Bad Credit No Deposit Mortgage

popmonster

Sorry this is another post about getting a mortgage with bad credit and no deposit but i've been reading/listening to conflicting advice allover and am just after another opinion as everyones circumstances are individual.

Basically me an my partner are looking to get onto the property ladder and are tired of throwing rent money away nearly £20k now.

Financial background: Im self employed for 2 years now...my partner is full time for over 8 years.

After debts for various reasons i currently have 1 default and my partner has 4.

I checked my credit score the other day and it is 780...although i've been told this means bot to mortgage lenders....it has gone from 500 in april this year to 780 now.

We only have 1 credit payment outstanding for a loan of £5000 which we pay £130 per month to....this is our only outgoing credit payment.

The most recent default was march 2008 so nearly 20 month ago...there are two defaults for around £2000-£3000....one was for a car loan around £6000....and the other 2 were around £500 each.

They are the only bad credit marks we have.

My partner earns £17.5k year gross and my earnings are Year1(£7100 net) Year 2(21000 net).

We do not have a deposit available and it would take years to save anything close to what would be needed i.e. 10-20%

We were declined a mortgage on the homebuy direct scheme a month ago but i dont think they took into account our bad credit as the interest rate i was quoted was 5%...which seems low for bad credit so i think this may be why it was refused....they wouldnt tell us what lenders they were applying to.

I spoke to a specialist mortgage advisor recommended by moneysupermarket today and he basically said as i have defaults and no deposit i have no chance and need to wait atleast 2 years.....he never asked me for any financial details at all......its a bit soul destroying as people make assumptions about you as soon as you say you have no deposit and bad credit.

Basically are we just stuck for a few years til our finances improve and the market gets better or is there an option?

We are i hate to say it (desperate) we are tired of throwing our money away.....we havent missed a single rent payment for 3 years......i really wish mortgage lenders could analyse each case individually and look at the things that matter.

Hope someone can offer advice.

Thanks

_Andy_

With the adverse and no deposit I don't think you have any options in terms of buying.
Don't see renting as 'throwing money away' - it isn't.
You may see the defaults as small issues but they are for large amount of money.

nervousftb_3

popmonster wrote: »

i really wish mortgage lenders could analyse each case individually and look at the things that matter.

unfortunately, to mortgage lenders the things that matter (particularly in the current clmate) is your past record of paying for things, and the security you can provide. these are the only things they can go on in order to make a decision.

as you said yourself, you have a number of issues with bad credit, and you have no deposit, and so unfortunately i don't really think there is anything you can do, other than wait (and i know this is not what you want to hear, so i'm sorry for that!). until the defaults have fallen off your credit report (they stay for 6 years), you will struggle to get a mortgage, and as 100% mortgages don't exist anymore the lack of deposit rules you out completely i'm afraid. your limited accounts don't help either - most lenders will want 2-3 years accounts minimum.

the only option is to knuckle down and scrape together as much as you can over the next couple of years and wait till your credit improves.

as i say, sorry this is not what you want to hear, but to a mortgage lender you are simply too high risk at the moment, and frustrating as it is you don't really have any options right now.

popmonster

all of these defaults have been paid off....i know they sit there for 6 years after they're cleared...they are however marked as settled.

You cant not feel like you're throwing money away.....if i rent for another 5 years til our defaults are gone we'll have paid nearly £50,000. If we then are starting from scratch paying again it is being thrown away...yes it is a roof over our heads but its just filling someone elses pockets.

Thanks for clearing that up then.......depression here we come lol.

not_tonight_josephine_2

popmonster wrote: »

Basically me an my partner are looking to get onto the property ladder and are tired of throwing rent money away nearly .

Thanks

If you took out (for example) a £150k mortgage over the usual 25 year term at the 5% rate you've been quoted (v unlikely that your rate would be this low for the full term), you'd pay well over £100,000 to the bank in interest. On top of this, you would have to pay buildings insurance, all maintenance costs etc for the property. Realistically it would probably cost you roughly £150k over and above the purchase price of the property. On top of this, if you bought now you'd likely be in negative equity by next year.

Renting isn't wasting money any more than paying mortgage interest is.......I do sympathise with the desire to own your own home, but please don't get so hung up on the idea that you make a rash decision now. If you wait a few years your bad credit will be cleared, you'll hopefully have a decent deposit, and house prices will likely be the same if not lower than they are now.

If you can't afford to save up for a deposit then can you realistically afford to maintain a house? How will you pay for a replacement boiler/washing machine/guttering etc etc if needed?

Bufger

Sounds to me like you have had good advice but refuse to acknowledge it.

Lenders look at a couple of things.

1. whether you're a real person
2. whether you can pay it back each month (credit history)
3. what percentage risk they are taking (LTV)
4. whether the property is real so they can get their money back if you fail to make repayments.

So in your case:

1. Looks good so far
2. not looking so good. 1 default is normally ok, 2 at a push. 3+ = problem.
3. 100% mortgage would be a massive risk to them (which is why none exist at the moment). If you couldnt pay your way from day 1 they would reposess, sell for 20% less and lose quite a few thousand in a short amount of time.
4. The property may be real but you're not at this stage.

They dont and wont take personality and likeability as factors for a mortgage. The cold hard truth is that you have to be able to show responsibility with repayments and are willing to commit a large sum into the investment up front. Only then will they take you seriously. They will look at your past and there isnt much you can do about it im afraid.

