Affordability is the number that really matters

Most first-time buyers start with a fantasy figure in their head — usually somewhere around four and a half times their salary. It is a handy rule of thumb, but it is not how lenders decide. Since the Mortgage Market Review rules came in, every lender must satisfy itself that you can genuinely afford the repayments, not just that your income looks big enough on paper. That means a detailed look at what comes in, what goes out, and how you have handled borrowing in the past.

Two buyers on identical salaries can be offered very different sums. One might be approved for £240,000, the other for £180,000, simply because of a car loan, a couple of credit card balances or a missed mobile phone payment three years ago. Understanding this early saves an enormous amount of heartache — and a lot of wasted Saturdays viewing homes you were never going to be able to buy.

What lenders actually look at

When you apply, the lender builds a picture of your finances from three main sources: your application, your credit report and your bank statements, usually the last three to six months.

• Income: basic salary is straightforward. Bonuses, overtime and commission may only be counted at an average of the last two or three years, and often at a reduced percentage. Self-employed buyers typically need two to three years of accounts or tax calculations.
• Committed outgoings: personal loans, car finance, credit card minimum payments, student loan repayments, childcare costs and any maintenance payments all reduce what you can borrow.
• Day-to-day spending: lenders are not looking to shame you for a takeaway habit, but regular overdraft use, gambling transactions, buy-now-pay-later plans and bounced direct debits are red flags.
• Credit history: missed payments, defaults, county court judgments and payday loans all count against you. Being registered on the electoral roll at your current address helps more than most people realise.
• Deposit and term: a bigger deposit and a longer term lower your monthly payment, which can stretch your maximum borrowing. A 5% deposit is possible, but rates are higher than at 10% or 15%.

Lenders also stress-test your application. They check you could still cope if rates rose, so the rate you are offered is not the only one being modelled.

Use a calculator, then speak to a broker

Start with an online affordability calculator to get a rough range. They are quick and free, but treat the result as a starting point rather than a promise. Calculators cannot see that a lender dislikes a particular type of new-build flat, or that another will happily accept a 5.5 times income multiple for a professional in certain careers.

This is where a whole-of-market mortgage broker earns their keep. A good broker knows which lenders are generous with bonus income, which are relaxed about a small default, and which will lend on a property with a short lease or cladding issues. They will also tell you honestly if your plans are unrealistic right now — far better to hear that before a credit search than after.

Once you have an idea of your budget, ask your broker to arrange an Agreement in Principle. It is a soft check in most cases and shows estate agents you are serious. Do not, however, submit multiple full applications to different lenders; each one leaves a mark on your credit file.

Improving your borrowing power before you apply

If your affordability is lower than you hoped, you have options — but they take a few months to work through.

• Clear or reduce debt: paying off a £200 monthly loan can release tens of thousands in borrowing capacity.
• Check your credit report with all three main agencies and correct any errors before applying.
• Register to vote at your current address and keep your address history consistent.
• Do not take on new credit in the six months before applying — no new phone contracts, car finance or sofa on finance.
• Consider a joint application if you are buying with a partner, though the lender will assess both of you, including any weak spots.
• Look at shared ownership or a guarantor-style scheme if your deposit or income is genuinely limited.

Budget for more than the mortgage

Affordability is not just about the monthly repayment. As a first-time buyer in England or Northern Ireland, you may qualify for first-time buyer stamp duty relief, though thresholds have changed recently and are worth checking on the day. In Scotland, Land and Buildings Transaction Tax applies instead.

On top of your deposit, budget for a valuation fee, a survey, legal fees, a mortgage arrangement fee, removal costs and the first month of bills. A realistic pot for these extras is £2,500 to £4,000, and more if the property needs work. Lenders also want to see that your deposit is genuinely yours — be ready to explain any large, recent deposits into your account, including gifts from family, which usually need a signed letter.

Getting mortgage-ready in practice

Give yourself three to six months. Download your bank statements, list every regular outgoing, and check your credit file line by line. Ask a broker for a realistic maximum and add a buffer — borrowing the absolute limit leaves no room for a boiler replacement or a rate rise at the end of your fixed term.

Then, and only then, start browsing. Arranging a Decision in Principle first means you can view with confidence, negotiate from a position of strength, and move quickly when the right place appears. First-time buying is stressful enough without discovering your budget was never real.