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Many graduates may have the impression that it’s impossible to get a mortgage loan after graduating but it’s not necessarily the case. Even with a lack of credit history, student loans, overdrafts and little deposit, it is still possible to get a mortgage loan given the right situations.
We discuss this in more detail in this article.
Can I get a mortgage as a graduate?
It is possible but finding the right pool of lenders for your circumstances is extremely important as applying to lenders and being rejected can have a negative impact on your credit score and make it even harder to be accepted for a loan in future. One of the main things’ lenders will want to assess is whether you can afford the monthly mortgage repayments and will check your affordability to order to verify this. Having a secure employment will be vital so they can check your income against your outgoings to make a judgement on whether you can afford a mortgage loan. It’s even possible to apply for a mortgage before graduating if your personal circumstances are suitable. If you have a job lined up for when you graduate and have a contract written and signed by your employer, a lender may be willing to accept you for a loan on this basis, providing they are satisfied the other requirements.
Lack of credit history
Lenders will carry out credit checks on all applicants. They use this as a way to make a judgement on how risky they’re loan would be and the creditworthiness of an applicant. Having a good credit history which shows reliable borrowing will indicate to them that they have a borrower who is likely to repay the loan and on time. Often graduates have a lack of credit history and some lenders may be wary of an applicant with a lack of credit history as they don’t have anything to base their assessment on. It’s good practice to check your credit score in general so you can make improvements or be notified of any errors on your credit report so it can be rectified, but it is important to check your credit file if you are looking to take out a loan.
Having student loans shouldn’t stop you from being able to take out a mortgage loan but whether you will be accepted by a lender will depend on several factors, including how much you pay monthly as your student loan repayment. When lenders are assessing a mortgage application, they will check the applicant’s affordability by checking their income against their outgoings such as bills, debt repayments and other monthly expenses that are occurring. Lenders are trying to determine the borrower’s disposable income and whether they will be able to afford all their monthly payments even with the extra added cost of monthly mortgage repayments. This will also have an effect on how much a lender will be willing to loan to you as a mortgage towards your property purchase.
Even if you have been saving whilst you were a student, with rising property prices, it can be difficult to save enough for a deposit. The good news is there are many products on the market which require a low deposit but whether a lender will be willing to loan a mortgage with a low deposit will depend on other factors such as your income. There are schemes available such as the government’s Help to Buy Equity Loan where you are required to pay a deposit of at least 5% whilst borrowing up to 20% of the cost of a new built home (up to 40% in London boroughs) from the government to add to your deposit and getting a mortgage for the remainder. There are also shared ownership schemes which allows someone to part-buy, part-rent a home from housing association (arranged by a local Help to Buy agent) and the share you can initially purchase is usually between 25% – 75% of the property price therefore this will lower the deposit amount required.
Recent graduates may find themselves on a low wage when they are just starting out in their field, but professional mortgages are geared towards borrowers who have recently completed a qualification for a certain type of professional occupation and just starting out on their career path. A professional mortgage provides loans for professionals on the basis that they are likely to stay in their industry after gaining the qualification and as a result, should see a steady increase in their income overtime. Lenders may see this as a less risky loan and may offer better rates.
Many people don’t realise that lenders do not only operate at high street banks. There are specialist lenders and lenders that don’t have a high street branch presence. Seeking professional help from a mortgage broker with access to the whole of market can make it easier and save you time when finding the right lender for your personal circumstances. A mortgage broker can use their experience and expertise to provide you with advice and assist you with the application process.