First-time buyer mortgage hurdles: what to expect and how to prepare

Buying your first home is undoubtedly exciting. But it can also feel like one of the most difficult financial milestones to reach.

For many first-time buyers, the challenge isn’t just finding the right property. That’s just the beginning. It’s everything else that makes the big picture hard to take in all at once:

• Saving a large enough deposit
• Passing affordability checks
• Managing existing debts
• Dealing with strict lender criteria
• Understanding how lenders assess your income

These hurdles can feel higher if you’re a self-employed professional. Lenders seem to make it harder if you’re a contractor, freelancer, agency worker, or part of the wider flexible labour workforce.

Yes, you may earn well. But your income doesn’t fit the traditional employed model lenders use to gauge affordability. As such, many lenders won’t assess your application in the most favourable light.

The good news is that first-time buyer mortgages aren’t out of reach. With the right preparation and the right lender, it’s possible to overcome many of the common barriers. This guide explains how.

Why first-time buyers can find mortgages challenging

First-time buyers often face completely different challenges compared with existing homeowners.

You’re unlikely to have equity from a previous property sale. You may still be renting while trying to save a deposit. Your credit history might be limited. Your income may be growing, but it has yet to be reflected clearly on paper.

You may also be dealing with other monthly commitments that reduce your borrowing power. Student loans, car finance, credit cards, or split-pay credit can all eat into your disposable income.

Lenders will analyse your full financial picture, including:

• How much deposit you have saved
• How stable and sustainable your income appears
• Your credit history
• Your existing debts and monthly commitments
• The type of property you are buying
• Whether the property valuation supports the purchase price
• How affordable the mortgage would be if interest rates increased

Understanding these areas before you apply can help you avoid surprises later in the process.

Saving for a deposit

One of a first-time buyer’s biggest hurdles is building up a large enough deposit. And, the grander the home you want to buy, the larger the deposit you’ll need.

Simply put, the larger your deposit, the lower the lender’s risk. A bigger deposit can also improve the range of mortgage products available. And, because of the lower perceived risk, you can access more competitive interest rates.

But saving a deposit isn’t easy, especially if you are already renting. Monthly rent, bills, transport, insurance, and everyday living costs mount up. Taken together, they can make it difficult to put money aside consistently.

For the self-employed, irregular payment patterns can affect saving for a deposit. You may have months with high income, followed by quieter periods, if your work is seasonal, or gaps between contracts. Fluctuating income makes budgeting and saving even more important.

Lenders will also want to understand where your deposit has come from. It may come from personal savings, a gift from family, a Lifetime ISA, or multiple sources. If part of your deposit is a gift, lenders often ask for evidence confirming it’s a genuine gift rather than a loan that you’ll have to repay.

Affordability checks and income limits

Another common challenge is mortgage affordability. All lenders have their own unique attitude to risk. This outlook will inform their lending criteria and affordability calculations.

It’s easy to assume that if you can afford the monthly payments, you should get the mortgage. Unfortunately, lenders don’t look at affordability in such simple terms.

They analyse your income, outgoings, credit commitments, dependants, household costs, and future affordability. They also apply their own internal calculations to decide how much they’re willing to lend.

For first-time buyers, such scrutiny can be frustrating. You may already be paying rent that’s similar to, or even higher than, the expected mortgage payment. But lenders still need to prove that you can afford the mortgage repayments under their rules.

Meeting affordability criteria can be especially important for contractors and self-employed workers. Some lenders base affordability on salary and dividends, which don’t reflect a contractor’s true affordability.

Other lenders will consider day rate, contract value, retained profits, or average income over several years. But getting access to those lenders is often a challenge in itself. So, yes: the difference between lenders can be significant.

Why lenders can assess contractors’ circumstances differently

Contractors often face an extra layer of complexity when applying for a first-time buyer mortgage.

A traditional employee usually provides payslips and a P60. A contractor may have a day rate, contract history, company accounts, dividends, retained profits, or umbrella payslips. Having to go these extra miles doesn’t mean the contractor is a higher risk. But it does mean the lender needs to understand the income structure and the nature of contracting.

Some lenders are more contractor-friendly than others. A lender that understands contract-based income will use contract-based underwriting. This method enables them to assess affordability using your contract rate rather than relying only on salary and dividends.

Contract-based underwriting can make a major difference to borrowing potential. Even moreso for first-time buyers trying to maximise affordability while also managing deposit constraints.

But again, accessing these specialist underwriters is a major hurdle. Most specialist underwriting teams won’t deal with the public direct. They insist on applications being vetted by specialist brokers like us before they even open the file.

