How to Get a Graduate Mortgage

If you’ve recently graduated from university and are looking for a mortgage, being approved can be difficult. However, it is possible to get a deal if you can prove you are able to afford the repayments. Read on to find out what options may be available.

Rachel Lacey Last updated on 06 October 2021.
How to Get a Graduate Mortgage

Graduating university is a massive milestone. After years of study you are now ready to kick off your career and start earning for real. But will you need to rent a property close to work, or could you manage to buy a home of your own?

There is no reason recent graduates can’t qualify for a mortgage to buy their first home. The catch, as with every mortgage application, is in having enough money to put down a deposit and to demonstrate to lenders that you can afford monthly repayments.

Unfortunately, recent graduates may find this easier said than done. When you have just left university, you are unlikely to have huge swathes of cash to put down on a deposit and you may still be nursing a student overdraft. You may not have a great credit history yet, or you might find that your entry level salary isn’t quite as high as you anticipated and you may not have the usual minimum proof of 6 months worth of income from a new employer.

However, there are options for new graduates that are determined to take that first step on the property ladder. Even if you have a job offer but are yet to start work, you may still be able to get a mortgage.

» MORE: How much might my monthly repayments be?

Graduate mortgages

Graduates do not need specific graduate mortgages, that is just a marketing term. Rather, they need a regular mortgage – but perhaps from a lender with more flexible criteria.

In order to get a mainstream mortgage, first-time buyers will typically need a good credit history, a minimum 5% deposit (preferably 10%) and a reliable income. You can typically borrow 4.5 times your income (or joint income if you are buying with someone else) but you may, in some cases, be able to borrow more.

Unfortunately, the more student debt you have, the harder it will be to get a mortgage. Any overdrafts, outstanding credit card bills, as well as the amount you are paying in student loans, will all be taken into account by lenders when assessing how much you can afford to borrow.

» COMPARE: Mortgages for first-time buyers

Professional mortgages

Getting a mainstream first-time buyer mortgage could be a tall order for a recent graduate.

However, graduates in certain professions may find it easier than others to get a mortgage and you may be eligible for a specialist professional mortgage.

These are likely to have a more flexible approach and lend more to borrowers who have qualified in certain highly skilled professions – for example, accountants, actuaries, solicitors, dentists, doctors, teachers, vets and engineers. In certain fields, lenders may also consider borrowers who are still in training.

Applications are likely to be considered on a case-by-case basis, increasing your chances if you are only recently qualified but can prove your likely career trajectory. However, you may still need to put down a sizeable deposit, for example 15%, depending on the lender.

Alternative options

If you are struggling to meet the required criteria for a mainstream first-time buyer mortgage, or if your chosen career isn’t on the ‘professional mortgage’ list, there are other options that could still help you buy your first home.

Joint mortgages

If you buy with someone else your combined income will be taken into account, which will increase the amount you are able to borrow and potentially the size of your deposit.

It might not be worth rushing into a new relationship just to get on the housing ladder, but you can team up with good friends or siblings. The key is to agree how the mortgage will be paid and purchase it on a tenants-in-common basis, which can reflect unequal shares in the property.

» MORE: Can I get a joint mortgage?

The Bank of Mum and Dad

You may not want to borrow money from your parents or accept a cash gift, but if you do you won’t be alone.

According to a 2020 survey by Legal & General, 56% of home buyers under the age of 35 did purchase their house with financial support from their parents. Of those, 71% said they would not have been able to buy their home without it.

However, giving or lending you money is not the only way your parents – or other family members – can help you buy a home.

Guarantor mortgages

If you have somebody, such as a parent or other family member, that would be willing and able to cover your mortgage repayments if you were struggling, then you may be able to get a guarantor mortgage.

A guarantor provides additional peace of mind for lenders and can help if you have a bad or limited credit history. It may also increase the amount you are able to borrow. The catch is that mortgage rates are likely to be higher and you need to be able to put forward a willing guarantor.

» MORE: Everything you need to know about guarantor mortgages

Joint borrower sole proprietor mortgages

Guarantor mortgages are now increasingly giving way to joint borrower sole proprietor (JBSP) mortgages. These deals can put up to four names on the mortgage but only one – the person moving into the property – goes on to the title deeds. This means you may be able to get a bigger loan than you could get on your own. Like guarantor mortgages, JBSP mortgages can be helpful if you have a poor credit record.

You can later remortgage in your own right and remove the supporting borrowers once you become eligible.

» MORE: A guide to JBSP mortgages

Family assist mortgages

A small number of lenders offer family assist mortgages. These deals allow you to take out a mortgage with a small deposit, or in some cases no deposit at all, with a parent or other family member putting their home up as security, or placing some savings in a linked savings account instead which acts as the deposit.

Help to Buy: Equity Loan

If you are struggling to get a loan and can’t call on family for help, you may be able to improve your chances with a Help to Buy equity loan – a government scheme designed to make it easier for first-time buyers to purchase a home.

The scheme enables you to borrow an additional 5% to 20% on top of your mortgage (up to 40% in London) to purchase a new-build home. The loan is interest free for five years, thereafter a monthly interest charge of 1.75% is made. The loan is repaid when you sell the property or repay your mortgage. There are some regional differences to be aware of too, so check your eligibility for Help to Buy.

» COMPARE: Help to Buy first-time buyer deals

Shared Ownership

Another way to get a leg-up on the property ladder is with a shared ownership scheme. Here, you only buy a portion of a property and pay rent to a housing association on the remainder. As you are not taking out a mortgage on the whole property, the amount you need to put down as a deposit is reduced.

As you start earning more, you can buy greater shares of the property in a process known as staircasing. You will, however, be limited in the choice of properties you can buy, which will either be new-builds or shared ownership resales. You may also find limits on the total percentage of a property you can own, for example, in leasehold buildings.

» MORE: Everything you need to know about a shared ownership mortgage

Getting advice

Getting on the property ladder can be tough for all first-time buyers but it's likely to be even harder if you are only just out of university.

Although there are a range of options, it is important to pick the most cost-effective one for you.

For this reason it is worth getting advice from an independent mortgage broker. They may have access to deals not available directly to consumers (for example, professional mortgages) and will know which lenders are most likely to approve your loan application.

» MORE: Should I use an online mortgage adviser or a broker?

Image source: Getty Images

About the author:

Rachel Lacey is freelance journalist with 20 years experience. She specialises in personal finance and retirement planning and is passionate about simplifying money matters for all. Read more

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