Last updated 05:34, Friday, 06 June 2008

The biggest investment most people make in their lives is buying a home. Where do you start? How do you do it? What are your options?

Homes to share: New houses at Hexham built under a shared scheme, where buyers acquire a percentage of the value and rent the rest

Home may currently be with your parents, in a house share, or renting independently. Wherever it is, the dream to own a place of your own can become a reality – but you need to take some steps to get there.

Firstly, set your budget. Each week, or month, know your income and your outgoings, and therefore your disposable income. Decide how much you can save and save it.

You may have some capital input from your parents, or grandparents. Even if this is enough to cover a deposit, you will still need money for valuation and legal costs, furniture and white goods.

You will need a deposit of between five per cent and 10 per cent of the value of the house you want to buy as the days of 100 per cent mortgages have gone (for now at least).

Once you have your deposit, you may find that your incomes are too low to allow you to borrow what you need.

For first-time buyers there are a couple of available options to help overcome this; some lenders provide special types of mortgages, designed for first-time buyers, to allow them to maximise their income allowances in certain professions as future income rises would be expected.

In addition, guarantor mortgages are still available, where one parent (or close relative) can add their own income with the highest buyer’s income.

Government-funded schemes are available in some areas to ensure affordable housing is included when a new housing estate is being built.

These properties are aimed at young people with certain chosen careers; police and nurses for example. Some mortgage lenders provide special loans in connection with government loans to assist in purchases.

A growing number of housing associations around the country are offering housing for sale under shared ownership schemes. This type of property is aimed at people who want to get a foot on the housing ladder, but who may not yet have the necessary income for a full mortgage and who do not want to use the guarantor route.

Under shared ownership, you own a percentage of the property and the housing association owns the rest. You raise a mortgage for, let’s say, 60 per cent of the property value and you pay rent, at market value, to the housing association for the rest. With this type of purchase, options are usually available for the owner to buy further tranches of the property at specified future times.

The property market has received a lot of press in recent months and, as property prices continue to reduce month on month, the first-time buyer will become the catalyst to kick-start the market again.

Prepare correctly now and you will be best placed to take advantage of this in the future.

If you would like more information about mortgages contact moneymatters@armstrongwatson.co.uk or call freephone 0800 195 2161.