The following is a guest post…
Times are tough for young adults hoping to gain a foothold on the UK property ladder. Affordable properties are few and far between and with the average salary failing to keep up with the cost of living, ‘generation renters’ as they have been dubbed in the press, are faced with the prospect of living in rental accommodation until they are well into their thirties. But although it is definitely not easy for a young adult to qualify for a mortgage, it is possible.
Check Out Property Prices In Your Area
The average price of a house in the UK varies considerably between different areas, so before you start looking for a home, you need to check out property prices in your area and make a decision about whether they match up to your income. Starter homes are few and far between in some areas, but it may be possible to buy a small and affordable flat or terraced property in a cheaper part of town.
Lender Requirements For Mortgages
Since the housing market imploded, lenders have made their mortgage lending criteria a lot tougher and unless you can prove that you are capable of making the repayments on a mortgage, you will be turned down flat.
- Employment status – lenders will expect you to be in permanent employment; seasonal or temporary employment will not be acceptable.
- Income – you will have to prove your income by producing bank statements and payslips and the amount you can borrow will be calculated by multiplying your annual salary by approximately 4.8, minus any loans and other financial commitments you may have.
- Financial commitments – lenders will look at what else you owe (for example student loans) to help them make a decision on whether (or not) you are able to afford a mortgage.
- Credit profile – a lender will check your credit history to make sure you can manage your finances in a responsible manner.
- Identification – you will need to provide identification before any application for a mortgage can proceed.
How Much Deposit Will I Need?
One of the biggest difficulties facing young people hoping to buy their first home is the size of the deposit required by lenders. In the bad old days, banks and building societies routinely offered 100% mortgages where no deposit was required, but since the start of the recession, these are no longer available and most banks and building societies ask for a minimum of 20% deposit. So if you are hoping to buy a property for £130k, you will need £26k up front, which is a huge chunk of money for someone earning less than £25k per year.
Borrowing The Money For A Deposit
If you don’t have the money required sitting in a savings account, lenders will accept a cash gift from a relative or even an inheritance bequest. And should you be lucky enough to be able to put down a larger deposit on your dream house, you will probably qualify for a better interest rate from the lender.
About the author: Susie and her boyfriend are hoping to buy their first home and found some useful information on www.hardwickmissoldmortgages.co.uk. They are currently saving hard for the required deposit, although Susie’s parents have agreed to help them out with a cash lump sum, and all being well they will qualify for a mortgage within the year.