First Time Buyer (FTB)
First-time buyers refer to individuals or couples who are purchasing a property for the first time. The process of buying a home can be exciting but also challenging, especially when you're unfamiliar with the various steps involved. Fortunately, there are many resources and programs available to help first-time buyers, including special mortgage products and government assistance.
Understanding Your Finances
1
Credit Score
Lenders use your credit score to assess your ability to repay a mortgage. A good credit score can help you secure a better interest rate. If your credit score needs work, take time to improve it before applying for a mortgage.
2
Deposit
Most lenders require a down payment, which is a percentage of the home's purchase price. As a first-time buyer, some government schemes may allow you to buy with a smaller down payment (e.g., 5% of the purchase price), but typically, you’ll need at least 10-20% for a standard mortgage.
3
Affordability
Lenders will also assess how much you can afford to borrow based on your income and existing financial commitments. As a general rule, the more you can save for a down payment, the better your mortgage options will be.
Mortgage Options
There are several mortgage options that are tailored to first-time buyers:
Help to Buy Scheme
In some countries (such as the UK), first-time buyers can access government-backed schemes like "Help to Buy," where the government provides a loan to cover part of the down payment. This loan is typically interest-free for the first few years.
Shared Ownership
Some first-time buyers opt for shared ownership, which allows you to buy a portion of the property (typically between 25-75%) and pay rent on the remainder. You can gradually increase your share over time.
Joint Owner & Sole Proprietor
A Joint Borrower Sole Proprietor (JBSP) mortgage allows multiple people to apply for a mortgage, but only one person is the legal owner of the property, while the other applicants are jointly liable for the mortgage payments.
Plan for your deposit!
1
Set a Savings Goal
Determine how much you need to save by calculating the deposit (usually 10-20% of the home’s price). For example, on a £200,000 home, a 10% deposit would be £20,000.
2
First-Time Buyer Savings Accounts
In some countries, there are savings accounts specifically designed for first-time buyers that offer tax incentives, such as the Lifetime ISA in the UK, which offers a government bonus.
3
Gifts or Family Help
Some first-time buyers receive help from family members or friends in the form of a gift toward their deposit. If this is the case, you’ll likely need a letter confirming that it’s a gift and not a loan.
Other costs!
In addition to the deposit, there are other costs to keep in mind when buying a home for the first time
