Open Question: Should I buy a cheap house or rent and save for a better one?

I have two options, and haven't worked out the figures yet to see what is best. My credit file is damaged and will take 5 years to be fully repaired and I am self employed and need to collect a few years of accounts first. I can either: Carry on renting at £450.00 per month and continue saving £500.00 a month towards a 25% deposit in 5 years, which I work out with interest will be around £32,000. Option 2 is to purchase a 2 bedroomed terrace, which go for around £28000 where I live in Hull - which I could buy with a deposit of £7000 next year (I have found a mortgage I can take with CCJs with 25% deposit and no accounts) and have a mortgage of around £21000 (£150.00 a month over 20 years). I would then be saving an extra £300.00 a month as I would not be renting, so I should then be able to save £800.00 a month for the 4 years after that and have something that I would use towards buying a decent house. I have been told not to buy as the area is not too great - but its a house and I will own a property rather than carry on renting, I am not too bothered about the area. I wonder what others think.