Whether you’re saving a deposit, getting your documents in order, or navigating the thousands of deals on the market, getting your first mortgage can be stressful and time-consuming.

But Which? is here to help. Unfortunately, we can’t make mortgage rates any cheaper, but we can help you get your head around the process, from saving to applying.

Read on to learn about the 12 key things you need to know about getting your first mortgage.

1. How healthy your credit report is

One of the first steps in applying for a mortgage is to check your credit report.

There are three main credit agencies: Equifax, Experian and Transunion. You can get a basic credit report from each for free, or pay for a more in-depth report. 

Each agency will give you a score, but this isn’t the most vital thing. The most important thing is to check that all the information on your  report is correct. 

This includes being on the electoral roll at your current address, and ensuring there are no errors (e.g. incorrect defaults on old accounts). 

2. How much you’ll need for a deposit

To qualify for a mortgage, you’ll almost always need at least 5% of the property’s value as a deposit. So for a £250,000 property, you’d need at least £12,500.

There are plenty of 95% mortgages out there, but if you can stretch to a 10% deposit you’ll have more choice and be able to get a lower rate.

You can use our mortgage deposit calculator to find out how much you might need to save to buy a home in your area. 

3. How much you might be able to borrow

Lenders usually allow you to borrow up to four-and-a-half times your annual household salary.

So if you’re buying with a partner and you collectively earn £50,000, that would be £225,000.

This can vary, depending on the lender, the type of deal and your financial circumstances, including any existing debt commitments. 

4. What’s happening to house prices

House prices flatlined last year, as high mortgage rates locked many people out of moving.

Rates still haven’t come down significantly, and this remains a big barrier to getting on to the property ladder.

However, a slower market may give you greater negotiating power. A chain-free and mortgage-ready first-time buyer can be an attractive proposition to a seller. 

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5. The jargon you’ll encounter

As with all financial products, mortgages come with a baffling array of jargon.

The good news is it’s easy to find jargon busters online that simply set out the key phrases you’ll need to know.

As a starting point, here are some of the most common words and phrases we encounter:

  • Revert rate/standard variable rate: the rate you’ll pay when your fixed term  ends. For example, if you take out a two-year fix, you’ll be automatically moved on to your lender’s SVR after the two-year period ends, unless you remortgage.
  • APRC: the overall cost of the mortgage as one simple percentage. This includes the rate during the fixed period, and the lender’s SVR thereafter. The APRC isn’t that important, as it’s highly unlikely you’ll stick with the same mortgage deal for the full term, but it can be useful for comparison.
  • Guarantor: a person (usually a parent or close family member) who agrees to act as ‘security’ for your loan. This means if you miss a payment, the guarantor will need to take  responsibility for it. Most mortgages don’t require a guarantor.
  • Arrears: if you fall behind on your mortgage payments, you are considered to be ‘in arrears’.

6. That you can get an agreement in principle

Getting a mortgage can be complicated, but you can get a simple indication of whether a lender might be willing to offer you a loan.

Most banks and larger mortgage brokers offer an agreement in principle (AIP), sometimes called a decision in principle (DIP).

You’ll fill in a form about your earnings and outgoings and the lender or broker will conduct a ‘soft’ check on your credit report to see if you’re likely to meet their criteria.

An AIP gives you the confidence to go ahead and view properties knowing there’s a decent chance a full application will be successful. 

A full application won’t usually be submitted until after you’ve had an offer accepted on a property.

7. The rates currently on offer

Mortgage rates are high at the moment, so where you might have got a 90% or 95% deal with a rate of around 3% a couple of years ago, you’ll now be looking at around 5%.

There are hopes that mortgage rates will begin to fall later this year, with the Bank of England expected to cut its base rate.

However, the days of very cheap deals are over for now. See our guide on the best mortgage rates for more information.

8. That rates aren’t everything

As borrowing costs have increased, mortgage lenders have bunched their rates closely together.

Headline-grabbing deals appear from time-to-time, but they tend not to last long, as any lender that offers a particularly cheap rate is quickly inundated with applications.

With little to choose on initial rates, it’s important to look at the other costs and incentives involved with mortgages.

  • Up-front fees: it’s common for first-time buyer mortgages to come with fees of around £1,000, though significantly higher and lower figures are available. A fee-free deal will usually have a higher interest rate, so you’ll need to weigh up whether paying the up-front fee is worth the saving in the long term.
  • Cashback: many mortgages come with cashback incentives, usually of around £500. These are paid after the mortgage has been granted and your payments have started. Cashback incentives are nice to have, but are rarely a deal-breaker.
  • Free legals: some mortgage lenders offer free legal services as part of the deal. You’ll sometimes be offered the choice between a deal with cashback or one with free legals. Research the services offered by the lender and consider whether you’re better paying for them yourself and recouping some of the money in cashback.

9. That your bank might not be the best option

You might be tempted to go to your bank in the first instance, believing you’ll be more likely to be accepted by a lender with which you have a long-term relationship. 

However, it’s highly unlikely your bank will offer the best deal, in a market where more than 50 mainstream mortgage lenders are competing against each other.

You might also think it’ll be easier to apply directly to your current bank, especially if the application process is a bit overwhelming. If this is the case, you might be best speaking to a mortgage broker, who can find you a suitable lender and guide you through the process. 

10. That you might need to consider a ‘marathon’ mortgage

Many first-time buyers are taking out so-called ‘marathon’ mortgages lasting 35 years or longer.

Borrowing for longer may help you meet the lender’s affordability requirements, and will reduce the amount you pay each month. There is also the option to cut your term down via overpayments. However, the big caveat is that the longer the term, the greater the amount you’ll pay in interest.

Lenders set maximum age limits on when the mortgage must be repaid – usually by age 70, 75 or 80. This means your age at the time of application will be a key factor in how long you can borrow for. See our guide on marathon mortgages for more information. 

11. The documents you’ll need to get together

Once you’ve had an offer accepted on a property, it’ll be time to submit your formal mortgage application.

There’s quite a lot of admin involved in this. You’ll need to get together lots of documents, and in most cases you’ll need the originals.

Documents required include proof of ID, proof of address, financial statements (current account and any credit cards/loans), and proof of employment. 

Find out more about acceptable forms of ID in our guide on how to apply for a mortgage.

12. That help is at hand

As we mentioned earlier, you don’t have to go through the mortgage application process alone.

You can find lots of free advice on the Which? website, and you might find it useful to speak to a mortgage broker. 

Most brokers are fee-free for applicants, so if you’re unsure about anything we’ve mentioned in this article, or want someone else to find you the best deal, it’s worth contacting a broker.

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