For many graduates, buying a home might not seem like something that should be at the top of the agenda. After all, UK home prices are rising, graduates are facing pay cuts, and houses are being snapped up. However, the fact remains that getting on the property ladder is one of the most reliable ways to build long-term security and equity.
The earlier you start, the better your chances of rising up the property ladder and building lasting wealth that will see you through retirement. If you do have the resources to buy a home, you may face specific challenges and opportunities as a young, first-time buyer. Here are our tips for navigating these successfully.
Audit your Finances
If you’re in the early stages of your homebuying journey, now is the time to conduct a forensic examination of your finances. The goal is to apply for a mortgage with the strongest possible chances of success. This means being clear-eyed about your own finances so that you can avoid any nasty surprises when you least need them. Make sure you have solid figures on your earnings, savings, investments, and guarantor finances.
Assess Graduate Job Security
When you apply for your first mortgage, your lender will want to know a lot about your current job. They will be looking for guarantees that you will be able to make timely monthly payments throughout the duration of the mortgage. For this reason, you should only apply if you can demonstrate job security in your first post-graduation role. If you are in a time-limited grad scheme with no guarantee of future employment, you might wish to defer your mortgage application until you can get into a more stable position.
Be Smart with your Credit Score
For buyers fresh out of university, your limited credit history is one of the biggest obstacles to a mortgage. You will not be able to demonstrate a long history of successfully making repayments on loans and credit cards, making it harder for lenders to assess your trustworthiness as a borrower. If you can, now is the time to build your credit by using low-interest credit cards and other low-risk methods.
You should also receive pre-approval on a mortgage without hurting your credit score. Oftentimes, lenders will perform a “hard” credit pull on mortgage applicants. Unfortunately, this automatically lowers your score, through no fault of your own. However, the free Mortgage in Principle service from Trussle soft checks your credit against 18 lenders to tell you exactly where you are eligible and where you can borrow. Consider services such as this when shopping for mortgages.
Utilise your Resources
If you’re a first-time buyer, help is available to get you on the ladder. For example, the UK Government’s First Home Scheme offers discounts of up to 30% on the home price for any first-time buyer who is buying a home built by an eligible developer. By buying your home through this scheme, you could instantly save tens of thousands of pounds on the cost of your home, giving you more resources to spend and save for your future.
By following these simple tips now, you can obtain your first home on the best possible terms.