the amount you're borrowing with the value or purchase price of the property.
For example, if a property costs £200,000 and you provide a £20,000 deposit, you would need to borrow £180,000.
The mortgage would therefore represent 90% of the purchase price, making it a 90% LTV mortgage.
Does having a bigger deposit give me a better mortgage rate?
It can.
Mortgage products are often arranged into Loan to Value bands. Reducing the Loan to Value can sometimes provide access to different mortgage products and potentially lower interest rates.
However, the lowest Loan to Value isn't automatically the right objective if using all your savings for the deposit leaves you without money for buying costs, emergencies or other priorities.
Can my parents or family give me my deposit?
Potentially, yes.
This is commonly known as a gifted deposit.
Mortgage lenders usually want confirmation that the money is genuinely being gifted rather than being provided as a loan that must be repaid.
The person providing the gift may also need to provide identification, evidence of where the money has come from and a declaration concerning the gift.
Requirements vary between lenders and solicitors.
Can I borrow my deposit?
Using borrowed money for a deposit can be problematic and many lenders will not accept certain forms of borrowed deposit.
If any part of your deposit is coming from a loan, credit card or another person and is expected to be repaid, this should be disclosed and discussed before proceeding.
Do I need to use all my savings as a deposit?
Not necessarily.
It's important to consider the entire cost of buying a home rather than focusing solely on achieving the largest possible deposit.
You may need money for solicitors, surveys, mortgage fees, moving costs, insurance, furniture, repairs and other expenses.
Keeping an appropriate financial buffer after completing your purchase can also be worth considering.
Credit & First-Time Buyer Mortgages
Do I need a perfect credit score to get a mortgage?
No.
There isn't one universal credit score that determines whether every UK mortgage lender will approve an application.
Lenders use their own lending criteria and credit assessment processes. Your overall credit history, existing commitments and how you've managed credit can be relevant.
Will checking my own credit report hurt my credit score?
Checking your own credit report through a credit reference service does not normally have the same effect as a lender carrying out a hard credit search.
Reviewing your report before applying for a mortgage can help you identify incorrect information or previous credit issues that may need to be discussed.
Can I get a first-time buyer mortgage if I've had missed payments?
Potentially.
It depends on the type of missed payment, when it occurred, how frequently it happened and your wider credit history.
Different lenders have different criteria for previous credit problems.
Can I get a mortgage with a default or CCJ?
Potentially.
A default or County Court Judgment doesn't automatically mean a mortgage is impossible.
The amount involved, age of the credit event, whether it has been satisfied and the circumstances surrounding it can all be relevant.
Some lenders have more flexible criteria than others.
Should I use Buy Now, Pay Later while applying for a mortgage?
It is sensible to be cautious about taking on new borrowing before or during a mortgage application.
Buy Now, Pay Later commitments and other forms of credit may be considered when a lender assesses your affordability and overall financial circumstances.
If you're preparing to buy a home, avoiding unnecessary new financial commitments can help keep your circumstances stable.
Can I take out car finance before completing my house purchase?
You should speak to your mortgage adviser before taking significant new borrowing during a mortgage application.
A new car finance agreement changes your monthly commitments and could affect affordability.
A lender may reassess your circumstances before completion, so receiving a mortgage offer doesn't mean that significant changes to your finances cannot affect the application.
Employment & Income
Do I need to have been in my job for years before getting a mortgage?
Not necessarily.
Lenders have different employment criteria.
Some may consider applicants who have recently started a new job, while others may have requirements concerning employment history, probation periods or the type of employment contract.
Can I get a mortgage during a probation period?
Potentially.
Some lenders may consider applicants during probation, while others may apply additional criteria.
Your employment history and whether the new role is in the same industry can sometimes be relevant.
Can I get a mortgage on a fixed-term contract?
Potentially.
Different lenders have different criteria concerning fixed-term contracts.
They may consider factors such as the remaining contract term, previous contract history, profession and continuity of employment.
Can I get a mortgage if I'm self-employed?
Yes, subject to affordability and lender criteria.
Self-employed applicants generally need to evidence their income differently from employed applicants.
The way income is assessed can also vary depending on whether you're a sole trader, partner, contractor or limited company director.
Finding & Offering on a Property
Should I get an Agreement in Principle before making an offer?
It can be helpful.
An Agreement in Principle gives you an indication of potential mortgage borrowing and can demonstrate that you've already started considering the finance required for the purchase.
