Mortgage approvals

Last post Thu, Nov 29 2012, 3:59 PM by freeman3030. 2 replies.
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  •  Thu, Nov 29 2012, 3:59 PM

    Re: Mortgage approvals

    Hi and thank you for your very comprehensive response!

    As for our earnings:
    My partner salary is £17,500 basic pay, he doesn't get a bonus (he might get a christmas bonus as this is his first year at this company) and I earn roughly £11,000 a year, last year it was a little more, the year before it was a little less.

    You've filled me with more confidence from what you have said.

    I have had a credit card since I was 18, so thats about 4 years now and each month I have paid off the balance in full. My partner took out his first credit card last month as I suggested it would be good to show you can pay back money (so long as he pays it).
    So hopefully by the time we come to get a mortgage he should have had several months of fully paid credit card bills.
    We've also both had the same bank accounts for over 4 years, so theres nothing you've said that we haven't done.

    I know you shouldn't really look for a home when you haven't got finance in place, but we've both had a look (basically to see what we can get for our money) and we can get a 1 or 2 bed flat, a couple have been in purpose built blocks, but most of them are converted 2/3 floor townhouses which are over 20 years old.

    We are mainly trying to find somewhere which we can add a bit of value. We're not put off about having to completely redecorate, replace floor coverings and have replace the bathroom and kitchen overtime (my dads a builder and is willing to help with jobs like that - I think its his way of getting rid of us!)

    I'm much more optimistic now thank you!
    • Post Points: 5
  •  Thu, Nov 29 2012, 9:10 AM

    Re: Mortgage approvals

    First of all.

    When using lenders calculators, be careful of how you enter your figures. Overtime, bonuses and commission will never be counted 100% towards a mortgage affordability. Often will only be counted as a percentage of maximum....normally 60% so £1000 of overtime per annum will only have £600 allowable towards any calculation. The lenders will normally differentiate on their calculators how this is to be split but its up to you to ensure you enter the right figures.

    Saying that, do also be aware that most lenders will take things like Child Tax Credit, Working Tax Credit and even Child Benefit into account and so it would be worth adding these to the calculation if you are in receipt of them.

    I would have to say that depending on the breakdown of your income and even assuming you only have a basic income of £20,000 between you then you should be shown to be affordable for a £80,000 mortgage....but you will have to take into account other things such as any dependants, any existing debts, maintenance etc. These will all reduce potential affordability.

    So far as the deposit from your family. There shouldnt be any issue with this what so ever. Normally a lender will ask for a Letter of Intent which is basically a letter written by the family member to say that they have gifted the deposit to you, to confirm that it is not a loan or repayable in any event or timeframe and is purely a gift.

    Yes, there are still hurdles to jump through to get a mortgage....but you are borrowing £80,000, (eighty thousand pounds). Do you expect they were just giving it away. The lenders want to ensure that they give it to someone who will vbe able to pay it back. This is not 2007 anymore and the lenders have to responsibly assess their applicants on the basis of affordability and the risk of default and as such things will naturally get tighter but will eventually lead to a far better lending economy.

    So far as if this is the right time to buy....if you wait another couple of years the prices will likely have risen...or at least we all hope they will. You stand the risk of higher interest rates and the attitude to lending is unlikely to have changed significantly to what it is right now.....it will not return to the lendig attitudes of 5 years ago.....not for many many many years anyway.

    Do speak to a moprtgage adviser, they will be able to give you an independant view of the whole market where as a lender will only make you aware of their own producxt range even if the bank next door has a significantly better product range...they cannot and will not advise you on what to do and what product to take, their staff are rarely qualified because of this (they dont need to be to just show you products) and you will get no liability of responsibility from the lenders they will not have made an advised recommendation...you will have chosen from a range. An independant adviser will be able to offer you everything the banks offer and more and they will have the weight of liability on them because of the advice they offer. They will offer from a range of lenders and products and discuss suitability of each product. they will advise you through insurance recommendations and importantly they will likely set up policies into trust which banks will not do. You may pay a fee to the adviser but report after report has always suggested that an adviser will save you thousands on the cost of your mortgage over the term....no prizes for guessing that I am a mortgage broker myself.

    Having a small buffer yourself will help to show to the lender that you are able to control your finances and even save money yourself and may offer them a little more reassurance to lend because of this.

    I would also suggest that if you are going to wait a year then try and save as much as you can. Stay with the same bank accounts. Ensure you are on ther electoral roll. Clear any balances on a credit card each month (no problem to use the card, just clear the balance) try your hardest not to miss a single payment in the next year, try not to change job in the next year. Try and do as much overtime or commission based earnings as possible over the next year and definitely the last 6 months before applying.

    All of these things will help to boost your score and ability to get an Accept decision with the lender but on the basis of what you have put already and assuming that you do not have any adverse credit between you I would imagine that you have a good chance of a pass with most lenders.

    Do also be aware that some lenders do not like to lend at 90% for first time buyers and almost certtainly most lenders will not lend at 90% for a new build property....will likely need a 15% or 20% deposit for new build.

    Good Luck

    • Post Points: 20
  •  Wed, Nov 28 2012, 4:50 PM

    Mortgage approvals

    My partner and I are looking to buy our first home. My mother in law to be is generously gifting us the 10% deposit of £8,000 as we're looking to buy something around the £80,000 mark.
    I've checked my credit rating with Experian and it is excellent. We've yet to check my partners, but his bank phoned him the other day and offered him a loan... to me that looks like a good sign (but we will check his before applying for a Mortgage).
    Combined, we earn around £28,500 a year and from various online mortgage calculators we can borrow:

    Lloyds TSB - £132,000

    Nationwide - £127,600

    Natwest - £121,125

    Santander - £99,750

    Halifax - £94,050

    As we're looking in the 80k region there at least a £14,000 buffer on what we could potentially borrow, does this work in our favour or would it make no difference than if we were to borrow the full amount they can offer us?

    I have heard time and time again on TV programmes like Phil Spencer's secret agent, and all those property programmes that mortgage approvals are down. Is this really the right time for us to buy? Or is this the best time for us to buy as property is cheap?
    I'm just concerned that if we get rejected, it's going to look bad on us and hinder us buying in the future.

    We intend to see a mortgage advisor next year when we get the ball rolling, but want to find out as much as we can prior to then!

    Also by the time we buy, we would have saved roughly £2,500 ourselves which we want to save as a buffer for property maintenance/improvement.

    I understand banks and building societies have their own lending criteria, but do we look like we could be approved a mortgage? I'm just concerned that we have a deposit from a parent and this will reflect badly on us because we didn't save for it ourselves.

    Any comments/advise would be much appreciated,

    Many thanks,
    A nervous worry wart!
    • Post Points: 20