Complete newbie asking for advice

SJCJDCLSC

Hello everyone. I would appreciate some help and advice in reference to our situation.

We are a young (ish - 26) married couple with one young child. We live in a rented three bed house for £500 a month, it is owned by my parents and we have rented privately from them for five years. Whilst we love the house and the area and the neighbours and there is nothing wrong with the amount of rent or with the house we want to buy a property of our own. As we understand it, it is a buyer's market so are quite keen.
Also, moving is something that I in particular really want to do as, whilst I love my parents, I do have a strained relationship with them because we live 'under their roof' as they see it and moving out would greatly improve our relationship and all of our lives. 6 months ago we had several rental viewings with a view to renting elsewhere but my husband didn't want to go through with this because, for the £500 per month price range what we could rent in our area was vastly downsizing on what we currently have, as the rent we currently pay is lower than average.

So the idea now is to see whether we can buy a three bed house so we wouldn't be downsizing or compromising on our independence. Basically - hubby wants to stay in a nice house, I want to not be under my parent's rules anymore.

Our stats:
from our P60s:

Hubby: 19k
Me: 13k

We both work shifts and have no childcare costs as he does mornings and i do evenings.

We did our experian credit check, both with scores of 999 and no defaults ever.
We have had a lot of credit agreements in the past and have always paid them on time and never had any trouble with them. The only thing is in January I applied for a new contract mobile and it came back saying I couldn't have it but I have no idea why, so we just did it in hubby's name. Also, one other time we went to buy a new TV and the check was denied. Later the shop called us and the guy had entered my age as 13 instead of 23 so we were then accepted but don't know whether that would have had any impact?!?
We currently have three outstanding credit agreements (we buy everything big on interest free credit you see) - a) a bed, runs out in Feb 2010 and has £430 outstanding, it's £53 a month. b) a(nother) tv, runs out in Oct 2009, £422 outstanding, it's £105 a month and c) some expensive family portraits, runs out in Sept 2009, £360 outstanding, it's £120 a month.
We are not worried about paying these off as we always pay very well but are worried that having these outstanding will impact on a mortgage application. They are all with BlackHorseFinance.
We also have a personal loan that will run out in Jan 2011, for which we are half way through the term and it has over £3000 outstanding and we pay £190 a month for this.

Our thinking is that if you combine the £278 that we currently pay on our credit agreements (exc the personal loan) with our current rent (£500 = £778), when our credit agreements are paid off we could afford to be paying £700 on a mortgage each month, as we clearly are paying more than that currently in financial commitments. So we do feel that we could handle a mortgage. We also have the means to pay off early the bed credit which doesn't run out until Feb which means we will be without credit agreements (exc the personal loan) from Oct of this year.

We have had a meeting yesterday with a mortgage advisor who was very positive. She basically said we would have no trouble getting a mortgage of about £112k (3.5 times our salary)

HOWEVER! We are very nervous about taking the first step and there are a few other issues.
1) we have no deposit. We do however have hubby's parents who have offered a lump sum of between £10-15k but they haven't confirmed the total. I have concerns about this because I don't want to transfer being under the obligation of one set of parents to being in debt with another set if you see what I mean - after all, we want to buy to gain independence.
2) our salaries are not steady, in fact our mortgage advisor described our payslips as 'a nightmare'. We are both deputy managers and as such our salary varies from month to month. Our P60s show that it averages out over the course of the year but our wages are linked to how much work there is where we work. It's not commission based exactly but it is similar. We have a guaranteed income salary but this alone is very small, more like combined of £22k rather than the £32k that we actually earned last year. We know that each year we will earn significantly higher than our 'base' salary and our payslips and P60 confirm this but we are worried that a lender will not accept this, particularly if they contact our employer and ask for the base salary that we are contracted for.
3) we are interested in Home Buy Direct but aren't sure whether it is really a good idea or not.
4) whilst our mortgage advisor said we could get approx £112k mortgage, when I contacted Natwest they said we could get a max of £103k based on our income from last year. How much can we trust our mortgage broker? The meeting was very positive but was it unrealistic? I would hate to fall in love with a house, put an offer in and then find that we can't get anywhere close to the mortgage that we need.
5) we do not manage our bank accounts very well and we have lots of them. In fact between us we have 5 different accounts, all with the same bank. We have two small savings accounts that are for our god-son (in hubby's name) or our son (this one is a joint one) and we save a pittance a month for them and would never touch them as they are not 'ours'. We then each have our own accounts that were our student accounts back in the day and they both have large overdrafts. Our wages go into these and then each month hubby transfers most of the wages out of these two accounts and puts them into another account which is a joint account and from this account all of our bills/creditagreements/direct debits etc come out of it. This account therefore always gets loads of money at the beginning of the month and then at the end is right at the bottom and last month went about £9 overdrawn. Also, hubby's main account is the account he uses for our 'fun' or luxury things and my main account is used for food/household etc. Hubby's account is often very overdrawn because, to be honest, quite often we just spend money on rubbish. We know we have to be better at budgetting and we are working on this. The crazy thing is whilst his account is overdrawn we have money in other accounts (eg mine) but we still pay the interest on the overdraft on his account, so we need to address is.
6) we are also both going for promotions at work which, if one or both of us were to be successful, would guarantee a higher and more stable salary.


Thanks for reading.
My questions are this:
1) will being overdrawn on one of our accounts be a problem and should be wait until we've sorted this out and been more sensible with our accounts before applying?
2) can we trust our mortgage broker or was she overly optimistic, trying not to put us off?
3) given our financial situation, what sort of mortgage would you expect we could get?
4) what information is there about home buy direct, particularly looking for personal experiences from people.
5) will our salary situation be a huge negative factor for us?
6) should we hold fire until the potential promotions?


Thanks!!

nw_man

No offence but that post is way to massive.

I read half of it.

I got to the bit where you said you have no deposit but could borrow it from hubbys parents, but didnt want to.

No deposit = no mortgage. A 10% deposit = a poor mortgage, as in not so great in terms of fees and rates etc.

McKneff

I thought you werent allowed to 'borrow' a deposit. or am i wrong

SJCJDCLSC

Sorry I didn't realise there were rules on post length? I wanted to give a complete picture. Please don't feel obliged to read the whole thing, I only want advice if people are happy to give it.
We don't have a deposit but hubby's parents are keen to help us out so have offered a lump sum for us. My concern is whether we should go for this given that later down the line we may feel that we didn't stand on our own two feet as we opted for a hand out. It's a physcological (?) thing. (to clarify - not borrowing the deposit but being given it.)
Hence our interest in HomeBuyDirect where you do not need a deposit in order to obtain a mortgage.

Thanks for helping.

MONDYMAN_3

It is quite a complex situation but the best advice i can offer you is to have a good chat with each other....sit tight and focus entirely on clearing all your small outstanding 0% finance options...
Get husbands account solid in the black ( thought wouldn't be a huge issue if there is a regular income )
If it means you have to stay there another 6 months it will give you time to be a lot more mortgage solid , obviously you want to move asap it seems from your post but the market is going to stay as a buyers market for some time yet so don't panic on that issue that your missing the boat..you won't be..
Above all else talk to each other ..work it through together

All the best