Many questions from a 1st time buyer

Slavo

Hello everyone,

I have just finished a BSc (Hons) in Computer Science and wish to buy my first house with my partner and 2 step-children.

I have not yet got a well-paid job, however I have been employed by my current employer for approximately 5 years (part-time during term-times).

I would like a mortgage for approximately £130k
I have savings put aside to use as deposit / other charges involved (approx £15k rising all the time) but also have an equally large student loan.

Properties I have been interested in have all been circa £145k

I am aware that 130k is a lot for a 1st-time mortgage... but I have a fair amount to be used for a deposit which I hope will support my application.

I have so many questions I would like to ask, including:

How rigid are mortgage lenders about the 'salary:lending' amount ratio?
Is the typical ratio approximately 4x salary?

I find this terribly hard to accept! i.e. 4 x £25k is only 100k.... that wouldn't buy many houses in the least desirable areas of my home city, Bristol.

I refuse to consider an 'interest-only' mortgage purely for the fact that 10 years later, I would have progressed nowhere in terms of owning my own home.

Do self-certified mortgages have a much higher repayment interest-rate, or how do they compare to conventional mortgages?

What sort of salary should secure a 130k mortgage (I know this must be a can of worms with so many factors to take into account, but roughly speaking?

Finally (for now), who would be the best people to sit down with and discuss my situation and what I can / cannot borrow?

I understand that my first priority is to obtain a well-paid job, let's pretend i've got said job and earn £xx,000 pa.

Any help, criticisms, do's / dont's greatly appreciated,

Regards,

John

AndrewSmith

Depending on your deposit situation it may be possible to get more then 4x income from a mortgage lender. Some willgo to 4.5x, others will use an affordability model which in some cases can mean multiples of up to 4.7-5x income. You do, however, have to bear in mind that each case is individual and you may not be able to achieve such levels.

Also consider looking at lenders such as Scottish Widows who offer tailor made schemes especially for graduate first time buyers.

Self certified would not be appropriate in your case as you have no problem proving your income. Self certify does not allow you to borrow more than the standard income multiples, nor does it change or increase the amount you earn.

The one thing you have to remember is that no lender actually has an obligation to lend you anything, they can refuse or decline your application for any reason without explanation.

Regarding a mortgage of £130,000. Using standard income multipliers you would be looking at needing income of approx £28,800 at 4.5x income.

Whatever formulae is used by the lender to ascertain how much you can borrow I'm afraid you have no choice but to accept it, or find another lender.

As for who to sit down with? Why not try discussing it in detail with a Whole Of Market mortgage broker? Make sure they charge no up-front fees so you are not out of pocket should you decide not to proceed at this stage.

Hope this helps

Andy

Slavo

Thankyou for your instant reply Andrew!

would it be reasonable to assume that the greater deposit I can offer to put down towards the cost of a house, the greater chance I have of lending the amounts I want?

The above I guess is how the mortgage lenders minimise risk when offering self-certified mortgages?

What is your opinion on self-cert mortgages?

I do not claim to be in any way an expert, I understand from reading your signature that what you post on this forum is in no way any legal advice and is for discussion purposes only.

MortgageMamma

Hi Slavo

I think what Andy is saying is that you really don't need a self certification mortgage as you will be employed and able to prove your income. Self cert mortgages are designed for self employed individuals who will struggle to prove their income, i.e. if the income comes in from a lot of different sources or they don't have any accounts. In the case if employee's they are mostly used where the employee is commission based. Self cert mortgages usually require 15% deposits and the rates are slightly higher than that of full status mortgages due to the addtional risk the lender takes. They cannot be used to inflate or even invent an income, this is fraudulent and can carry a prison sentence for both client and advisor. For this reason I doubt an advisor would recommend a self cert mortgage to you.

The general opinion on self certs is that they are good products if used correctly, however they have been abused in the past.

Your situation is in its early stages and nows the best time to harvest as much money as you can. A huge deposit won't make a lender lend you more, but it will open up your options as to mortgage products and you will often get a better rate if you are borrowing a lower %of the property value.

HTH

MM

AndrewSmith

The above description sums up the use of self certify mortgages and their correct use well.

With some lenders Slavo the higher the percentage deposit you have, the higher the multiplier they will apply to your income. Do not look at this in isolation though.

There are a number of other issues that will play an integral part in the determination by a lender of how much (if at all) they are prepared to lend you.

I would suggest you need to be looking at a lender who will underwrite your case in a more traditional style, looking at the individual merits of your case personally, as opposed to allowing the decision to be made by a computer.

The more traditional type lender will be looking for ways to accept your case and get as close to the amount you wish to borrow as possible within their criteria, whilst the more automated lenders will simply go by the decision of a computer which in 95% of cases cannot be over-ridden.

As for my own opinion of self certify? Good question.

Self certify mortgages have their place in the market, and as long as they are used for their correct purpose, can be an absolute god-send to some people looking to obtain a mortgage. Example being some one who has recently gone self employed but does not yet have a full years audited accounts. Lets face it, when one is assessed on a preceeding year basis as we self employed are, it could be a case of being almost 18 months after you began trading and you may still not have audited accounts drawn up. Irresponsible, but possible.

I always liken mortgages to something simpler to allow a proper understanding of how they work. Example:

You are employed on a salary which is proveable therefore self certify is not for you. In the same way you wouldn't use a No1 wood to tee off from a par 3, or use a Mini to tow a 20 ft caravan.

Hope this helps.

Andy