I want to buy a home but have no deposit: how to start (guide)

Homeownership remains a significant milestone for many, yet the barrier of accumulating a substantial deposit often delays or derails these aspirations. The traditional requirement of saving 10-20% of a property’s value can represent tens of thousands of dollars, creating what seems like an impossible hurdle for first-time buyers or those with limited savings capacity.

What are lender requirements for high-loan mortgages?

High loan-to-value mortgages, typically covering 90-100% of a property’s purchase price, come with specific lender requirements that differ significantly from conventional loans. Financial institutions assess these applications more rigorously due to increased risk exposure. Credit score requirements are generally higher, often requiring scores above 620-680 depending on the lender and loan program. Income stability becomes crucial, with many lenders requiring at least two years of consistent employment history and comprehensive documentation of all income sources.

Debt-to-income ratios receive heightened scrutiny, with most lenders preferring ratios below 43% of gross monthly income. Additional requirements may include mortgage insurance premiums, which protect lenders against potential losses. Some programs require completion of homebuyer education courses, demonstrating your understanding of homeownership responsibilities and financial obligations.

How does guarantor and family-assisted financing work?

Guarantor mortgages involve a family member or close friend providing security for your loan, typically using their property or savings as collateral. This arrangement allows lenders to offer more favorable terms or higher loan amounts than would otherwise be available. The guarantor becomes legally responsible for mortgage payments if the primary borrower defaults, making this a significant commitment requiring careful consideration from all parties involved.

Family-assisted financing encompasses various arrangements, including gift deposits from relatives, family loans with favorable terms, or joint mortgage applications. Some lenders offer specific family programs where parents can use their property equity to secure their child’s mortgage without requiring cash deposits. These arrangements often involve legal documentation to protect all parties and ensure clear understanding of responsibilities and ownership structures.

What are shared ownership schemes?

Shared ownership programs allow buyers to purchase a percentage of a property, typically between 25-75%, while paying rent on the remaining portion. These schemes, common in many countries, are designed to make homeownership accessible to those who cannot afford full market prices. Buyers can increase their ownership share over time through a process called “staircasing,” gradually purchasing additional percentages until they own the property outright.

Eligibility criteria vary by location and program but generally target first-time buyers or those whose household income falls below specified thresholds. Properties available through shared ownership schemes are often new builds or resales from previous shared ownership buyers. While these programs offer a pathway to homeownership, buyers should understand the ongoing rent obligations, potential restrictions on property modifications, and the complexity of selling shared ownership properties.

Prices, rates, or cost estimates mentioned in this article are based on the latest available information but may change over time. Independent research is advised before making financial decisions.

What documents are needed for affordability checks?

Affordability assessments require comprehensive documentation demonstrating your financial capacity to maintain mortgage payments. Essential documents include recent payslips covering the last three months, P60 or tax returns for the previous two years, and bank statements showing at least three months of transaction history. Self-employed applicants need additional documentation, including business accounts, tax calculations, and accountant-prepared financial statements.

Lenders also require proof of identity through passport or driving license, address verification through utility bills or council tax statements, and details of existing financial commitments including credit cards, loans, and other monthly obligations. Property-related documents become necessary once you identify a potential purchase, including the mortgage valuation, legal pack, and survey reports. Some lenders may request additional information such as employment contracts, pension statements, or evidence of any financial gifts intended for the purchase.

Preparing these documents in advance can significantly accelerate the application process and demonstrate your serious commitment to potential lenders. Digital copies organized in clearly labeled folders can streamline submissions and reduce delays caused by missing or unclear documentation.

Successful home buying without a traditional deposit requires careful planning, thorough research, and realistic expectations about available options. While these alternative pathways may involve different challenges compared to conventional purchases, they provide viable routes to homeownership for motivated buyers willing to explore creative financing solutions. Understanding your options, maintaining good financial habits, and seeking professional advice when needed can help transform your homeownership aspirations into reality, even when starting without substantial savings.