How much can a First Time Buyer borrow?

When looking to purchase a property it is an exciting time with a lot to think about. Most people have a good idea of what their ideal home will look like, the area and type of property they would desire. However, it is important to understand how much you are able to borrow before arranging viewings and possibly setting your heart on a property that isn’t suitable. Here we will look at some of the deciding factors that help lenders determine just how much they are willing to lend for your mortgage.

Criteria for lending:

Banks will use lending criteria to determine how much they are willing to lend you. This is mainly based on how much you earn. The usual criteria for lending is 4.5 times your annual salary, so for example if you earn £25000 a year banks will usually look at lending you £112,500 for your mortgage. They will sometimes take into account other factors such as other outgoings and risks.

Amount of Deposit:

The higher the deposit amount that you have available will positively impact the interest rate available for your mortgage which in turn will allow you to borrow more.

Credit score and history:

Poor credit scores and history will make it difficult for you to source a mortgage lender and if you do have a poor credit history the likelihood is that you will have to pay more interest as you will be deemed as a risk. If the interest is higher you will have to probably borrow less to ensure that the monthly payments are affordable.

Existing debt:

Lenders will look at any current debts and payments that you are making to allow them to make an informed decision when deciding on how much they can agree to lend, The less debt and outgoings you have the higher the amount you will be able to borrow.

Government schemes:
There are government schemes for first time buyers to allow them to get onto the property ladder. Help to buy which is a government scheme helps first time buyers purchase new build property. The government are lending first time buyers up to 20% of a new build property value in an equity loan which in turn gives you a larger deposit amount meaning you are able to borrow more.

In summary regarding the question of how much can I borrow? varies for each individual application for a mortgage dependent on various circumstances. Even if you are on exactly the same salary as another person the amount you can borrow maybe different due to other circumstances. Mortgage calculators can give you an indication when asking how much can I borrow? However, real quotes and estimates are more helpful. Contact one of our friendly advisors today if you would like to find out how much you are able to borrow and we will be more than happy to help.

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