So, you’ve just graduated and are now looking to take the next step in life. Getting on the property ladder is a common goal for a lot of graduates, but it can be a difficult situation to navigate. Don’t worry though, this article will provide you with information and advice regarding how you can be best prepared.
Is buying out of reach?
Buying a property is a huge step and can be fairly daunting, but it’s not always out of reach depending on the situation.
If you have just graduated, buying a property can seem like a distant dream. However, there are different options and plans available which can help you reach that dream quicker.
Read on for some tips for getting on the property ladder after university.
Find a job
Of course, to be able to afford a housing deposit and qualify for a mortgage, you’re going to need a regular source of income. Finding a job is not always an easy task, but hopefully after graduating you have an idea of the career path you want to go down.
Depending on how much of a priority getting on the property ladder is, you may decide that it’s better to accept any job in order to secure a deposit and a mortgage, before pursuing your long-term career goals.
The importance of saving regularly can’t be understated. It’s difficult to have a deposit ready in one big lump sum of money, so regularly putting away money is the best way of saving up.
Most housing deposits are typically between 5-15%, which can be a large sum of money considering the average first time buyer properties are currently costing around £231,000 (2019). Of course, housing costs will depend on the location and this is one of the most important things that people look for when house hunting. With this in mind, it is possible to find properties valued much cheaper than the average, if you look in less sought after areas.
Still, the best way to be ready to put a housing deposit down is to put money away regularly. Even if it just a small portion of your monthly income, set some aside for your deposit fund.
Pay off existing debt
Once you start earning money regularly, one of your first priorities to get on the property ladder should be paying off any existing debt you have.
The main reason for this, is because one of the deciding factors that mortgage lenders consider is how much you spend every month on debt repayments. If you have a number of outstanding debts, it will likely reflect negatively when lenders are conducting their affordability assessments and deciding what kind of mortgage payment plan you can afford.
Save then spend
If there are a few different things you want to buy whilst also looking to get onto the property ladder, it could be a better idea to save for your deposit first before spending. Decide what your priorities are, and then try save as much as possible before spending anything unnecessarily.
Know and work on your credit score
It’s important to know your credit score and to keep track of it, as having a bad credit score can make it harder to get a mortgage. Credit scoring agencies such as Equifax, Experian and TransUnion allow you to check your credit score for free.
A credit score is part of your credit report which details your repayment history and how well you have stuck to payment agreements. The types of transactions that are monitored can include direct debits such as phone bills and gym memberships, so ensuring these types of bills are paid in full and on time will give you a better credit score. Credit card and loan repayments are more impactful, so if you have a history of missing loan repayments then it may reflect negatively in your credit score.
There are ways of improving your credit score, including using a credit card to pay for things whilst ensuring you clear the balance on time. Being registered on the electoral roll is also a good way of improving your credit score if you are not already registered.
It’s also important to note that student loans do not impact your credit score, so don’t worry if your student loan is still outstanding!
Help To Buy scheme
There are a few different options available through the Help To Buy government scheme that can assist you when looking to buy your first property. If you were able to set up a Help to Buy: ISA account before November 30th 2019, the government will add 25% up to £3000 as a bonus towards your first house. Unfortunately, this scheme is no longer available to sign up for. However, the Lifetime ISA is a good alternative, with the government adding a 25% bonus towards a deposit for first time buyers.
Alternatively, the Help To Buy scheme offer an equity loan, which is a loan from the government that you put towards the cost of buying a newly built home. There is also the option of Shared Ownership. This is another scheme which lets you buy a share in a property (between 25% and 75%) whilst paying rent on the remaining share. This is a potential option if you can’t afford the full deposit on a house.
See if help is available from your family
One option is to see if any family member is able to help. Of course, not every family has the luxury of being able to help other family members financially, so this is something to consider before asking anyone for money. If a family member is able to lend you money, then it is worth considering as the repayment plan is likely to be more flexible than with a normal lender. Family members can also act as guarantors on your mortgage, which can impact how much a bank may be willing to lend you.
Even if family members are unable to contribute financially, it is still a good idea to reach out to them for advice and support whilst considering how to get on to the property ladder.