Is There An Easy Way To Get On The Property Ladder?

Thursday, January 17, 2019

Property is more expensive than ever and mortgage lenders are continuing to demand high down payments. Consequently, it’s never been more difficult to be a first-time buyer. Fortunately, there are a growing number of options out there that are making it easier to get a foothold on the first rung of the property ladder. Here are just a few ways to make affording property easier.

Look for 0% down payment mortgages

Unbeknown to many people, mortgages that require no down payment do exist – they’re just very rare. On top of being hard to find, these mortgages also tend to only be eligible to a select few.

VA loans are one example of a mortgage that requires no down payment. These loans are only eligible to veterans – they are issued out by private lenders and guaranteed by the United States Department of Veterans Affairs. Many veterans don’t realise that these loans exist as they are not widely publicised.

You may also be able to try a USDA rural development mortgage. These mortgages similarly require no down payment and are eligible largely for rural farmland properties (although there are some non-rural properties available under this scheme). These loans are issued by banks rather than private lenders. Such loans are extremely popular for obvious reasons – the USDA sadly only has a limited amount of money it can lend each year, so you’re best applying early in the fiscal year.

There are other no down payment options out there available from certain private lenders. These loans tend to be reserved for young first time buyers. You’ll generally need to be on a good income and you’ll need a clean credit score, which leads to the next point…

Improve your credit score

Having a good credit score can make getting on the property ladder easier. That’s because a good credit score allows you access to more lending options. These high credit score loans often come with a cheaper down payment as well as lower interest rates.

There are lots of ways to improve your credit score. The most obvious is to start being a better spender – by consistently paying your bills on time and eliminating existing debts, you can usually increase your credit score. It’s also worth checking all your accounts and cards to ensure that they use the same name and address – conflicting personal details can also damage your credit score.

Your local bank may also be able to offer a credit-builder loan. This is a small loan designed specifically to build your credit score – if you succeed at paying it back on time every month, your bank will then put in a good word every time you have a credit check. These are by far the fastest ways to improve your credit score.

Joint-buy property

Buying property with someone else can allow you to both save up together, helping you to speed up the savings process. You could decide to save up with a partner, a family member or even a group of friends.

Joint buying does have its risks. You firstly both need to be committed – you don’t want to save up with someone who pulls out at the last minute. As co-owners of the property, you’ll also need to negotiate who pays monthly mortgage payments and home repairs.

When joint buying, you generally need a guarantor who can continue paying mortgage payments for you in the event that you are no longer able to keep paying. This means that if you move in with a partner but break up and then refuse to pay your share of the mortgage, your guarantor will have to step in.

When both taking out a mortgage, you’ll both need to have equally good credit scores and proof of a stable enough income. If one of you has a bad credit score or hasn’t got a stable enough income, it could prevent the two of you from taking out a shared mortgage, so look into this beforehand.

Consider the location

You can also save money on your first home by thinking carefully about the location. If property prices are expensive locally, but you’re not tied down to the area, you could consider the option of moving to a cheaper area. Prices tend to get cheaper the further away from cities you go, however a nice view or local attractions can push the price up.

There are also other factors that can affect the property prices in an area, but they may involve poor compromises. For example, a high crime rate can often make an area cheaper – this is something that few people are going to want to risk simply for the sake of lower prices. You should also watch out for dangers such as frequent flooding in the area, high noise levels (common for properties around airports) and risks of sinkholes/subsidence. All in all, make sure that you do your background research before being sucked in by a suspiciously low price.

Try a new build

The type of property you buy can also affect the price. New builds could be one option to explore – on top of generally being cheaper upfront, new builds often have much lower running costs. Their age makes them less prone to wear and tear, so you won’t have to make many repairs, and they’re also well insulated helping to save you money on your energy bills. The disadvantage of new builds is that you may need buy fixtures such as an oven and washing machine.

You should research into local development plans in your area to get yourself in there early – new builds in certain areas can be popular and may be bought up quickly. Be wary that not all new builds are going to be cheap.

Try a repossessed property

You could also try looking for properties that have been repossessed. These homes are very cheap and are often sold at auctions. Such properties generally attract developers because they’re often not in great condition. This is something to be wary of before going down this route – whilst the upfront price may be cheaper, you may need some money left over for improvements.

You can usually view properties before attending an auction – it’ inadvisable to buy without seeing the property. This will allow you to budget more effectively when it comes to improvements.

Many people that buy repossessed properties are cash buyers, but many people also buy these properties using a mortgage – just make sure that you arrange this beforehand as you’ll generally need to put down a deposit there and then.

It’s possible you could take on a property as a development project with the hope to sell it for profit rather than living in it. This could give you some extra money to then consider placing a down payment on a more suitable property to live in. There are buy to sell mortgages that you can take out for these projects.

Consider alternative properties

Property can be more than apartments and houses. In fact, there are many alternative forms of property that you can own and live in that are much cheaper.

Houseboats are the most recent trend. These are generally much cheaper than houses and apartments. You can buy a houseboat with a marine mortgage – some of these have very low down payments making them a very affordable option. It’s worth noting that houseboats do come with extra fees that you don’t get from living in a brick and mortar property – these include mooring costs and fuel costs if you plan to take your boat on journeys. Depending on where you buy your houseboat from, you may also need to pay transport fees.

Another popular form of alternative property is a container home. This is a home built out of shipping containers. You can buy containers for as little as 5k each – these can be constructed together and converted into a home relatively cheaply. You will of course need to factor in the cost of land, which can push the overall cost up drastically depending on the location. There are self-build loans that you can buy specifically for container homes which can cover the cost of sourcing the containers (although these are few and far between), and there are land loans that can be used to purchase the land.

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