1st Time Buyer Bad Credit History Mortgage Advise Needed

jimmiblaze

Hi,

I'm a first time buyer with a poor credit rating. About 6 months ago I got offered a "Mortgage in Principle" from Natwest, which I decided not too procede with. I've now seen another property I'd like to buy and would like to get a morgage and am planning to see if Natwest will offer me a Mortgage in Principal.

Between 6 and 8 years ago when I was still living with my parents I got into some serious debt which has now been paid off. Because of this debts and me just ignoring it I eventually recieved serveral CCJ's and Defaults, all have been closed and paid off but because they've changed hands with various debt collectors this hasn't been reflected on my credit file. Over time when I moved out of home I had built a reasonable credit history and now have credit cards and loans. About 18 months ago I moved back in with my parents so I could save a deposit which has meant I've now inherited my old poor credit record.

I have banked with Natwest for almost 10 years. I took a loan out to pay my overdraft and credit card off shortly after moving in with my parents. I failed a credit check and they offered me a debt consolidation loan at a higher rate. The condition was I'd have to surrender my debit card and have a basic solo card and wouldn't be able to have any other credit facility for 6 months. I went ahead with this. About 3-4 months ago(after the initial morgage offer) I was paid late and had a direct debits due so phoned natwest to organise a temporary overdraft for £150 until I got paid, they declined me on the basis of adverse credit. In the last 12 months or so my salary has increased over 50%(i'm earning 50% more than last year) since taking out the consolidation loan. Natwest have recently upgraded me to a gold debit card with £250 cheque guarantee without me asking. Last week I phoned up to check something on my account and they asked me if I was interested in learning about some offers because I have an advantage gold account. They metioned an overdraft so I thought I'd see if they'd give me one, more out of interest. I intially asked for £500 but she mentioned something about I'd been approved up to £7000 so I settled for £2000.

After me rambling and waffeling my question. If natwest offer me a mortgage in principle will my credit report effect the final decision? I've read elsewhere that some lenders do perform the credit check on the IP quote and providing valuation, property searches, identity and salary checks are okay it'll go ahead. I've also read as a mortgage is secured it's more your affordability than your credit history that is importance. I don't want to be in a situation where I put an offer in get accepted and start forking out money to start the ball rolling if I know it's going to be declined.

My other question is based on the following financial information has anyone got any advice for getting a mortgage thats not going to cost me a premium because of bad credit history, I've looked at several companies that specialise in bad credit history mortgages and it's going to be around £250- £200 more and it's a variable rate rather than fixed rate.

Salary £51000

Take Home Each Month: £2,935.91

Loan Repayments: £500 (PM)
CreditCard Repayments: £100

Property Value £154950
Mortgage £144950
Deposit: £10000 (I could strech to the full 10% if needed)
Term: 35 Year
Age: 27

I obtained a full credit report from checkmyfile.com these are the details:-

Credit History

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CCJ: 1 Obtained 05/2000
Defaults: 3 Obtained 08/2002, 01/2001, 02/2001 (these are the dates of account closed).

Experian Credit Score: 338
Callcenter Credit Score: 760
Experian Credit Score: 475

I also have serveral accounts that the worst state was between 3-6 months overdue.

I realise the most sensible thing to do would be pay off my current loans and credit cards and then think about buying then in which time my bad credit history would have dropped off my record. My reasons are at the moment my work involves me been onsite at customers so I live in hotels in the week and live at my parents at weekends, But this will end in 4 - 6 months and I'll be back at my office. Although I get on with my parents I can handle it for the weekend but not day in day out, Also because I'm earning good money they expect me to pay a fair rent when I'm based there full time so it's not like it's much cheaper so I will look at renting my own place if I can't get an affordable mortgage, which I don't really want to do unless i have too. Another option is prehaps go for a cheaper property but I really want a 2 bedroom property so I can take on a lodger (got a few friends who'd be interested) which their rent would cover the majority of all the bills.

Apologies for my long winded ramblings, any advice will be greatly appreciated.

Thanks,

J.

Debt_Free_Chick

When are you planning to apply? The CCJ will disappear from the credit file in May this year and you will definitely be in a better position then. Pity about the three defaults and the late payments .... but "no CCJ" would improve the position.

How much do you owe on the loan and the credit cards? Could you pay off some serious money against them between now & May, whilst you wait for the CCJ to disappear? You would then have (a) no CCJ and (b) less debt ... which is a definite improvement.

With the late payments & defaults, you may not get the best mortgage rate. I think you need to see a mortgage broker - you should not have to be limited to mortgages for those with "a bad credit record" after the CCJ disappears. But the combination of the defaults and the need to have an offer in principle which includes a credit check means you'll either have to shop around or get a mortgage broker to do all the hard work for you.

What do others think?

AndrewSmith

I think you are somewhat right debt_free_chick.

With the CCJ gone in May this year (may take a few weeks to dissappear, check your credit file end of may) you stand a better chance of being acceptedat high street rates.

However many lenders actually look less favourable at defaults than they do CCJ's these days. One default may not have been a problem but, in the eyes of the lender, 3 defaults shows a definate inconsistency of making monthly credit payments and will make them less likely to want to accept you.

Be careful when freely accepting sources of credit from ones own bank in such a way, this is how many of the unfortunate people in serious debt end up posting on here asking for help. Dont take a credit card unless you actually need it. Also with a 50% increase in your salary in the last month why would you need a £2000 overdraft? This will only spiral out of control if not checked now and will lead to more defaults further down the line.

However, if natwest have offered you a mortgage in priciple in the past I think you may have a good chance once the CCJ has gone. The fact that you have been accepted for credit since will have improved your credit rating and credit score.

I would ask friends / collegues for a recommendation of a local mortgage broker to you, who you can visit and discuss the case thoroughly. Call on their experience and market knowledge in knowing who will accept your case based on your situation. Once the broker has all your information he / she should be able to make an appropriate recommendation to you.

Beware of companies you may see advertising offering mortgages regardless of credit history or those who suggest they specialise in such cases. You will find they only deal with 'centralised lending houses' where the rates are less competitive than elsewhere.

Hope this helps

Andy