low credit score & no deposit

jay7_2

Me and my wife moved to the UK 6 months ago from an EU country. Both of us have jobs (£20k & £11k). We rent a flat for £525 pcm. Both of us are just under 30 years.

We are thinking of getting a mortgage and buying our first home. The problem is that since we had to buy a car and furniture, we haven't got much savings - just enough to cover the fees, duty stamp, etc. We have no deposit. But during last couple of months, when we didn't have any greater expenses, we managed to save £1000 a month and I am quite sure we will be able to save a grand each month in the future as well. We have never had any debts and never missed a payment. We have UK credit cards as well and we are listed in local electoral roll.

According to checkmyfile.com, my credit score is 717, which is lower than average. The reason might be the fact that we have been living in the UK for 6 months only.

Now, we want to move to be closer to the places of our work (now both of us commute 17 miles every day). We will probably rent a new flat for £600 a month. Another option is to get a mortgage and buy our home now. We planned to do so anyway as soon as we can.

The trouble is that with our salaries, the highes amount we can get (according to basic calculations) is about £82k. That is not enough, since we live in Berkshire, our ideal first home costs around £150k. According to various mortgage comparison web sites, there is no product that matches our criteria.

Finally, my question: Is there any chance any lender will lend us 100% of the property price (£150k) with our poor credit history and low income?

Thank you.

herbiesjp

Hi there

Based on the information you have provided, I think you may well be able to get a 100% mortgage but not for the £150k you are looking for.

You are looking in the region of £110,000 and this would cost £576 per month an interest only basis.  So if you were looking at the £150k mark on a repayment basis then you are going well above the £600 you would be paying in rent.

You are not alone in having a low credit score, but this would not in itself prevent you from getting the mortgage - this depends on the credit score you get with the lender.


Hope this gives you some figures for thought.

jay7_2

Thanks for the quick reply.

Since we are paying a £525 rent and saving £1000 a month now, I think we can afford up to £800 monthly payments for the mortgage. Also, we are very likely to have better salaries soon.

Anyway, thanks for the good news, we will definitelly research the option of buying now.

I think our next step should be getting a personalised advice from a professional. I know some of the mortgage advisors take fees. Which ones don't? Can you please recommend a good one in Reading? Thanks.

herbiesjp

sent you pm

jay7_2

I have additional questions: If we manage to save £7000 deposit in summer 2005, will our chances of a better deal be better then? Is it worth waiting and renting a flat untill then, or should we step on the property ladder as soon as we can? Considering our circumstances, we are probably not going to get a good deal now, are we? Also, the prices might be lower next summer than today. Any ideas are welcome. Cheers.

Fairdo_2

jay7

You are right. If there is no drastic rush, as long as you don't mind paying rent for a bit longer, the more money you save for the purchase costs and deposit, the better.

Also, the longer you have in the UK with loans and credit cards being serviced properly, the better this will be for you. There should be more lenders available to you and the mortgage should be better generically for you, if you have more choice and you take good advice!

It may be a small point, but a may also assist you if you take a mortgage in a few more months as things like Electoral Role information gets updated more accurately after November and unfortunately it often takes a bit of time to end up on credit file information.

herbiesjp

The decision of when to buy ultimately rests with you.

The 7000 deposit may make a bit of difference, but it all depends on house prices at that time - no one will tell you what they are going to be in Summer 2005.

The rates are those available for 100% mortgages and so are higher than those for people with higher deposits.

It really does depend on what YOU want to do though.

Fairdo_2

I totally agree with this point. It is your choice on when to purchase. We are here to give Generic advise and answers to particular questions. When you are armed with as many facts as possible, I hope this places you in a position where you can make your decisions with your eyes open.

I hope this is a given that none of us are gining particular recommendations, but helping to provide you with a chance to make informed decisions.

The previos poster makes a very important point that the £7,000 is available, but choices may be based on "100%" rates, this could be because Purchase costs such as Stamp Duty, amongst other costs have to come from somewhere, therfore, without being privvy to all the facts, we have to make certain assumptions on these threads.

In general, the minimum deposit required for many lenders tends to be 5%. Ideally 10% deposit gives even more freedom and likelihood of slightly less up front cost.

Good luck whichever time you decide to jump.

I would say keep your eyes peeled at the moment anyway as there is no harm in learning more and more about the housing market. As they say "Practice makes Perfect" and if you stumble across something sooner, then more power to you!