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Mortgages for graduates

Last updated on 7th December 2023 by Martin Alexander

Graduating is often the start of new beginnings and may include buying your first home. Although graduate mortgages exist, gaining approval is far from simple. Post-graduation may leave you without adequate funds for a deposit while repaying your student loan. With the right approach, getting a mortgage as a graduate doesn’t need to be difficult.

Most lenders understand the position applicants will be in shortly after graduating. Furthermore, mortgages for graduates often have particular benefits tailored to help you kick-start your new chapter as a homeowner.

This guide will explain everything you need to know as a graduate searching for a mortgage. You can also speak to an advisor if you’re unclear about what to do next.

Mortgage schemes for graduates

There are mortgage schemes available that graduates can benefit from. Government schemes are designed to help first-time buyers on the housing ladder and are a perfect fit for graduates. This is because schemes often allow smaller deposits and can cater to those with smaller incomes or who have become recently employed.

The following two schemes are particularly useful if you’ve just graduated:

  • Shared ownership
  • The Mortgage Guarantee Scheme

Shared ownership mortgages for graduates

Shared ownership can be a great way to buy your first home as a graduate. As the name suggests, you’ll only own a share of your home, usually between 25% and 75%. You’ll then pay rent to a housing association on the remainder.

You can increase the share in your home as you save more money. You can even increase your overall share to gain full ownership once your finances allow you to do so.

Shared ownership is particularly useful when you’ve just started a new job and don’t earn a large enough income to purchase full ownership of a home. Your share in your home can then grow alongside your income and savings. Understandably, you may have to start at an entry-level income after graduation.

Income and affordability assessments for shared ownership are often easier to pass when compared to getting a mortgage for the total value of a property. This is because your income and affordability requirements will be much less as you only buy a share of your home. As a graduate with a small budget, this can be an ideal solution to buying your first home.

Read more: What is a shared ownership mortgage?

The Mortgage Guarantee Scheme

The Mortgage Guarantee is a government-backed scheme that helps first-time buyers buy a home with a 5% deposit. Saving a large deposit isn’t easy for someone who just graduated, so the scheme is ideal to help you buy your first home. However, you’ll unlock better rates by saving at least a 10-15% deposit.

You’ll still need to meet mortgage criteria, such as income large enough to repay the loan and a good credit score.

Alternative mortgage options for graduates

Graduates don’t have to use mortgage schemes. If you have family support, you can use alternative mortgage options, such as:

  • A gifted deposit – Family members can gift you a deposit, which most lenders will happily accept. You’ll need to inform your lender you’re using a gifted deposit. Your parents will also need legal advice to understand the deposit gift isn’t a loan and won’t be repaid.
  • Applying with a guarantor – Using a guarantor can help you get a mortgage once you’ve graduated, giving lenders security if a mortgage isn’t paid. Not all lenders accept guarantors, so you must check before applying.
  • Family mortgages – Some lenders offer family mortgages, allowing parents to use their savings account as collateral for a mortgage. If your application falls short due to recently graduating, a family mortgage could be an alternative for getting a mortgage.

Graduating in a professional field

Graduating in a particular profession can make it easier to get a mortgage when compared to borrowers in other fields. For instance, if you’ve graduated in law or medicine or a similarly skilled profession, you may find it easier to get a mortgage.

If you’ve recently qualified in a professional field, the chances of finding employment are often very high. Furthermore, lenders often assume you’ll stay in your profession for several years, so repaying a mortgage will rarely be an issue. Graduating in a field such as law or medicine takes many years, so you’d unlikely want to work elsewhere.

That’s why lenders may see you as a low-risk applicant and approve you in cases they otherwise wouldn’t. Some lenders may even offer you preferential rates.

Credit checks for graduates

While income and affordability checks are part of your mortgage assessment, lenders will also carry out a credit check. This can often be challenging as you perhaps won’t have any additional credit apart from your student loan. While student loans shouldn’t impact your credit score, the lack of credit can.

Having no credit is similar to having a bad credit score. If lenders can’t assess your financial conduct, they’ll struggle to assess your application and can decline you. On the other hand, if you’ve used credit, you should have a credit score that lenders can check.

Rather than taking a chance, it is best to check your credit report before applying for a mortgage. Mortgages for graduates are often more difficult than mortgages for more established borrowers. Checking your credit file before a lender can give you an insight into potential problems during your mortgage.

Mortgage lenders for graduates

Getting your first mortgage doesn’t need to be daunting. For experienced brokers, we’ve helped many graduates secure mortgages and can also guide you through the process. Having an experienced broker on your side can make all the difference in getting your first mortgage approved.

With numerous schemes available, choosing the most suitable method for your situation is crucial. Choosing a suitable mortgage lender is just as important.

A mortgage is typically the biggest financial leap you’ll take, so getting a professional opinion makes sense. Furthermore, getting the right mortgage can save you thousands of pounds over your mortgage term. In comparison, getting an inadequate mortgage could result in losing money. This can happen if you approach a lender that isn’t suitable.

Even experienced property buyers often utilise an advisor’s expertise, so it’s an absolute must for first-time buyers. Many first-time borrowers believe they’ll receive preferential treatment by going to their bank, but this is rarely true.

An advisor will compare hundreds of lenders and thousands of deals to ensure you get the best deal possible. In comparison, your bank will only ever show you their deals. As a result, it’s impossible to know whether you’re getting a good deal or not. You can make an enquiry, and our advisors will guide you on the best route to a mortgage.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.