Mortgage advice for first time buyers

If you've been following the news while trying to save for your first home over the last few years you might be forgiven for becoming a little pessimistic about your chances of getting a foot on the housing ladder.

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But it's not all doom and gloom, and there are even some advantages to being a first-time buyer in the current housing market.

In the wake of the credit crunch there were reports of first-time buyers being asked to pony up much bigger deposits that the "standard" 10 per cent that used to be common.

Mortgages may still be available at that level, but more and better deals will be offered to buyers who can manage to scrape together a higher deposit.

According to e.surv chartered surveyors, the number of mortgages with a deposit of 15 per cent or under was up by 32 per cent on 2010 as lending conditions eased.

Taking December 2011 in isolation, the average loan to value on first-time buyer property was 69 per cent, up from 66 per cent in December 2010.

The average deposit in December 2011 was 38 per cent, down from 41 per cent a year ago.

To help future buyers, the government is introducing a special first-time buyers' mortgage scheme which will offer 95 per cent loans backed by the taxpayer - to help beleaguered buyers.

Some developers are already trying to shift new-build homes by offering first-time buyers loans of up to 95 per cent - and/or paying the stamp duty themselves if applicable.

Other developers are offering deals to first-time buyers which include an insurance policy against default - which is paid for by the developer.

Stamp Duty
The government has been waiving stamp duty for first time buyers up to £250,000, but this measure will end on March 24 this year. The reason given is that it wasn't working.

Get in quick though and you might save thousands of pounds.

It's vital to work out exactly what you can afford before you start hunting for a home. And that doesn't just mean looking at your income and the price of the home you want.

You also need to factor in stamp duty (if applicable), solicitors' and legal fees, removal costs and the money you might need to make your new home habitable.

It might also be a smart move to look at your credit rating online and address any issues arising from it before you apply for a mortgage.

The world of mortgages can be bewildering to the uninitiated, but so long as you understand the basics you should be able to decide which type fits your needs best.

The main choice will probably be between fixed rate (usually for a few years) or variable tracker. Interest-only mortgages are a rarity for first-time buyers.

When doing your research into the subject, you should also consider tie-in periods and flexibility for overpayment/payment breaks - and see how they relate to your own circumstances.

One new innovation is loans where a parent puts down a proportion of the deposit and their adult child a smaller sum - these are intended to give young buyers access to rates they would not normally be offered.

As offers and deals change very quickly, it's best to check the comparison sites for the best deals being offered to first-time buyers when you're ready to buy.

What do you reckon? Is it harder out there than ever before? Comment below...