First Time Buyer Tips: Hidden Mortgage Mistakes That Could Cost You Thousands

Most advice for first-time buyers centers on down payments, but homeownership costs go way beyond the original expenses. Experts suggest building an emergency fund worth 10% of your home’s value to cover unexpected costs. Smart comparison of mortgage rates, terms, and lender fees can save you money on your purchase. The stack of bills that comes after you buy your home might catch you off guard if you’re not prepared.

This piece reveals common mistakes new buyers make during their mortgage journey and offers practical tips to direct your property purchase with confidence.

One big mistake first-time buyers make is looking for houses without getting a mortgage in principle first. This can waste time, lead to disappointment, and you might lose your dream home to buyers who came better prepared.

A mortgage in principle (also called an Agreement in Principle, Decision in Principle, or mortgage promise) is a document from a lender that shows how much they might lend you based on simple information about your finances. While it’s not a guaranteed approval like a full mortgage offer, it’s a crucial first step in your home-buying experience.

Why an AIP matters to sellers

Estate agents and sellers see your AIP as proof that you’re a serious buyer. Surveys show that all but one of these buyers agree that having a mortgage in principle makes them more appealing to sellers. On top of that, 58% of buyers think getting a mortgage in principle before house hunting is very important.

The current competitive property market means an AIP gives you a real edge over other potential buyers. Estate agents give priority viewings to people who can prove they’re financially ready. Some areas—especially those in high demand—won’t even let you view a property without an AIP.

Sellers naturally prefer buyers who look more financially prepared when they have multiple offers. Your AIP shows you’ve taken real steps to arrange financing, which could be the deciding factor when a seller chooses between similar offers.

How to get one quickly

Getting an AIP is simple. The process takes about 10 minutes online, and you’ll usually get an instant decision. You’ll hear back by the next day if you apply outside business hours.

You’ll just need to provide:

• Your personal details and address history (usually for the last 3 years)
• Your income details, including salary, bonuses, and other earnings
• Your monthly expenses and existing debts
• Your National Insurance number

Most lenders run a “soft” credit check that doesn’t affect your credit score. This lets you explore your borrowing options safely without hurting your credit history.

What happens if it expires

AIPs stay valid between 60 and 90 days, depending on your lender. This gives you enough time to look for properties and make offers confidently.

Don’t worry if your AIP expires before you find a property or get an offer accepted. You can get a new one or renew it easily. A renewal won’t hurt your credit score.

It’s worth mentioning that you should update your information if your finances have changed since your original application—maybe due to a new job, pay rise, or more debt. Even good changes, like a better credit score or less debt, could help you borrow more.

Note that while an AIP isn’t legally binding, it shows you’re ready to buy. Getting one early in your house-hunting experience makes you look like a prepared and credible buyer.

First-time homebuyers often focus only on saving a deposit. They soon find that buying a property comes with many more costs. Getting the full picture of finances helps buyers avoid budget problems that could lead to money troubles.

Costs beyond the deposit

The deposit is the most important upfront payment—usually 5% to 20% of the purchase price—but it’s just the start of your financial commitment. You’ll need to budget for several big expenses.

Mortgage costs add up fast and often surprise first-time buyers. You’ll pay booking fees (about £100), arrangement fees (£500-£2,000+), and mortgage valuation surveys (£150-£800). On top of that, it costs around £2,000 including VAT for legal and conveyancing fees, plus £250-£300 for local searches.

Property surveys are another must-have expense. These cost between £400 and £1,500 based on how detailed you need them to be. Many first-time buyers don’t think about stamp duty. Even with relief on properties up to £300,000, it can add thousands to your costs.

Once you complete the purchase, you’ll need insurance right away. Combined buildings and contents coverage costs £375 per year on average. You must also plan for moving costs, home improvements, and regular bills like council tax, utilities, and service charges.

Emergency fund importance

New homeowners need an emergency fund. Financial experts say you should save enough to cover three to six months of simple living expenses.

A good emergency fund helps in several ways. We focused on making sure you can pay your mortgage if you lose your job or face health issues. Without these savings, you risk losing your home and damaging your credit score for years.

Homeowners must pay for all repairs and maintenance themselves. Big unexpected problems—like broken heating in winter or roof leaks—need quick fixes and cost a lot. Your emergency fund helps you avoid expensive debt when these problems show up.

