First-time buyers all moved in

Mortgage rates, and more specifically their rise, have been making the headlines all month.

While property prices are continuing to plummet, First-time buyers are now having to hand over deposits as big as 25%, meaning fewer and fewer people are stepping on to the property ladder.

Unfortunately the mortgage famine shows no sign of ending, but the good news is there are ways of increasing your chances of getting a mortgage deal that’s right for you. These five steps should help you make your way through the mortgage minefield:

1. Work out what you can afford

Set out a detailed budget including fees, moving costs, stamp duty, council tax, mortgage repayments and other costs, such as energy bills and your broadband.

2. Do your research

There’s loads of information on personal finance websites and newspaper supplements on property prices and mortgages, as well as specialist magazines. Check them out so you know exactly what kinds of mortgage deals are available. Then try a mortgage comparison site to see what’s available to you, matching your circumstances to lenders’ offerings. Alternatively talk to a mortgage broker.

3. Check your credit health

Look at your credit report. Your credit report lists loans, credit cards, previous mortgages and other credit accounts, your payment history and other details that help lenders decide if you can comfortably afford to repay what you owe.

If you’re buying with someone else, get them to check their credit report too – if either one of you has had past problems, from a missed repayment to bankruptcy, it could count against you both.

4. Be realistic

There’s no point targeting a mortgage designed for someone with 50% equity when you can barely scrape together 10%, or applying for a deal that demands a 20% deposit when you simply don’t have the cash. Every lender targets a specific group of people with each mortgage, so make sure you fit the profile before you apply.

5. Remain optimistic

If you still can’t get what you want, then you have a few options. For example, you could wait while you save up a larger deposit, work on improving your credit rating or take the view that prices will continue to fall.