Own Home Scheme Pros and Cons

coffeedog

Sorry to go on about it but do they ask about any debt etc you have at the interview stage?

superfran_uk

Of course they do coffeedog. Any lender will want to know about your debts.

Remember it's the first stage - even if you are eligible, you have to apply for a mortgage from the co-op and their criteria are like any other lender - and any debt you have will come out then so there is no point in lying.

I believe they will deem you unacceptable immediately if you have over £10,000 debt (could be £15k) excluding student debt or you have any ccjs etc. There are obviously other things they take into account, i.e. debt to income ratio or whatever - I don't know exactly because this does not apply to me. However be aware that you will not be eligible if you cannot afford to take on a mortgage.

coffeedog

Thanks for that super fran, i'm just trying to prepare myself. I certainly would not think about lying!

Anyhow thanks for the advice -if the 10k of debt limit is true that would rule me out as i have a lot of debt from studying to do my job

superfran_uk

Having looked for my letter, and found no evidence of this, it MIGHT be homebuy that has the 10/15k rule. There will be some kind of limit, it's just not on the literature. Anyhow, if it's student debt then it won't be a problem.

If it's a private loan you took out to finance yourself I think it will depend on how much you are paying back per month and whether you have ever missed any payments.

My letter simply says you must be uk resident, have a clean credit history, looking to buy in the next six months and have a household income of 60k or under. It is no more specific than that. Obviously you will need 3.5-5k for fees etc, and be able to get and sustain a mortgage.

coffeedog

Ok. Some of my debt was for studying but was postgrad and borrowed from a bank( ie, not classed as a student loan) but i had to do it to qualify for my job unfortunately.

I guess i'll wait and find out. It's just the 1st hurdle, like you say. The Homebuy scheme does have limit of £15 k of debt, that's why i didn't apply for that one.

I'll keep posting my progress, even if i get rejected so other people going through ownhome can see what's happening.

superfran_uk

I would say go for it, but don't get your hopes up and don't start looking for somewhere. If you get in, great, it you don't (and lots of debt, particularly in this climate would indicate that you might not be a safe bet - and they don't really care if you borrowed to further yourself or buy crack) then you can try to pay your debt off and you'll be in a much stronger position to apply again in a year or so.

jockosjungle

Yes they will ask you about debts, if i had some debts i'd have been accepted at a better rate but since i don't they didn't. The homebuy interview is merely an eligability test, they don't check anything you tell them and it is all based on how much the co-op will actually lend you. The co-op also actually won't tell you officiially how much they will lend you until you hsvr put an offer on a house

The problem with the basic criteria is that is the very maximum and if you think you will qualify based on that you earn less than that then you will most likely be disapointed. My advice would be to see what a fairly cheap semi in an okish area costs in your area and that'll be the max u can borrow, if you want a house more than that or 3.5 times your salary + 20% is more than that then you don't qualify. yopu can't top it up with own cash if its more than the limit.

we've decided just to save up a 10% deposit ourselves as we only qualified for the bare minimum 20% and it limited us to a house that cost exactly £109,927 (no kidding), so we'd have to take out a 6% mortgage with co-op. Which we can get with a 10% deposit

R

superfran_uk

I still don't understand - presumably 109k is enough to get a 2bed flat/terrace, possibly a semi at a push, in your area? (edit - having looked on rightmove there are over 230 properties in Warrington from which have 2 beds, are under 110k, which are not S/O. We had a choice of 17 properties in our area which matched our criteria! You can even get a detached house or bungalow!)

They are not there to provide you with the house of your dreams. Obviously you will have to compromise some on the location etc. We have picked an ex-council semi about 2 miles away and we are over the moon, it's not the palace we would choose if we won the lottery but it will be ours, and that's all that matters!

Presumably on a salary of 25k, the max mortgage you could get would be £75k, at a push £87.5k (at the moment that would probably go for anywhere, not just co-op) - so they are still helping you to buy a place you could not afford/get a mortgage for otherwise?

We also had to go for the 5.99% rate. But we're not complaining as even on 50k between us, we could never hope raise the £25k+ which we would have needed for a 10% deposit and fees if this scheme had not come along!

Cloister

YAY!

Mortgage offer received today! 5 year fix at 4.69%, why did you only get 5.99? Was it because you were less than 40%?

We took the 40% from PFP therefore we could go for the lower rate.

Jock I know how the scheme works and I can't follow your post... from my point of view this is what happened for us.

We earn Combined 30k

Places for people said we had to get a mortgage of at least 81,000 and they can cover 20 to 40% on top of that.

When I spoke to co-op they asked me what percentage I wanted for the PFP equity loan for the property I had found - I told them 40% and that was it - I went through the application process and today received my offer!

(I have been on the phone quite a lot checking progress as I'm just a little impatient to move into my new home so as long as it's not every 5 mins it might psay to do this as if I hadn't I would have been waiting still for the surveyor to recontact the co-op)

superfran_uk

That's fab news for you.

I know i've said it before in this thread but I shall repeat it here:

We earn 50k. My OH has some debt (which will actually be paid off in 6 months) which had to be taken into account so our minimum mortgage was 128k, about 3x salary - debt. The max price for a 2 bed house/flat in our area was in the region of 195k.

40% of 195k would leave us with a mortgage of 117k - under the minimum we would be expected to take on our earnings.

The actual house we went for in the end was 187k, leaving us no option but to take a 30% loan and leaving us with £130,900 mortgage. The next step up (35%) would have left us with a mortgage of £121,500 which was under our minimum mortage amount. So taking the 30% loan, we paid £2k off as a very small deposit and so are left with a mortgage of £128,900 on 5.99% - which will be about £825 a month, not very far off what we pay on our rented flat at the moment.

I hope that makes sense.