First-time buyer? Here is what lenders look for

Buying your first home can feel like being marked on an exam nobody gave you the syllabus for. In reality, lenders are looking at a fairly predictable set of things, and most of them can be tidied up well before you apply.

Here is what matters, in the order it tends to matter, for first-time buyers in Bristol and the wider South West area.

Affordability, not just income

Income sets the ceiling, roughly four to four and a half times your annual income for most lenders, with some going higher for particular professions or income levels. What decides where you land under that ceiling is everything going out: car finance, loans, credit card balances, childcare, and any Buy Now Pay Later agreements.

Lenders also stress test. They check the payment would still be affordable if rates were higher than the rate you are applying for, which is why the amount you are offered can be lower than an online calculator suggested.

Clearing a small loan before you apply can sometimes lift your borrowing by several thousand pounds. Sometimes it does the opposite by draining the deposit. Worth checking rather than assuming.

Your deposit, and where it came from

Expect to evidence the deposit properly: usually several months of bank statements showing it building up, or a gift letter and proof of funds if a family member is helping. Large unexplained deposits into your account will be queried, so keep the paper trail tidy from the start.

Your credit file, which is not the same as a score

The three-digit number an app shows you is not what lenders see. They look at the underlying file: whether payments have been made on time, how much of your available credit you are using, whether you are on the electoral roll at your current address, and whether there is anything adverse registered against you.

Simple things help. Register to vote, keep card balances well below their limits, avoid multiple credit applications in the months before you apply, and check all three agencies rather than just one, because they do not always hold identical information.

What an Agreement in Principle really means

An Agreement in Principle, sometimes called a Decision in Principle, is a lender's early indication of what they would lend based on the information given so far. Estate agents in Bristol will often ask to see one before they take an offer seriously, so it is worth having in hand before you start viewing.

An Agreement in Principle is a strong signal, not a guarantee. The full application still has to satisfy the lender once documents and the property valuation are in.

If you are looking at flats, check the lease

Most flats are leasehold, which means you own the property for a fixed number of years rather than owning the ground it sits on. Three things to check early: how many years are left on the lease, what the annual service charge and ground rent are, and whether the building has any cladding or remediation issues.

Short leases make lenders nervous and can be expensive to extend, so find out before you fall in love with the place rather than after.

The costs nobody warns you about

Beyond the deposit, set money aside for:

• Stamp Duty Land Tax (SDLT) above £125,000. First-time buyers pay nothing up to £300,000, as long as the property costs £500,000 or less.
• Legal fees, searches and the various disbursements a conveyancer bills for.
• A survey, which is money well spent on anything older or unusual.
• Buildings insurance, which most lenders require to be in place from exchange.
• The unglamorous first month: removals, white goods, and the things you did not realise the seller was taking with them.

Your first payment may be bigger than you expect

First payments often catch people out. Lenders usually collect interest from the day you complete up to the end of that month, alongside your first full monthly payment, so payment one can be noticeably larger than every payment after it. It is normal, and it is not a mistake, but it is worth knowing before it lands.

Talk it through with an adviser in Bristol

Every case is different, and your first purchase is one of those decisions where a half-hour conversation saves months of second-guessing. Our advisers work across Bristol and the South West, search the whole market, and never charge you a fee: we are paid by the lender, not by you. We can often have an Agreement in Principle arranged within 24 hours of speaking to you.

Call 0800 069 9110, 7 days a week, or send us a message and we will call you back at a time that suits.

This article is general information, not advice for your circumstances. Your home may be repossessed if you do not keep up repayments on your mortgage. Speak to an adviser about what is right for you.