Advice For First Time Buyers

dans107

Hi,

Like so many others, I’ve been a lurker on here for a long time, but now need some advice.

Me and my Girlfriend, 23 and 22 respectively, have been living in her Grandma’s house since October last year. Her Grandma moved into a home summer 2008 due to dementia and rather than leave the house empty or sell it straight on, we were given the opportunity to move in, use the house as our own and pay “rent” to my Girlfriend’s parents, which would then make up our deposit for a mortgage. Fantastic.

It’s been a year and we are now looking for a mortgage, as First Time Buyers.

We applied for Natwest’s First Time Buyer mortgage around six weeks ago, but were declined. The mortgage advisor was extremely positive before the decision came through and could not understand why we were declined.

We both checked our credit reports afterwards and both have no black marks on our reports. Neither of us have missed a payment on anything, except I was a few days late with the payment for my very first credit card (around five years ago), but obviously this wasn’t apparent on my report.

We also looked at our credit scores and I can’t remember the exact figures, but they were both around the 850 mark (one was slightly under and one was slightly over).

In terms of current debt, I have a loan that has £6,000 remaining on it and a credit card with £1,500 on it. My Girlfriend has no outstanding balances on her credit card and neither of us stays in our overdraft for any longer than a few days. However, my Girlfriend does have her student loan from her time at University (she left a year ago and she does not currently pay anything towards that, as far as I’m aware).

In regards to earnings, I am employed full time and earn a basic salary of £15,500 and have a regular and fixed honorarium of £1,500 each month.

My Girlfriend is self-employed as a Piano Teacher and whilst she charges £11 for a half our lesson, with around 35 pupils each week, due to holidays, sickness and people cancelling, her earnings for the year do not look fantastic – she earned around £10,000 last year and is on course to earn around £14,000 in this financial year. She has accounts for three years (four including this year) to prove her earnings.

Basically, we’re looking for a bit of advice. The mortgage advisor at Natwest told us she was not sure why we were declined and to come back in around 10 weeks to try again, whilst I understand some banks have a set figure they can lend and strict criteria currently, so to look elsewhere or wait until the New Year.

We have a 10% deposit at the moment, but could look to increase this to 12.5%. However, I’m thinking it may be better to use this additional 2.5% to go towards paying my credit card off, etc.

It may be worth noting that as well as working full time, I am also registered as self-employed and work on a freelance basis. However, my self-employed income is slightly more volatile than my Girlfriend’s – for the past few months I’ve been earning around half of my full time income through my self-employed work, but as I work on a month-to-month and sometimes week-to-week basis, this isn’t guaranteed and therefore I would not like to include this in any mortgage applications. Saying this, I would if it was the difference between getting a mortgage and not getting a mortgage.

The money I earn from my self-employed work pays for my loan each month, as well as my credit card and the rest is put into savings for the deposit or I pay more off my credit card.

Any advice you can offer would be very much appreciated. My Girlfriend’s parents are by no means pushing us out of the house, but we do not want to outstay our welcome by simply renting the house.

Many thanks in advance,

Dan

foxwales

Mortgage lenders these days will actually look at your current expenditure against your income where as before they were less inclined to do this, hence the boom and bust environment we now find ourselves in.

• You should clear your debts as quickly as you can as to reduce your monthly outgoings, this shows your potential mortgage lender that you have more than enough disposable income to contribute towards the mortgage and that you are not over-extending your finances.
• You need to keep accurate records of all self-employed earnings as currently self-employed are higher risk borrowers due to the volatile economic environment currently affecting businesses.
• Consider looking for a smaller mortgage, don't borrow up to your lenders maximum as you are more likley to get accepted if you can more than afford the mortgage repayments.
• Use a fee free mortgage broker to help you find the most competative FTB mortgage on the market.
• If you can sit tight and raise a greater deposit, say 15-20%, then lenders will be more likley to lend to you along with you being able to take advantage of better interest rates.

sasha_page

Hi Dan

Have you checked to see if you are registered on the voters roll ? If your not this can have a negative affect on your score with a lender especially when you are looking to put down a 10% deposit, lenders have a very strict score rating when it comes to smaller deposits. You could try another lender but the more searches you have against you the lower your score will get. I think at the moment you may need to try and put down a 15% deposit, this will give you a much wider choice of lenders whos credit scores are not as hard to pass.

Let me know how you get on

Sasha ([EMAIL="sasha.page@btinternet.com"]sasha.page@btinternet.com[/EMAIL])

dans107

Thanks for both of your replies, they're much appreciated.

Sasha, we are both on the electoral roll and have been since October 2008. Everything, with the exception of the home insurance (due to us not actually owning the house) is in our name.

Foxwales, my thoughts have been to contact a fee-free broker and see what they can find for us for 10% with our current debts. However, i'm wondering if it would be better until we have cleared at least part of our debt, say the credit card balance, as not only will we have less debt, but we'll also have accrued a greater deposit.

Although (i'm assuming) the latter makes more sense, is there any reason why should not do this and I should contact a fee-free broker now?

Thanks for your help.

lb364

On the nationwide site you can put in the figures and see what they will lend you if that helps...

herbiesjp

Can your OH's Grandma gift you some of the deposit?

This way you have your funds, and her gifted deposit, and you would be able to get better rates.

I think you might well be better off discussing with a whole of market adviser, as they may have ideas, such as this, which could help out

dans107

Unfortunately, all of my Girlfriend's Grandma's money is spent on her care, so that isn't really an option.

We've actually heard about something in which the house can be transferred to another family member, which removes the need for a deposit.

Have you heard of anything like this?

herbiesjp

dans107 wrote: »

Unfortunately, all of my Girlfriend's Grandma's money is spent on her care, so that isn't really an option.

We've actually heard about something in which the house can be transferred to another family member, which removes the need for a deposit.

Have you heard of anything like this?

Sorry what i put was not typed clearly.

And what you are asking is what I meant.

The gifted deposit, was not actual cash, but part of the value of the property.

So yes you can do that, and was exactly what i was talking about