Buying a Property for the first time can be a daunting experience, and being able to afford to buy a property has become the biggest problem for those trying to get on the property ladder.

Saving a deposit is the place to start. The bigger your deposit, the wider your choice of mortgage loans will be. And if your deposit is worth at least 15 per cent of the property you want to buy, many more lenders will be prepared to lend to you. However, when 15 per cent deposit on the average first-time buyer house is more than £18,000, it can be hard. Tempting as it may be, avoid borrowing the money for your deposit from a bank or building society, or on a credit card. Before your mortgage is agreed, you will have to declare the loan with all other monthly expenditure on your mortgage application, which cuts the amount mortgage lenders will let you borrow.

In the past, many lenders were happy to lend 100 per cent – or more – of the value of the property. The current credit has put paid to that for now, but these mortgages are likely to return at some point.

Affordability

Mortgage lenders have traditionally used income multiples to decide how much to let you borrow – although again, since the housing boom hughly inflated prices, this calculation can produce an affordability ‘gap’ because house prices have risen beyond these calculations. Now, many lenders- at least 30 according to Moneyfacts – let you borrow based on ‘ability to pay’, which sometimes allows applicants to borrow a little more. If, for example, you have a clean credit record, no children and two incomes, some lenders may be willing to give you more because you may have a higher disposable income.
Abbey, Alliance & Leicester, Standard Life Bank, Halifax, Norwich & Peterborough BS and Nationwide anre among these Lenders. Incidentally, lenders are often prepared to offer you a little more rate mortgage, because the monthly repayments stay the same for a long time, which is easier for borrowers.

FEES

First-time buyers can be surprised by all the mortgage-related fees and charges. Mortgage application fees, lender valuations and stamp duty alone can start at anything from £2,000 depending on the property price- and that’s you move on to solicitor fees and surveys. Research from Abbey shows fewer than 10 percent of first time buyers put cash aside for these fees. So many people pay fees out of their deposit, further limiting their mortgage options. Occasionally, you’ll find cash back or fee-free mortgages to first-time buyers, which provide some welcome cash at a financially tricky time. However, rates are likely to be higher on these loans and so may cost more in the long run.

Many lenders will charge you a fee called ‘higher lending charge’ (HLC) for having a small deposit or none at all. Abbey, Halifax and Alliance & Leicester are just some of them, so always ask your bank, building society or adviser about HLCs, which can amount to thousands of pounds.

TOP TIPS

1. Get Some Good Advice.

One of the best ways to help yourself as a first-time buyer is to seek out independent, professional advice.  Family and friends are understandably the first port of call for many first-time buyers.  Mortgage advisers and market knowledge: they can also act as your guide through each step of the mortgage process.

2. Never Borrow more than you can afford.

It may be tempting to try to outbid the competition for a property you like, but be realistic.  Unless you take out a fixed-rate mortgage, interest rates rises can increase your monthly repayments, and added extras like furnishing your new home or ongoing bills like insurance and travel costs to your new home could be a burden.

3.Investigate Shared Home Ownership.

Shared equity or part-buy/part-rent schemes can appeal because buyers only need to find half the deposit and mortgage amount for the same property on the open market.  You only buy part of the property – usually 25 to 50 per cent – from a social housing landlord and pay rent on the portion owned by the housing association.

4. Do Some Mortgage Research on the Internet.

Check out websites like www.whatmortgage.co.uk, or mortgage specialist sites www.charcolonline.com or www.moneysupermarket.com, where you can shop around for a mortgage to suit you and find answers to many of your questions.