Managing debt-to-income ratios

Debt can have a direct impact on how much you can borrow. Lenders will look at your regular financial commitments, including:

• Credit cards
• Personal loans
• Car finance
• Student loans
• Buy now, pay later agreements
• Smartphone contracts
• Childcare costs
• Maintenance payments
• Other fixed monthly commitments

Even if you’ve never missed a payment, these commitments can reduce your available income. Less disposable income can then impact the lender’s affordability assessment.

For first-time buyers, managing debt before applying for a mortgage can be extremely helpful. To help improve your position, you should try to:

• Reduce credit card balances
• Avoid unnecessary new borrowing
• Keep monthly financial commitments under control

You must prove your mortgage would remain affordable alongside your other commitments. Lenders want to see that you manage your overall finances responsibly. Showing financial competency is particularly important if your income is variable or you’re a contractor between contracts. It could be the difference between a successful application and rejection.

Credit history matters

Your credit history plays a vital part in any mortgage application. Having a good credit score applies to all applicants, not just first-time buyers.

Lenders will usually review how you have handled credit in the past, including:

• Whether you have made payments on time
• How much credit you use
• Whether you have any missed payments, defaults, CCJs, or other adverse credit

For first-time buyers, the issue is not always bad credit. Sometimes it’s a limited credit history. If you’ve never had much credit, there’ll be less evidence for lenders to assess how you manage borrowing.

Before applying, it’s sensible to check your credit report and make sure the information is accurate. You should also make sure you:

• Are registered on the electoral roll where possible
• Keep credit utilisation sensible
• Avoid missed payments
• Must be cautious about taking out new credit shortly before applying for a mortgage

A strong credit profile does not guarantee mortgage approval. But it could improve your chances, secure better rates, and increase the number of lenders available to you.

Interest rate stress testing

When lenders assess affordability, they don’t just look at whether you can afford the mortgage at today’s rate. They may also consider whether the mortgage would remain affordable if future interest rates rose. We call this part of the process stress testing.

The aim is to reduce the risk of borrowers taking on a mortgage that may become unaffordable. Both future rates rising and monthly payments increasing at the end of a fixed-rate period could swing this balance.

For first-time buyers, stress testing can sometimes reduce borrowing capacity. Personally, you may feel comfortable with the initial monthly payment. But the lender’s internal calculation may still limit how much they’re prepared to offer.

Stress testing is another reason why preparation matters. Reducing unnecessary commitments, improving your deposit position, and choosing the right lender can all help strengthen an application.

Joint borrower sole proprietor mortgages

For some first-time buyers, affordability is the main obstacle. In these cases, a joint-borrower sole-proprietor mortgage may be worth exploring.

A joint borrower sole proprietor mortgage allows another person to join the mortgage application without being named as an owner of the property. Most lenders will only accept a parent or a close family member to be the ‘joint borrower’.

The joint borrower’s income could support overall affordability, while the first-time buyer remains the legal property owner. This support helps when a buyer can afford the monthly payments on paper, but doesn’t meet the lender’s borrowing calculation on their own.

However, JB/SP mortgages aren’t suitable for everyone. The supporting borrower would still be responsible for meeting the mortgage repayments. As such, lenders will assess their income, age, commitments, and financial circumstances, too.

It’s important to take advice before considering this option. There can be legal, tax, and financial implications, which is why lenders often insist that only the closest family members are involved.

Property downvaluations

Another issue first-time buyers may face is a property downvaluation. A downvaluation happens when the lender’s valuation comes back lower than the agreed purchase price.

For example, you may agree to buy a property for a set price. But when the lender values it, they may determine it’s worth less.

The lender always bases the mortgage on their valuation, not the price you have agreed to pay. Such a discrepancy can, obviously, create problems. If the valuation is lower than expected, you may need to:

• Renegotiate the purchase price
• Increase your deposit
• Find another lender
• Reconsider whether the property is still the right purchase

For first-time buyers with limited savings, downvaluations can be particularly difficult. If you don’t have spare funds, bridging the gap between the agreed price and the lender’s valuation may not be feasible.

Anticipating such hurdles is why it’s important not to stretch yourself too thin. Setting aside some savings for unexpected costs can give you flexibility if such issues arise.

