Credit Building > What Is the First Homes Scheme and How Does It Work?

What Is the First Homes Scheme and How Does It Work?

Wollit Team4 minute read · Updated 21st March 2025

What Is the First Homes Scheme and How Does It Work?

The First Homes scheme represents a significant opportunity for aspiring homeowners in England who have been priced out of the property market. This government initiative aims to make homeownership more accessible by offering substantial discounts on new-build properties, helping first-time buyers take their initial step onto the property ladder.

What is the First Homes scheme?

The First Homes scheme is a government initiative in England designed to help first-time buyers purchase homes at a discounted price. Launched to address the growing affordability gap in the housing market, this scheme offers a pathway to homeownership for those who might otherwise struggle to buy their first property.

Discounts range from 30% to 50% off the market value, making homeownership more accessible for eligible buyers. The percentage discount varies by location, with higher discounts typically available in areas with more significant affordability challenges.

The scheme applies to new-build homes or properties previously purchased under the scheme. This focus on new builds helps to increase the overall housing supply while simultaneously making a portion of these new homes available at below-market rates to eligible buyers.

Who is eligible for the First Homes scheme?

To qualify for the First Homes scheme, you must meet several criteria:

• Be a first-time buyer, meaning you've never owned property in the UK or abroad.
• Be at least 18 years old.
• Have a household income of £80,000 or less (£90,000 in London).
• Secure a mortgage for at least 50% of the discounted property price.

Local councils may prioritise key workers, such as teachers, NHS staff, and emergency service workers, or those with a local connection. This local connection typically means living, working, or having family ties in the area where you wish to purchase a property.

Armed forces members and their families may be exempt from local eligibility criteria. This exemption recognises the unique challenges faced by military personnel, who may need to relocate frequently due to their service commitments.

Meeting the necessary first time homebuyer credit score requirements is essential for securing a mortgage under this scheme. Most lenders will want to see a good credit history before approving your application.

How does the First Homes scheme work?

Buyers purchase a home at a discounted price, with the discount applied to the property for its lifetime. This perpetual discount ensures that the property remains affordable not just for the initial buyer but for all future eligible purchasers.

When selling the property, the same percentage discount must be passed on to the next buyer. For example, if you purchase a home with a 30% discount, when you eventually sell the property, it must be sold at 30% below the market value at that time.

The process typically involves:

1. Finding a property being sold under the First Homes scheme.
2. Confirming your eligibility with the local authority.
3. Securing a mortgage for the discounted price.
4. Completing the purchase with the knowledge that the same discount will apply when you eventually sell.

What are the benefits of the First Homes scheme for first-time buyers?

Lower property prices mean smaller deposits and reduced mortgage repayments. This can make a significant difference to affordability, particularly in high-value areas where saving for a deposit is a major barrier to homeownership.

The scheme supports buyers in staying within their local communities, especially key workers. This helps maintain community cohesion and ensures essential workers can live near their workplaces, which is beneficial for both the individuals and the communities they serve.

It provides an alternative to other affordable housing schemes, such as shared ownership or 5% deposit mortgages. Having multiple options allows first-time buyers to choose the approach that best suits their circumstances and preferences.

Additional benefits include:

• Full ownership of your property (unlike shared ownership schemes).
• No rent to pay on any portion of the property.
• The opportunity to build equity as property values increase.
• The security of knowing you own your home outright.

How can I apply for the First Homes scheme?

Check your eligibility with your local council or housing developer offering First Homes properties. Requirements may vary slightly between different local authorities, so it's important to understand the specific criteria in your target area.

Secure a mortgage in principle for at least 50% of the discounted property price. This demonstrates to sellers that you're a serious buyer and have the financial means to complete the purchase.

Submit an application through the developer or estate agent managing the property sale. They will guide you through the process and help ensure you meet all the necessary requirements.

Ensure your financial profile is strong by using tools like a wollit credit builder. Improving your credit score can increase your chances of mortgage approval and potentially secure you better interest rates.

The application process typically involves:

1. Registering your interest with developers selling First Homes properties.
2. Providing proof of eligibility, including first-time buyer status and income verification.
3. Obtaining a mortgage agreement in principle.
4. Completing the standard property purchase process with the added step of confirming the discount with the local authority.

Are there any restrictions or conditions for homes purchased under the First Homes scheme?

The property must be your primary residence and cannot be used as a second home or rental property. This restriction ensures the scheme fulfils its intended purpose of providing homes for people to live in, rather than investment opportunities.

The discount remains tied to the property, ensuring affordability for future buyers. This perpetual discount is a key feature of the scheme, creating a lasting legacy of affordable homes within communities.

Local councils may impose additional criteria, such as prioritising buyers with a local connection or key worker status. These local variations allow the scheme to be tailored to address specific housing needs in different areas.

Other restrictions may include:

• Limits on the market value of eligible properties.
• Requirements to obtain local authority permission before selling.
• Potential restrictions on home improvements or extensions that significantly increase property value.

How does the First Homes scheme compare to other government initiatives?

The First Homes scheme is one of several government initiatives designed to help first-time buyers. Unlike Help to Buy, which offers equity loans, or Shared Ownership, which involves purchasing a portion of a property, the First Homes scheme provides a straightforward discount on the full purchase price.

For many first-time buyers, particularly those who want to own their home outright without government loans or shared equity arrangements, the First Homes scheme represents an attractive option. The perpetual nature of the discount also helps to create a sustainable supply of affordable homes for future generations of first-time buyers.

When considering which scheme is right for you, it's worth exploring all available options and potentially seeking independent financial advice to understand which approach best suits your circumstances and long-term goals.

Is the First Homes scheme right for you?

Whether the First Homes scheme is the right choice depends on your personal circumstances, including:

• Your local housing market and the availability of First Homes properties.
• Your income and ability to secure a mortgage.
• Your long-term housing plans and investment goals.
• The availability of other housing schemes in your area.

For many first-time buyers, particularly those with a connection to areas where property prices have outpaced wage growth, the First Homes scheme offers a valuable opportunity to enter the housing market with a significant discount.

As with any major financial decision, it's worth researching thoroughly and potentially seeking independent advice before proceeding with a purchase under the First Homes scheme.

By offering substantial discounts on new-build properties, the First Homes scheme represents a significant initiative to address housing affordability challenges and help more people realise their dream of homeownership.

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