However, it still doesn't guarantee that the lender will approve the property or the full mortgage application.
Should I offer the full asking price?
That is a decision for you as the buyer.
The asking price is what the seller would like to receive, but it doesn't necessarily determine what the property is worth or what a lender's valuation will conclude.
Your offer may be influenced by local comparable properties, the property's condition, demand, how long it has been marketed and your own assessment of its value.
What happens once my offer is accepted?
Once an offer is accepted, the mortgage and legal processes can begin in more detail.
Your mortgage adviser can research the appropriate mortgage options and, once you have agreed how you wish to proceed, submit the full mortgage application.
You'll also need a solicitor or conveyancer to deal with the legal work involved in purchasing the property.
The lender will need to assess both you as the borrower and the property being offered as security.
Does having my offer accepted mean the property is definitely mine?
No.
In England, an accepted offer does not normally make the transaction legally binding.
The legal commitment generally occurs later in the conveyancing process when contracts are exchanged.
Until then, circumstances can potentially change for either party.
The Mortgage Application
What documents will I need?
The exact requirements depend on your circumstances and the lender, but documents commonly requested can include:
Identification
Proof of address
Recent bank statements
Recent payslips for employed applicants
Evidence of self-employed income where applicable
Evidence of your deposit
Details of existing financial commitments
Further documents may be required depending on your circumstances and the lender.
Why does the lender need my bank statements?
Bank statements can help a lender verify income and understand financial commitments and account conduct.
They may also help evidence the source of your deposit.
The information required and period covered vary between lenders.
Will the lender check my credit again after the application?
A lender may carry out additional checks during the mortgage process.
You should therefore try to keep your financial circumstances stable between obtaining an Agreement in Principle, applying for the mortgage and completing the purchase.
What is mortgage underwriting?
Underwriting is the lender's assessment of the mortgage application.
The underwriter may review your income, expenditure, credit history, documentation and other information to decide whether the application meets the lender's criteria.
They may request additional information before making a final decision.
Valuations & Surveys
Is the lender's mortgage valuation a property survey?
Not necessarily.
A lender's valuation is primarily carried out for the lender to determine whether the property provides acceptable security for the mortgage.
It shouldn't automatically be treated as a detailed inspection of the property's condition.
Should I arrange my own property survey?
That is your decision, but buyers may choose to arrange an independent survey to obtain more information about the property's condition.
The appropriate level of survey can depend on factors such as the property's age, construction, condition and complexity.
What happens if the lender values the property lower than my offer?
This is sometimes referred to as a down valuation.
If the lender values the property below the agreed purchase price, it may affect the amount it is prepared to lend.
You may then need to consider your deposit, renegotiating the purchase price or potentially reviewing alternative options.
Mortgage Offers & Completion
What is a mortgage offer?
A mortgage offer is the lender's formal offer to provide the mortgage, subject to the conditions contained within it.
It is issued after the lender has completed the necessary assessment of the application and property.
How long does a mortgage offer last?
Mortgage offers normally have an expiry date, but the length of time varies between lenders and can also depend on the type of transaction.
If a purchase is significantly delayed, it may be necessary to discuss an extension or reassessment with the lender.
Can my mortgage offer still change?
A mortgage offer is an important milestone, but you still need to comply with its terms and inform the relevant parties if your circumstances materially change.
A lender may reassess an application if significant new information arises before completion.
What is exchange of contracts?
Exchange of contracts is the stage at which the buyer and seller normally become legally committed to the transaction in England.
Your solicitor or conveyancer will guide you through the legal requirements and explain the implications before exchange takes place.
What is completion?
Completion is when the purchase is finalised.
The mortgage funds and other purchase monies are transferred through the legal process and, once completion has taken place, you can normally collect the keys to your new home.
Mortgage Costs
What costs are involved in buying a home?
Your deposit isn't the only cost to consider.
Depending on the transaction and your circumstances, you may need to budget for:
Mortgage advice or arrangement fees
Mortgage product fees
Solicitor or conveyancing fees
Searches
Survey costs
Moving costs
Insurance
Any applicable property taxes
Understanding these costs before you begin making offers can help you decide how much of your savings you are comfortable using as a deposit.
Do you charge first-time buyers for the initial conversation?
There is no charge for your initial conversation with Cambs Ely Mortgages.
This gives us an opportunity to understand your circumstances and discuss what you're trying to achieve before you decide whether to proceed.