How to calculate true affordability

Look past simple deposit math to know what you can afford. Lenders start with income multiples, usually offering 4-4.5 times your salary. This can range from 3 to 6 times, depending on your situation.

Lenders have moved beyond simple income calculations. They look at your debt-to-income ratio and want to see 20-30% for the best rates. They inspect your monthly spending, especially existing debts like credit cards, personal loans, and car payments.

Monthly costs like phone contracts, streaming services, and gym memberships affect what you can borrow. Your spending habits, especially gambling, can worry potential lenders.

Financial experts suggest saving an extra 10-15% of the property’s price beyond your deposit. This extra money gives you peace of mind and makes moving into your new home easier. It protects you from surprise costs that could make your home-buying experience difficult.

Your credit behavior can put your home purchase at risk even after getting mortgage approval. Many first-time buyers don’t realize what it all means when they apply for new credit during this period.

How credit checks affect your score

Mortgage lenders use two types of credit checks during your application process. The original check is a “soft” credit check when they provide a mortgage in principle – this won’t affect your credit score. Later, when you submit a formal application, lenders run a “hard” credit check that stays visible on your credit report for 12 months.

Each hard check drops your credit score by several points. The good news is that most credit scoring systems treat multiple mortgage searches within 14 days as one search. You can compare mortgage deals without worrying about extra damage to your credit score.

Remember that many credit applications in a short time can make you look financially desperate or too dependent on borrowing. Financial experts suggest you should avoid new credit applications six months before your mortgage application.

Mortgageable offers a free Equifax Credit Report as part of its service, with no obligation to proceed. Something worth considering.

Why lenders may withdraw offers

Lenders might pull their offer before completion for several reasons. We checked and found they run extra credit checks before exchange and completion, which could show recent credit problems. These checks might reveal:

• Credit applications or borrowing you didn’t mention before
• Recent missed payments on your current credit card
• Your credit score has suddenly dropped
• Changes in your income that affect your regular payments

Lenders can immediately cancel their offer if they find hidden information or spot suspicious activity. Any change that doesn’t fit their lending criteria could lead them to withdraw the offer.

A withdrawn mortgage offer can throw your entire property purchase into chaos. Your financial stability throughout this process is vital.

Tips to protect your credit profile

Here’s how to protect your mortgage offer until completion:

1. Freeze all new credit applications until you’ve completed your property purchase. This means no credit cards, phone contracts, monthly car insurance, or buy-now-pay-later deals.
2. Make all payments on time for your existing credit. Direct debits are a great way to avoid missed payments.
3. Keep your lender informed about changes in your situation, like losing your job or income changes.
4. Be completely honest with your application. Give accurate information and tell your lender about any changes.
5. Monitor your credit report regularly to spot errors or issues. Free services let you check without hurting your score.
6. Maintain low credit utilisation where you can. Try to keep balances at 25% or less of your credit limit.
7. Stay registered on the electoral roll to help confirm your identity and address.

Managing your credit profile carefully during this vital period will reduce your risk a lot. You’ll be much closer to completing your first home purchase successfully.

Many first-time buyers skip property surveys to save money. This decision often leads to regret and can get pricey. Research reveals that almost half of buyers who skip a professional survey need major repairs within their first year of ownership.

What surveys reveal

Professional house surveys uncover hidden problems that buyers miss during typical viewings. Legal & General Surveying Services data shows the most common overlooked issues: damp (22%), asbestos (18%), and unauthorized building alterations (12%). These issues affect both health and finances. The NHS spends about £1.4 billion each year to treat illnesses linked to cold or damp housing.

Buyers who found repair needs after moving faced substantial costs. About 49% paid over £3,000 for repairs, while 15% dealt with bills exceeding £10,000. The survey cost seems like a bargain when you look at these numbers.

Types of surveys and when to use them

Three main survey levels are available today:

RICS Home Survey Level 1 (previously Condition Report): This simple survey works best for newer, conventional properties in good condition. It provides a ‘traffic light’ rating system but lacks advice or valuation.

RICS Home Survey Level 2 (previously HomeBuyer Report): This option suits conventional properties in reasonable condition. It offers more detailed information than Level 1 and recommends further investigations.

RICS Home Survey Level 3 (previously Building Survey): This detailed option suits properties over 50 years old, unusual designs, listed buildings, or homes in poor condition.

