What is the First Homes scheme?

The First Homes scheme is defined by the government as “an initiative thanks to which developers offer homes to first-time buyers with at least 30% of the market value taken off the price". You can either buy a new home or a new build home that had been previously bought by someone through that scheme.

This new government-backed programme was launched in England, in June 2021 to help first-time buyers get onto the property ladder despite rising affordability issues. It guarantees you will pay no more than £250,000 for your home outside of London, and no more than £420,000 in the capital city.

The discounted prices are made possible through a combination of developer contributions and government subsidies. Price caps are set to ensure that homes remain within reach for eligible buyers, and the discounts are applied upfront, reducing the initial cost of purchasing a home.

The First Homes scheme aims to address the affordability challenges faced by first-time buyers and key workers, particularly in areas with high housing costs. By providing discounted homes and prioritizing local residents, the scheme seeks to help individuals and families achieve homeownership and establish roots in their communities.

What are the First Homes scheme eligibility criteria?

The eligibility criteria for this scheme are a bit more specific than other alternative ways to buy. There are general eligibility criteria that you must adhere to regardless of where the property is located.

• You and anyone you are buying with must be a first-time buyer
• You must get a mortgage to pay for at least half the price of the home
• Your earnings should be £80,000 or less, and £90,000 or less if the property is in London

However, for the first 3 month of a home being on sale, buyers could have to comply with local eligibility criteria as well which could make it tricky for your application to be successful. In many cases, applications from key workers, locals or those on lower incomes could be prioritised.

How can I apply to the First Homes scheme?

Unfortunately, there isn't a straightforward way to apply yet. No portal has been launched for you to register. Instead, you will need to do your research to find First Homes properties in your area and get in touch directly with developers.

You can search for homes through different a property portal or a developer's website. When you find a home you are interested in, you need to go ahead and check you meet the specific criteria for the area as well as the scheme in general. You can have a look at the Own Your Home page dedicated to the First Homes scheme further understand the different steps of the process.

Once the programme has been up and running for a few years, you will also be able to buy your home through First Homes resales. That means that homes previously owned will be available through the open market with the 30% discount.

Is it easier to get a mortgage with the First Homes scheme?

One of the main issues faced by people when trying to buy their first home has to do with mortgage affordability. Interest rates are running high and house prices remain more expensive.

With the First Homes scheme, eligible buyers can purchase homes at a minimum discount of 30% off the market value. This reduced purchase price may make it more feasible for buyers to qualify for a mortgage because they are borrowing a smaller amount relative to the property's value.

A lower purchase price means a lower deposit requirement, which can be advantageous for buyers who may not have substantial savings. However, buyers should be aware that lenders typically require a deposit even for discounted properties.

While the discounted price and lower deposit requirement may make obtaining a mortgage more accessible for some buyers, lenders still assess applicants based on their financial situation, credit history, income stability, and affordability. Lenders may have specific criteria for mortgages associated with affordable housing schemes like First Homes.

How does the First Homes scheme compare to Shared Ownership?

The first difference between the schemes is the eligibility criteria. To buy a home through Shared Ownership, you don't have to be a first-time buyer as long as you are not currently owning another home. This alternative way to buying outright is made for anyone who cannot afford a house on the open market. It typically does not require you to be a key worker, veteran or local buyer.

The second main difference is that Shared Ownership allows individuals to purchase a share of a property, typically ranging from 25% to 75%, while paying rent on the remaining share owned by a housing association. It means it might be more accessible for people facing affordability issues when it comes to buying their first home. They will only need to get a mortgage for the share of the property they are buying and not for the total value. In some cases, the deposit they will need will come to less than £10,000.

The last difference is that when you buy a home through Shared Ownership and staircase to own 100% of your home, you can then sell it at full market value. With the First Homes scheme, you have to pass on the 30% discount. This means that if your First Homes house is assessed at £200,000 when you want to sell it, you will only receive £140,000 from the buyer.

Depending on your situation it could be that Shared Ownership is more advantageous. To learn more you can have a look at our guide to Shared Ownership.