First-Time Buyer Guide: Everything You Need to Know in 2025

Buying your first home is one of life's biggest financial decisions. With house prices, interest rates, and government schemes constantly evolving, having the right information is crucial. This guide covers everything you need to know about buying your first home in 2025.

How Much Deposit Do You Need?

The minimum deposit for most mortgages is 5% of the property's purchase price. On a £250,000 home, that's £12,500. However, a larger deposit opens the door to significantly better interest rates.

Here's how deposit size typically affects your options:

• 5% deposit (95% LTV) — Access to the market, but higher interest rates and limited lender choice
• 10% deposit (90% LTV) — Noticeably better rates; this is where many first-time buyers aim
• 15-20% deposit (80-85% LTV) — Access to competitive rates from most lenders
• 25%+ deposit (75% LTV) — Typically the best rates available

The difference between a 5% and 15% deposit on a £250,000 property could save you £150–£250 per month on repayments. Over a 2-year fixed term, that's £3,600–£6,000.

Understanding Mortgage Types

Choosing the right mortgage type is one of the most important decisions you'll make. Here are the main options:

Fixed Rate Mortgages

Your interest rate stays the same for a set period — usually 2 or 5 years. This means your monthly payments are predictable, making budgeting easier. Fixed rates are the most popular choice for first-time buyers because they offer certainty.

Variable Rate Mortgages

These include tracker mortgages (which follow the Bank of England base rate) and standard variable rates (SVRs). They can be cheaper initially but carry the risk of payments increasing if interest rates rise.

2-Year vs 5-Year Fixed

A 2-year fix gives you flexibility to remortgage sooner, potentially at a better rate. A 5-year fix provides longer-term security. In the current market, 5-year fixes are often only marginally more expensive than 2-year deals, making them attractive for peace of mind.

What Other Costs Should You Budget For?

The deposit is just part of the picture. Here's a realistic breakdown of additional costs:

• Solicitor/conveyancing fees: £800–£1,500
• Survey costs: £300–£700 (depending on the type)
• Mortgage arrangement fee: £0–£2,000 (can often be added to the loan)
• Stamp Duty: First-time buyers pay no stamp duty on properties up to £425,000
• Removal costs: £500–£1,500
• Immediate home costs: £1,000–£3,000 (furniture, repairs, etc.)

As a rule of thumb, budget £3,000–£5,000 above your deposit for these additional costs.

Government Schemes for First-Time Buyers

Shared Ownership

Buy a share of the property (typically 25-75%) and pay rent on the rest. This reduces the deposit needed significantly. You can buy more shares over time through a process called "staircasing." Read more about Shared Ownership.

Lifetime ISA (LISA)

Save up to £4,000 per year and receive a 25% government bonus (up to £1,000 per year) towards your first home deposit. The property must be worth £450,000 or less. You must be aged 18-39 to open one.

First Homes Scheme

Provides a discount of at least 30% on new-build homes for local first-time buyers. Eligibility depends on your local authority area and household income (generally under £80,000).

How the Mortgage Application Process Works

The process typically follows these steps:

1. Decision in Principle (DIP) — A lender confirms they'd likely lend you a certain amount, based on initial information. Takes 24-48 hours. This shows estate agents you're a serious buyer.
2. Property search and offer — Find your property and have your offer accepted.
3. Full mortgage application — Submit detailed financial information, payslips, bank statements, and ID.
4. Property valuation — The lender values the property to confirm it's worth the purchase price.
5. Formal mortgage offer — The lender issues a formal offer (usually valid for 3-6 months).
6. Legal work and exchange — Your solicitor handles searches, contracts, and exchange.
7. Completion — You get the keys to your new home.

From DIP to completion, the process typically takes 3-4 months.

Tips to Improve Your Mortgage Application

• Check your credit report — Review your Experian, Equifax, and TransUnion reports. Fix any errors and register on the electoral roll.
• Reduce existing debt — Pay down credit cards and loans where possible. Lenders assess your total commitments.
• Avoid new credit applications — Each application creates a footprint on your credit file. Avoid applying for new credit in the 3-6 months before your mortgage application.
• Save consistently — Regular savings demonstrate financial discipline. Even small monthly deposits into your savings account look positive.
• Keep your payslips and bank statements tidy — Lenders scrutinise 3 months of bank statements. Avoid gambling transactions and unexplained large payments.

Self-Employed First-Time Buyers

If you're self-employed, getting a mortgage is absolutely possible — but requires more preparation. Most lenders ask for 2-3 years of accounts or SA302 tax calculations. Some accept just 1 year if the figures are strong.

The key is choosing the right lender. Different lenders assess self-employed income in different ways — some use your net profit, others use salary plus dividends for company directors. As whole-of-market advisors, we know exactly which lenders work best for your specific situation.

Why Use a Mortgage Advisor?

As a first-time buyer, you're navigating unfamiliar territory. A mortgage advisor:

• Compares deals from across the entire market — including products you can't access directly
• Handles the application and paperwork for you
• Provides expert guidance on schemes, costs, and timing
• Saves you time and often finds better rates than going direct

At Homeway Mortgages, we specialise in helping first-time buyers. We'll guide you through every step of the process and make sure you get the best deal for your circumstances.