What does Cambs Ely Mortgages charge for arranging a mortgage?
A fee may be payable for arranging your mortgage.
Your adviser will confirm the amount before you choose to proceed.
Our mortgage arrangement fee is usually between £295 and £995, with the precise amount depending on your circumstances and the complexity of the work involved.
Choosing a Mortgage
Should I choose a two-year or five-year fixed mortgage?
Neither is automatically better.
A two-year fixed mortgage provides certainty for a shorter period and allows you to review your mortgage sooner.
A five-year fixed mortgage can provide payment certainty for longer, but you may also be committed to the product and its Early Repayment Charges for longer.
Rates, fees, future plans, the likelihood of moving home and your preference for payment certainty should all be considered.
Should I choose the mortgage with the lowest interest rate?
Not necessarily.
The headline interest rate is important, but it isn't the only cost.
Product fees, valuation fees, incentives, cashback and the length of the mortgage deal can affect the overall cost.
A lower rate with a significant product fee isn't automatically cheaper than a slightly higher rate with lower fees.
Should I take the longest mortgage term possible to keep my payments low?
A longer mortgage term generally reduces the required monthly payment on a repayment mortgage.
However, borrowing for longer can mean paying more interest over the life of the mortgage.
The objective should be to find a term that balances affordable monthly payments with the longer-term cost of borrowing.
Can I overpay my mortgage later?
Many mortgage products allow some level of overpayment, but the rules vary.
There may be limits on how much you can overpay without incurring an Early Repayment Charge during a particular period.
Your mortgage illustration and mortgage offer will explain the conditions that apply to your particular product.
Protection for First-Time Buyers
Do I have to take life insurance with my mortgage?
Life insurance is not generally a legal requirement simply because you're taking a mortgage.
However, buying a home creates a significant financial commitment, so it can be an appropriate time to consider what would happen financially if you died, became seriously ill or were unable to work.
What protection should a first-time buyer consider?
The appropriate protection depends on your individual circumstances.
Areas that may be considered include life insurance, critical illness cover and income protection.
The purpose isn't simply to insure the mortgage. It is to understand the financial consequences of death, serious illness or being unable to work and decide which risks you want to protect against.
What is income protection?
Income protection is designed to provide a replacement income if illness or injury prevents you from working and the policy conditions are met.
This can be particularly relevant when taking on a mortgage because your mortgage payment and everyday living costs still need to be met if your income stops.
What is critical illness cover?
Critical illness cover is designed to pay a benefit following diagnosis of a specified serious illness where the policy definition is met.
Policies differ in the illnesses covered and the definitions used, so the details of the cover are important.
What Should I Avoid While Buying My First Home?
Once you're preparing for a mortgage, keeping your financial circumstances stable can be very important.
Try to avoid making significant financial changes without discussing them with your mortgage adviser first.
That can include taking new loans, car finance, credit cards or other borrowing, significantly increasing existing credit balances or making major changes that affect your income or expenditure.
Even after receiving a mortgage offer, the purchase hasn't completed yet.
If something changes, tell your mortgage adviser rather than assuming it won't matter.
Have More First-Time Buyer Questions?
Buying your first home involves much more than choosing an interest rate.
You need to understand affordability, deposits, lender criteria, the property, mortgage costs, legal work and what happens between having an offer accepted and finally receiving the keys.
Our First-Time Buyer Guide provides a more detailed explanation of the complete home-buying journey, while our Mortgage & Home Buying Guides explore individual subjects in greater depth.
Our Educational Videos also provide straightforward explanations of mortgage and home-buying topics if you prefer to learn by watching.
Ready to Start Your First Home Journey?
You don't need to have found a property before speaking to us.
An initial conversation can help you understand your potential borrowing, deposit, likely property budget and the steps you may need to take before making an offer.
Cambs Ely Mortgages is based in Cambridgeshire and helps first-time buyers in Ely, Cambridge, Cambridgeshire, East Anglia and throughout England through convenient remote appointments.
Building Blocks for a Brighter Future.
#BuildingBlocksForABrighterFuture
Your home may be repossessed if you do not keep up repayments on your mortgage.
Information on this page is for general guidance and does not constitute personalised mortgage, protection, insurance, tax, legal or financial advice. Mortgage availability, affordability and eligibility depend on individual circumstances and lender criteria. Protection policies are subject to insurer terms, conditions and underwriting.