What a problem someone who is trying to get on to the property ladder for the first time has these days!

Traditionally sky high property prices with the frightening mortgage costs these require, together with the almost impossible task of saving for a deposit which gets higher and higher anyway as property prices increase.  And now, when property prices have been falling and there seems to be a glimmer of hope for would be first time buyers, it's often very difficult to get a satisfactory mortgage.   With the high rent often paid and crippling credit card, loan and other costs all seeming to conspire against first time buyers - the situation is extraordinarily difficult.

However, the 'credit crunch' has brought one unexpected bonus to first time buyers - property prices have fallen dramatically in many parts of the country, and this has opened up the market considerably.  Whilst the problems of finding a good deposit remain, the lower mortgage required has made what was for long just a dream, a real possibility for some anxious to get on the property ladder where the first step has always been a long way off the ground!  Perhaps now is the opportunity many have been waiting for. And rememebr - we are still in a buyer's market,(just) and you can find real bargains about at the moment if you look hard enough. And never, never, never offer the asking price on a property - a bit of bargaining can often bring the price down considerably. This won't lasst long however, and prices are starting to rise again in many parts of the country.

But there are still many obstacles to overcome as you head towards that property ladder!

 Briefly

Your status must be perfect - no late telephone bill payments, missed credit card dues and the like and these together with more major problems such as court judgements, defaults will unforunately rule you out completely as things stand.  You need an absolute minimum of one year unblemished record before a lender will even CONSIDER an application at the moment.

You will need a minimum deposit of 20 - 25 % of the purchase price if you want a really competitive rate!! -  Yes, we know this is absolutely crazy but that's the way it is at the moment.  The lenders continue to be petrified at making a wrong move and are being ultra cautious. However, over the last couple of months an increasing number of mortgages  have been made available where a 10% deposit can be raised,, and considerably more if 15% of the purchase price is available.  The rates of interest are nowehere near as competitive as those with a larger deposit, but have become a lot better than they were this time last year. Sometimes, taking everything into consideration, paying the higher interest rate involved might be justified, if. for example, a 90% mortgage might be the means of obtaining a property at a highly competitive purchase price, and the 'profit' on such a purchase outweighs the 'loss' on the mortgage rate!   But certainly more and more 'first timers' are now beginning to make enquiries as to the possibility of getting on that property ladder.

Mortgage availability will be governed by your status, age, income,job stability and other factors which are churned into a mix by the lenders and come out as a 'credit score' This basically means that if you are over 21, have a steady job, not moved about too many times in the last 3 years, have the appropriate deposit, do not want to borrow much more than 3 or 4 times your provable gross income you at least have a chance of a mortgage!

 Here are a few practical suggestions which may help.

1. Can mum and/or dad or another close relative help in any way, either by actual cash to assist with a deposit, standing as guarantor if this is possible, or even using equity in their own property to help raise finance? 

2. Have you considered buying your first home jointly with others on a ‘shared purchase' basis? Such arrangements have to be considered carefully, but can sometimes be a positive way forward. The actual arrangements can be either a formal Housing Association shared equity type of mortgage or friends combining their income and resources to at least make a start on climbing that ladder!

3. High income multiples? Young professional applicants especially, but also others in secure employment can often borrow with  higher income multiples than normally allowed - but if you are thinking of borrowing in this way take great care that you do not over commit yourself from the outset. Normally you can borrow between 4 and 5 times available income if you have an unblemished status record, but remember any credit you have will be taken into account in determining how much you can actually borrow.

4. Interest only mortgage to start? Especially in the early days, an interest only mortgage is something that could well be considered as this would reduce mortgage outgoings considerably, but the implications would need to be clearly understood. In any event lenders generally will not allow an interest only mortgage where the borrowing exceeds 75% of the purchase price or valuation.

WARNING! Many first time buyers may be tempted, in their desire to get on to the property ladder, to enter into arrangements which might on the surface appear to be the answer to their problems, but which have hidden dangers which may not have been adequately explained or understood.

IT IS IMPORTANT THAT FIRST TIME BUYERS IN PARTICULAR TAKE
APPROPRIATE PROFESSIONAL ADVICE.