Property type limitations

Not every property is acceptable to every lender. Some property types can be more difficult to mortgage, including:

• Certain types of flats/apartments
• Ex-local authority properties
• Studio flats
• Properties above commercial premises
• Non-standard construction homes
• High-rise blocks
• Properties with short leases
• Homes with cladding concerns

More affordable property types, especially in expensive areas, may attract first-time buyers. But if the property falls outside a lender’s criteria, it can restrict your borrowing options.

That a property falls outside the norm doesn’t always mean that it’s unmortgageable. It just means you may need a lender comfortable with that specific property type.

Before making an offer, it can be helpful to understand whether the property is likely to raise any lending concerns. Talking to a specialist broker first can help you decide whether a certain property type is worth pursuing.

Why lender choice matters

Not all lenders assess first-time buyers in the same way. Some are stricter on affordability. Some are more flexible with contractor income. Some are more comfortable with gifted deposits. Some have different rules around property types, credit history, or employment structures.

For a first-time buyer with straightforward PAYE income, traditional lenders may offer multiple options. But for applicants with contract-based income, variable earnings, limited accounts, or more complex financial profiles, choosing the correct lender from the outset becomes even more important.

That’s why we’ve spent over two decades building relationships with self-employed and contractor-friendly lenders. We want to make sure you get your mortgage application right first time.

But a declined application doesn’t always mean you can’t get a mortgage. It may simply mean that the lender wasn’t the right fit for your circumstances.

But, please be warned. Every application leaves a trace on your credit file. Too many failed applications will make it harder to get a mortgage in the future. If you have non-standard income, talk to a specialist before you submit your application!

How first-time buyers can improve their chances of mortgage success

First-time buyers can take several steps to improve their chances of success before applying for a mortgage:

• Check your credit report early:
  Review your credit file for errors, missed payments, old addresses, or unexpected issues.
• Build your deposit where possible:
  A larger deposit can improve your options and reduce lender risk.
• Keep debts under control:
  Reducing monthly commitments can help with mortgage affordability assessments.
• Avoid unnecessary new credit:
  New credit agreements, such as loans, credit cards, or finance contracts, can affect your application before you apply.
• Keep evidence of your income:
  Contractors should keep contracts, accounts, payslips, bank statements, and tax documents organised.
• Understand your income structure:
  How lenders assess your income will depend on whether you’re employed, self-employed, a limited company director, an umbrella worker, or a contractor.
• Get advice before making an offer:
  Understanding your borrowing potential early can help you set a realistic budget and avoid wasted time. Talk to us if you’re unsure of any aspect of the process!

First-time buyer mortgages for contractors

Contractors can make for strong mortgage applicants. But they often need the right lender and the right presentation of their income and situation.

A contractor may have a strong day rate and a consistent work history. But if a lender only looks at salary and dividends, the application may not reflect their true earning potential.

Specialist contractor mortgage advice can help identify lenders that understand flexible working patterns. Underwriters at contractor-friendly lenders will assess income in a way that more truly reflects your affordability.

Contractor-friendly lenders are particularly useful for contractor first-time buyers who need to balance:

• Deposit size
• Affordability
• Evidencing income
• Contracting history and continuity
• Credit history
• Property choice

Our guide, Unlock your mortgage potential with contract-based underwriting, explains contractor mortgages in more detail.

Final thoughts and next steps

First-time buyers face a range of mortgage hurdles. From saving a deposit to passing affordability checks to meeting lender criteria, it can seem an uphill battle.

For contractors and flexible workers, the process can prove even more complex. However, having non-traditional income does not automatically mean you’ll struggle to get a mortgage.

The key to application success is understanding how lenders assess your circumstances. You can then make sure your application goes to the right lender from the outset.

At Freelancer Financials, we specialise in helping the entire flexible workforce secure mortgages. Contractors, freelancers, self-employed professionals, locums, CIS workers and more have all successfully used our services.

After getting to understand what you need, our experienced advisers can work with you to explore your options, whether you’re:

• Buying your first home
• Trying to understand your affordability
• Unsure how lenders will assess your income

Have a confidential chat with our team today, even if you’re just exploring your options. We’ll help you find your feet as a first-time buyer.

In the meantime, use our range of calculators to work out things like:

• How much you may be able to borrow
• What deposit you may need
• What Stamp Duty you may have to pay, and more

Being prepared is everything. We’re here to help in any way we can. For now, good luck!

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We’re committed to transparency and upholding our responsibility to Consumer Duty. As such, our parent company, Mortgage Quest, has produced an in-depth PDF guide for first-time buyers. Here’s the comprehensive document for you to download: First-Time Buyers’ Guide: Your leg-up onto the property ladder (no sign-up required).