Escape the millennial trap and buy your first property

Get yourself ready for a mortgage BY TRICIA PHILLIPS

UNDER-35s are being dubbed the Unlucky Generation when it comes to housing. They are struggling in a Catch 22 – if they go to university to further their careers they end up in huge debt and struggle to save.

When they do manage to put a bit away, property prices keep escalating out of their reach.

They also have fears about debt and poor credit scores, which are leading millennials to give up on thoughts of home ownership altogether.

Research from credit firm Noddle shows one in 10 believe they already have too much debt and therefore have no chance of getting a mortgage.

One is six say they have a poor credit score and that will stop them. Yet just a tiny 2% have actually been rejected for a home loan based on their credit score.

Noddle held a Cred & Breakfast pop-up event recently, giving over 100 young people personal guidance to help them overcome issues around poor credit scores, and to help them get onto the property ladder. A key theme at the event was the low financial morale among millennials.

There are ways you can get mortgage-ready so you have the best chance of getting the keys to your first home. Here’s our seven-step plan...

HOW TO GET YOUR FINANCES FIT TO BUY 1 Check your credit score

At least a year before you plan to buy find out exactly where you stand – how good your credit rating is and to ensure that all the information on your credit file is correct.

If you have any black marks such as missed payments, it is best to wait until your record improves. This will help increase your chances of a successful mortgage application and having a good credit score will mean you can bag the best loan rates.

Get free access to your credit report via Noddle.co.uk, Experian.co.uk, Equifax.co.uk and clearscore.com.

2 Go through your spending

The tougher lending rules mean lenders will dig deep into your financial situation to check you really can afford a mortgage. So you need to show your finances are in the best possible shape – and that you can manage your money well and don’t struggle to make ends meet each month.

Go through your bank statements, check everything you are paying out and see if there are outgoings you can remove or cut back on to save a few pounds.

3 Get out of the red

If you live in a constant overdraft it’s time to take control. You might not be able to get it paid off in one go, so tackle it in chunks, reducing it by £20-£50 a month, for example.

If you think you’ll struggle to do it that way, then consider taking out a 0% money transfer card or a structured loan to get it cleared. Don’t overstretch yourself – ensure you can easily afford the repayments each month.

It’s the same with credit cards and other debts – try and get your balances as low as possible.

Ideally, credit card balances should be below 50% of your credit limit and you should aim to pay at least 10% off the outstanding balance each month. Make payments monthly and on time. Set up a direct debit to at least pay the minimum, or a standing order to pay a regular amount above the minimum.

If you can repay it in full each month, even better. Avoid building up other debt, such as via catalogues and on other loans.

4 Pay all bills on time

Always pay all bills on time every month. Late or missed payments will leave a mark on your credit report and that will put lenders on alert.

5 Avoid gambling sites

Regular payments to gambling websites will mean lenders think you are too much of a risk taker. Payday loans are another warning sign to a lender that you’re unable to manage your money.

6 Start Saving

Set up a regular savings account and prove that you can put money aside and that you are financially disciplined. This is very good practice for when you do have a mortgage to pay.

The more you can put away, the less you’ll have to borrow as you’ll have a bigger deposit – and that will mean you can bag a better mortgage rate.

Boost savings with products such as a Help to Buy ISA where you’ll get a 25% bonus from the Government.

7 Try online calculators

There are tools available, such as those at moneyadviceservice.org.uk, where you can work out how much you could borrow, how much deposit you would need and what the monthly repayments will be.

Always pay your bills on time so you don’t harm your credit record