How to beat the mortgage borrowing blues

Tips for potential first-time buyers from moneysupermarket.com's Louise Cuming: House prices have plummeted in the past year, making property more affordable. Yet getting a mortgage, if you are a first-time buyer, is arguably harder than ever.

We need a complete change in attitude towards saving and debt. Unlike our parents' and grandparents' generations, we got used to easy credit, and not having to save up and wait for the things we really want.

Now we need to get back to some old-fashioned values of restraint, planning and a bit of prudence.

Even if you have a poor credit rating, there are three simple steps you can take to make yourself more attractive to mortgage providers.

1 - Offer at least a 10 per cent deposit

Even a five per cent deposit isn't enough nowadays. The simplest way for young first-time buyers to save up a deposit of 10 per cent is to live at home with your parents and save a regular amount.

However much people might complain about paying board to their relatives, it's not going to be anywhere near as much as paying rent in the commercial sector.

Making regular deposits into a high-interest current account and savings account is also a really good idea.

Saving regularly - and paying board to your family - is great training for you to get used to the discipline of making monthly payments.

Returning to the family home is not always easy for young people who have enjoyed their first taste of independence while away at college - and for parents who have become used to some space, peace and quiet.

Relationships will need to be renegotiated. Parents have to realise they can no longer say: 'What time do you call this?' or 'You're not going out dressed like that!'

It's all a question of education. Starting to teach the value of saving sooner rather than later is vital.

If renting is unavoidable, it is still possible to save a substantial amount every month towards a mortgage deposit.

Be frugal with the amount of rent you are prepared to pay. Don't go for a penthouse. Go for something more modest, recognising it's only a temporary stage in your life. Save now and you really will benefit later.

2 - Maintain a good credit rating

There are simple but crucial rules regarding credit cards. Make sure you pay towards your credit card debt every month - at least the minimum payment. If possible, pay off what you have used in full each month.

Even if you are very prudent, it is actually a good idea to have a credit card and use it every now and then - paying it off in full, of course. Someone without a credit card - even if they have no other debts or financial problems - will not have as good a credit rating as someone with a credit card.

Most lenders use a system to score credit ratings. These systems do have something of the black arts about them. But one thing you can say for sure is if you are young, your age will count against you, making it harder to get credit.

There's not a lot you can do about your age - except enjoy the fact that you're still young!

Details of all missed credit card payments are held on your personal files for six years and may count against you when your credit rating is accessed.

The answer is not to worry about what has already happened. Concentrate on changing your personal fortune now by drawing a line in the sand, taking control of your debts and working hard to pay them off as soon as possible. It will take discipline and planning but, more often than not, it can be done.

3 - Concentrate on affordability

Going back only 18 months, people were being offered mortgages of anything up to 10 times their salary. That was crazy.

Now we have to be much more realistic. The most you are likely to get is four times your salary. This means that if you earn £20,000 a year, the most you will be offered will be £80,000.

This will be a problem for most young single people, because barely any houses are at that price level.

If you are married or with a long-term partner who also earns around £20,000 then you would be looking at a potential mortgage of £160,000 though.

Buying a house with shared equity through a social housing scheme is an excellent option.

It's a great idea, as many social housing shared-equity properties tend to be new-builds which need nothing doing to them and with very low maintenance costs.

And then there's the flexibility of being able to buy more of your property when you are in a position to do so.

But there are drawbacks. First, there aren't enough social housing schemes to meet the need at the moment, so you have to be quick off the mark when you find something you like.

And some mortgage lenders are reluctant to provide loans for them, because if it comes to repossession proceedings there are increased legal implications - and therefore costs - for the mortgage provider to bear.