Affordability

LilacPixie

Anyone any idea how banks work their affordability calculations??

We really need to move for health reasons. We have found a suitable place that is not yet for sale but will be soon. Mortgage required will be somewhere between 67-81k with an ltv of between 75 and 90% depending on value of current home/sale price of new place and whatever we can save between now and then.

We are a couple with 2 kids. My income 23k OH income 18500 basic with regular bonus taking it up to 22k approxomitly. OH has debt LOTS of debt. 475 a month loan (finished 2012)
147 a month loan (finished 2012)
1k credit card ( 30 a month min payment)
2k overdraft (30 a month interest)
1700 store card (170 a month min payment)
He also has about 3k due to student loans company that comes directly off his wage at source.

I have no debt

OH has some missed payments late 2006/early 2007.

I worry we will not be able to get a mortgage with his history/current circumstances. Current mortgage is mines alone predating our relationship. OH is a 1st time buyer will be 2nd time for me.

I have done some calculating and I personally feel we can afford the £570ish a month mortgage payment based on our current income considering our outgoings and lifestyle. The place we are looking at in no bigger than current place but has no stairs, same council tax banding, gas heating etc so I cannot see why our utility bills would change much. The postcode area is slightly better so insurances should be much the same.

Does the bank look at things in this way or do they have weird and wonderful ways of looking at things.

TheMiner

His debts and payments would get taken off the maximum you could borrow, but you might find his credit score may stop you getting a mortgage at all.

I would check with a broker to see if you can get a mortgage in principle, plus also get his credit score checked to see if there are any improvements that could be made.

LilacPixie

how can you check a credit score?? i thought each lender had own methods so those you could buy were worthless?? We have both credit files which is why i know aout missed payments. What else should i look for when looking for improvments?

VIGILANT22

LilacPixie wrote: »

how can you check a credit score?? i thought each lender had own methods so those you could buy were worthless?? We have both credit files which is why i know aout missed payments. What else should i look for when looking for improvments?

You're correct..."credit score" means nothing, other than a marketing ploy for companies who do this..........


Financial Association

How is yr credit file?... if yr credit file is good, applying for joint finance ie mortgage with someone who has an impaired credit rating can have an effect on the person with the clean file and can impact on you applying for credit in the future....

LilacPixie

My file is fine. 1 credit card paid in full every month bank account has overdraft we are never in let alone over tv/phone/internet reports to equifx and is ots of green 0000000. I tend to be quite conservative with credit and ony use the bare essentials like mortgage and I ike to have a £100 buffer overdraft just for emergancies. Our bank account is a joint one so I am already financially linked.

I had not realised OH having debt would count as him having an impaired credit file, i presumed that was for people who had defaulted on payments

Conrad

Lilac - I get people in all the time that want to know the same thing. As I always point out, we can talk forever, but in the end the ONLY way any applicant will know thier borroing limit is by applying!

All talk is more or less pointless as none of us acan second guess a computer alogrythm

herbiesjp

Credit scores are pretty much useless.

The details on the credit report are the important pieces of information.

Having the debts, 2 children, and missed payments will reduce the maximum mortgage potential available to you.

However you should be able to find lenders to agree the mortgage amounts needed - that is assuming the missed payments do not affect your chances too much.

I'd suggest discussing this with a whole of market mortgage adviser, to see what options you could have available, and then apply for an agreement in principle to find out whether or not the missed payments would scupper your chances.

LilacPixie

Thank You.

I hate wasting a brokers time if it is a total no go, plus I would hate to look stupid. This place being valued this week so I guess I will be spending next week getting an AIP before deciding if we can actually put it on the market or if we need to find a plan B C or D.

herbiesjp

You are not wasting their time.

You will not look stupid either.

You need to know the answer before you can start putting in any offers really - so as long as you explain everything to the adviser, I'm sure they will be happy to help.

worriedindebt

hi lilac

dont ever worry about wasting a lender or brokers time.. they will be only to pleased to find someone looking to buy a home believe me.

re; affordability, the bank i work for (im not a mortgage specialist though i should add and this is just what ive picked up from talking and learning) works it out on approx 3.5 - 4 times salary.
then they will deduct how much you pay out for loans/ credit cards and work it out from there

i think if hubby has a lot of debt totalling almost 900 a month in repayments then that would almost make it pointless including him in the affordability checks as his entire income is virtually swallowed up in debt repayment.
if he also has missed pmts on his file you may find it more beneficial doing a sole application in your name only

its not impaired credit file if hubby has debt but something called exposure. how much debt you are exposed to (or have available whether you use it or not) carried a perceived risk for a lender.
impaired credit file is usually achieved if you miss payments.

so therefore someone who jumps from one 0% balance transfer to another without closing the old cards could have an exposure of 40k say without actually having borrowed more than a grand (unlikely scenario but possible)
good luck in your search though

LilacPixie

Thanks for everyones advise. I went to see a broker, discussed in's and outs of everything and he recomended we seek and AIP from Halifax just to feel out the lay of the land. Halifax said yes up to 85% LTV and we are looking at having possibly a 25% deposit depending on how quick we sell so I am happy.