The recession hasnít given would-be home-owners much to smile about but there is a glimmer of hope in recent reports that, in some parts of the country, itís now cheaper to buy your home than to rent ñ if you can straighten out your finances and make yourself attractive to lenders.
Property website Zoopla suggests that the average renter is currently shelling out 10.5 per cent more per month than a home-owner with an interest-only mortgage at five per cent ñ and that buyers are better off than renters in eight out of 10 British towns and cities.
Zooplaís research, which compared the sale and rental prices of two-bedroom flats, showed that in Milton Keynes ñ the place with the highest property rental prices ñ rents outstripped mortgages payments by a staggering 42 per cent. Even in London, which has the highest asking prices in the country, buyers stand to save £4,656 a year over their non-home owning counterparts.
Similarly, the Halifax reports that buying a three-bedroom home is nearly £100 a month cheaper than renting.
ìThis blip is the result of low interest rates and falling house prices, combined with extra demand for rented property from would-be first time buyers unable to get on the property ladder,î says Pete Turner, managing director of Experian Interactive.
ìBut the situation could change if interest rates rise, so buy when the timeís right for you ñ which means getting your finances straight before you even visit the estate agent.î
Start as you mean to go on
Get to know your credit report
This is the history of your credit accounts, such as cards and loans, plus your repayment record. Lenders look at it when they decide whether to make you an offer, so everything should be accurate and up to date. If you find an error, contact the relevant lender and get it amended. Your credit report will also give you a clearer idea of how much you can afford to borrow and what you can manage without. Itís free to see your Experian credit report with a 30-day trial of CreditExpert.
Max out your depositÖ
Cut back on household expenditure using a price comparison site, such as LowerMyBills.co.uk. Downgrade holidays, clothes and even supermarket brands. Then look for painless ways to save, such as going running instead of to a gym.
Önot your credit card
Lenders want to be sure that you can manage your repayments comfortably, so itís a good idea to pay off as much credit as you can before you apply for a mortgage.
Clean up your credit history
Close unused accounts, add a note if special circumstances ñ an illness or accident, for example ñ explain past problems and make your repayments on time, every time. A missed or late repayment stays on your credit report for at least three years, damaging your chances of getting the mortgage you want.
Before you visit an estate agent
Do your research
Make sure you understand the different types of mortgage and keep up with the financial press and websites so you know what deals are out there.
Lose the ex
Close joint credit accounts with former partners. Their credit history could affect your ability to borrow if your names are still linked financially.
Do a cost assessment
Include all the expenses involved in buying a house, from stamp duty to removal costs ñ or you could end up struggling to pay your mortgage.
Register to vote at your current address
Lenders use the electoral roll to check that you live where you say you do. If youíre not listed, it could affect your chances of getting a good deal.
When you go house-shopping
Give yourself a price limit and stick to it. Most lenders require at least 10 per cent deposit, and more for their best deals, so you could end up in trouble if you overspend ñ especially if interest rates go up.
Get expert help
Use an independent mortgage broker or financial adviser ñ they can search the whole market for the best deal and arenít tied to just one lender.
Donít make multiple applications
Each one leaves a record on your credit report that other lenders will see ñ if there are too many, they may think you are desperate for money or trying to commit a fraud. And always read the small print before you sign.
Keep checking your credit report
Your credit status changes over time, so you need to keep on top of your finances if you want to get the best mortgage deal. You can see your Experian credit report for free with a trial of CreditExpert. While youíre at it, check out your Experian Credit Score ñ it can give you an idea of how lenders may regard your mortgage application.