For people buying their first UK home who want the full process end to end — from proving you can borrow, through the hidden costs beyond the deposit, to collecting the keys. It is the process guide; for the budgeting detail and every cash cost on day one see first-time buyer budgeting, and for how much you can actually borrow see mortgage affordability.
Before you view anything: the Agreement in Principle
An Agreement in Principle (AIP) is a soft-check document from a lender stating roughly how much they will lend you. Estate agents expect one before they will take an offer seriously, so get it early — it also tells you your real price ceiling before you fall for a house you cannot afford. It usually involves a soft credit search that does not affect your score.
How much you can borrow: the 4.5× rule
Most lenders cap borrowing at around 4.5 times gross annual household income, subject to affordability checks that stress your ability to pay at a higher rate. On a £40,000 salary that is roughly £180,000; the rest of any purchase price must come from your deposit. Joint buyers are assessed on combined income.
The deposit and the LTV it buys you
- 5% deposit — possible under government guarantee schemes, but carries the highest rates and strictest checks.
- 10% deposit — the standard entry point, with better rates and a higher chance of approval.
- 20%+ deposit — unlocks significantly cheaper rates by dropping you into a lower LTV band.
First-time buyers can use a Lifetime ISA to save the deposit: the 25% government bonus on up to £4,000 a year is hard to beat for this purpose.
The costs beyond the deposit
The biggest first-time buyer mistake is assuming the deposit is the only cash needed. Budget for:
- Conveyancing (solicitor): £1,000–£2,000.
- Survey: £400–£800 for a Level 2 Homebuyer's Report — this is for you, not the lender, and flags damp, structural issues and costly repairs.
- Mortgage arrangement fee: often £999, sometimes addable to the loan (but you then pay interest on it for 25 years).
- Stamp Duty Land Tax: first-time buyers pay no SDLT on the first £300,000 of a property up to £500,000 (5% on the portion from £300,001 to £500,000). Above £500,000 the relief does not apply. Verify current thresholds at GOV.UK: Stamp Duty Land Tax.
Worked example: total cash on day one for a £250,000 home
- 10% deposit: £25,000
- Solicitor: £1,500
- Level 2 survey: £500
- Stamp Duty: £0 (within FTB relief)
- Mortgage fee: £999 (added to loan)
- Total cash needed up front: ≈ £27,000
Plan your deposit timeline with the Savings Goal Calculator and stress-test the monthly payment with the Mortgage Calculator.
From offer to completion
- Make an offer once you have an AIP; it is subject to contract and survey, so you are not committed yet.
- Instruct a solicitor and surveyor. The survey tells you whether the price is fair and whether expensive repairs are coming.
- Formal mortgage application — the lender does their own valuation and full affordability checks.
- Exchange contracts — you pay the deposit and become legally bound.
- Completion — your solicitor transfers the mortgage funds to the seller's solicitor; once cleared, you get the keys.
Limitations
Housing markets are highly localised and SDLT thresholds and FTB relief change with government budgets — confirm current rules on GOV.UK before relying on the figures. Affordability multiples and rates vary by lender and credit history. Your home may be repossessed if you do not keep up mortgage payments. This is educational, not advice; a mortgage broker can tailor recommendations to your situation.
Written and maintained by Shaun da Silva, Finance Consultant. Learn how we ensure accuracy and quality in our Editorial Policy.