Survey prices range from £300 to £1,500 based on type and property value.

How survey results can save you money

Survey results often lead to successful price negotiations. About 35% of homebuyers who get a survey manage to reduce the purchase price. Major issues found during surveys give you options. You can ask sellers to fix problems before purchase or negotiate a lower price based on repair costs.

Rising damp repairs cost around £2,750, while asbestos removal runs about £1,750 per square metre. Finding these issues early helps you make smart decisions about the purchase and negotiate better terms based on expected repair costs.

Insurance protection is a vital yet often overlooked part of buying your first home. You need to know what insurance you need and exactly when you need it. This knowledge could save you from major financial troubles down the road.

When insurance becomes your responsibility

A common mistake among first-time buyers is thinking insurance matters only after moving in. The truth is you become legally responsible for your new property at exchange of contracts, not completion. This difference is significant—any disaster between exchange and completion still leaves you legally bound to buy the property.

Your mortgage lender will need buildings insurance ready by the time contracts are exchanged. Missing this requirement could derail your mortgage and the whole purchase chain might collapse.

What buildings insurance covers

Buildings insurance safeguards your home’s physical structure—the walls, roof, and floors—along with permanent fixtures like kitchen units and bathrooms. Your coverage extends to external structures such as garages, sheds, and fences.

This insurance typically protects against damage from:

• Fire, floods, and storms
• Subsidence
• Burst pipes
• Fallen trees or lampposts

Most policies won’t cover damage from wear and tear, poor maintenance, or certain pests.

Other useful insurances to think over

Buildings insurance isn’t the only protection you’ll need. Here are other important options:

Life insurance gives you peace of mind that your family can keep up with mortgage payments if something happens to you. Your personal circumstances and remaining mortgage amount help determine the right coverage.

Income protection helps you financially if you can’t work due to an accident or injury. This support helps you keep up with mortgage payments.

Critical illness cover pays a lump sum if you’re diagnosed with specific conditions. This money could clear your mortgage or pay for rehabilitation.

An adviser can help you make smart insurance choices based on your unique situation.

Related reading: 

• Current mortgage rates: What you need to know right now
• How many paylslips for mortgage
• Interest only mortgage rates
• How to get your first mortgage
• Interest only vs repayment mortgages
• Best mortgage brokers/advisors UK

Buying your first home is an exciting milestone, but hidden pitfalls can catch you off guard. You need to understand these mortgage mistakes to protect your financial future. A mortgage in principle shows sellers you mean business and gives you an edge in the property market. Your budget needs to cover more than just the deposit – think legal fees, surveys, and emergency funds.

Keep a close eye on your credit profile while buying a home. Lenders can pull their offers if they spot new credit applications or money problems before completion. Property surveys might seem expensive upfront, but they’re worth it. They can save you thousands by spotting hidden issues like damp, asbestos, or structural problems that could become your headache later.

Buildings insurance needs to start from the exchange of contracts, not completion – a detail many first-time buyers miss. This coverage, along with life insurance and income protection, shields your investment from unexpected problems.

The road to homeownership has its challenges, but good preparation reduces financial risks. This knowledge helps you tackle your first property purchase with confidence and avoid mistakes that could turn your dream home into a money pit. Remember, your choices during this process will shape your financial health for years ahead.

These essential insights will help first-time buyers avoid costly mortgage mistakes and navigate the property purchase process with confidence.

• Secure a mortgage in principle before house hunting – it makes you 67% more appealing to sellers and gives you a competitive advantage in viewings and offers.

• Budget for hidden costs beyond your deposit – legal fees, surveys, and moving costs can add £5,000+ to your purchase, plus maintain an emergency fund worth 10% of the property price.

• Avoid all new credit applications between mortgage approval and completion – lenders conduct additional checks and can withdraw offers if they discover undisclosed borrowing.

• Never skip property surveys to save money – 49% of buyers without surveys face repair bills over £3,000, whilst 35% who survey successfully negotiate price reductions.

• Arrange buildings insurance from exchange of contracts, not completion – you become legally responsible for the property at exchange, and most lenders require coverage before this point.

Remember, the mortgage process extends far beyond securing approval. Each decision during this journey affects your financial well-being for years to come, making proper preparation and professional guidance invaluable investments in your homeownership success.