My advice is to save up as much as you can for the next 2 years, get yourself excited at the fact that you will be on that property ladder at some point, enjoy saving towards the property (yes it can be fun) and every now and then take a look at rightmove to keep your imagination going to spur you on.

Best of luck to you. Its a long journey and only those that really want it will make it there.

popmonster

We have worked our our finances......we are currently paying our rent...bills etc and misc and also saving £200 per week......but it would take nearly 2 years to save the deposit.....and another 2 for the defaults to come off. 4 years is a long time.

Its not that i dont want to acknowledge it...its just that some people say you have no chance....deal with it....yet you see all this info saying no deposit no problem....bad credit no problem...etc.....even some of the mortgage advisors still tell you theres hope even after getting all the raw facts.

Anyway last comment to avoid dragging the post out unesscesarily.

Hopefully someday in the future they will work out a more fair system that does consider people individually rather than dropping them into boxes....not everyone with bad credit was irresponsible with their money.

Thanks

benjo

I know exactly what you mean about throwing money away - that is certainly something my parents always felt about renting, I have to say though, while I understand your sentiments I dont altogether agree with them, since interest paid on a mortgage is throwing money away too!

The only real way to house yourself without wasting money is to pay cash for a house - no rent lost, no interest lost - but that isnt a reality for most of us, so we have to pay for somewhere to live, hotel, motel, rented or mortgaged - its all frantic semantics - different amount of wasted money going into someone elses pocket, dont beat yourself up about paying rent, it isnt wasted unless your roof leaks.

Now, back to your original problems re getting a mortgage. You have several issues that will need to be addressed before you will be able to make a successful mortgage application.

1. Length of time being self employed - make sure you have books/accounts for 2-3 years. Im sure this doesnt apply to you but Im gonna say it anyway, since it comes up here so many times. Dont be tempted to 'reduce' you income on paper in order to pay less tax and then expect you will be able to explain to a mortgage lender that in reality your income is 20k a year higher, nudge, nudge, wink, wink - you would possibly admitting to fraud and it wouldnt be a great advert for you as an honest trustworthy prospect - again, I know it doesnt apply to you - but it happens.

2. Defaults/bad marks on credit file - unless they are there in error you cant erase them but they will dissapear after 6 years and you just have to sit tight, wait for them to dissapear and make sure you dont accrue further bad marks.
You mention that you wish mortgage lenders would look at cases individually - if they did, they would see that on 5 separate occassions someone lent you money and you failed to keep up your side of the deal - those bad marks say you are not a good risk, wait for them to go and you will have A. more choice in lenders and B. a better interest rate.

3. No deposit - no way around this one at this moment in time, there are no 100% mortgages, two choices here A. save a deposit or B. wait, dont save and hope for the return of 100% mortgages (doubtful).

Take a look at the debt free wanna be board, there are some great ideas about reducing outgoings and increasing incomings that would help you to save for your deposit while you wait for the credit file to improve, goodluck in getting the home of your dreams and stop beating yourself up for renting.

Dan_1976

Your paying for a home. This is an issue that has put our country in this mess. People feel more shame in renting or feel they are wasting money than they are to be living off the state!

Whatever argument you put forward, a mortgage for you does not exist and the very same mortgage cripple a few businesses!

I am not saying you dont diserve a mortgage or that you will never get one, but in 2009 it aint gonna happen.

Hav you thought about getting a cheaper place to rent and saving your deposit until the mortgage market is better?

Bufger

popmonster wrote: »

We have worked our our finances......we are currently paying our rent...bills etc and misc and also saving £200 per week......but it would take nearly 2 years to save the deposit.....and another 2 for the defaults to come off. 4 years is a long time.

Its not that i dont want to acknowledge it...its just that some people say you have no chance....deal with it....yet you see all this info saying no deposit no problem....bad credit no problem...etc.....even some of the mortgage advisors still tell you theres hope even after getting all the raw facts.

Anyway last comment to avoid dragging the post out unesscesarily.

Hopefully someday in the future they will work out a more fair system that does consider people individually rather than dropping them into boxes....not everyone with bad credit was irresponsible with their money.

Thanks

I do understand your position and there are hundreds of people here in MSE in a similar position all clawing their way out of it. Use MSE as a support group and stick around, you'll find it very helpful.

Try not to believe anything you hear on the radio or on TV unless its a real news channel (and even then use caution!! lol). When buying a house everyone wants a slice of the money and they'll make deals look attractive in order to do so. You can soon find yourself in over your head with yet more defaults and a reposession, you could be in a really bad position then.

Banks are too big to be personal. They have systems in place to take away decisions from their people, its the big guys that make the offers black and white that actually make the decision and you have to get yourself in that right box. At least knowing how it works gives you the best chance of making it there! Think of it all as boolean logic, yes and no, true or false and thats how most big companies work.

Keep on going and you certainly wont regret it. Infact you'll realise afterwards you can do anything if you put your mind to it! Its all a matter of time and discipline.

jamief

The simple fact is that

No deposit = a problem
Terrible credit history = a problem.

If you have to wait 4 years as the cost of your irresponsible past, then so be it. People who have been financially responsible and spent years renting and saving up deposits have coped, so why can't you?