Please advise a potential first time buyer

3000BC

Please advise a first time buyer...


My partner and I wish to get a mortgage on our first home. It is valued at 78K. We have 34K available as a deposit through the Right to Buy Scheme.


Last year we were refused a mortgage by my bank due to my bad credit and her CCJ for £1600. Even though the mortgage repayments are less than the rent I am paying. Since then I have been paying back all of my debts and have satisfied all but 2 (£4500) of my 18 credit accounts (most of which were closed years ago but remained in a default state).


My Experian credit score was ‘poor’ 600, but has now increased to ‘good’ 890. (I know people’s opinions of the Experian score and I don’t take it very seriously either. Please don’t get sidetracked with an Experian debate).


I am not on the electoral register until Dec 7th 2010 when it is issued.


Should I -


1. Wait until I have settled all accounts (I read somewhere that if all debts are cleared and removed off your report it can have an overall negative effect) and I am on the register, and then apply for a mortgage.


2. Test the market by applying for a credit card, or similar, to see if I really have good credit. Then try for a mortgage if successful. But risk a refusal on my report.


3. Apply for an additional £5000 on top of the mortgage as a home improvement and use it to clear my £4500 debts.


4. A combination of the above?


I really don’t know what to do.


The sooner I get a mortgage the better. I hope to have it paid off in 5 years, fingers crossed.

Many thanks in advance.

BitterAndTwisted

Please clarify what this means: "We have 34K available as a deposit through the Right to Buy Scheme."

3000BC

Our house has been valued at 78K. The local housing authority has given us a discount of 34k due to our long term tennant status (16 years).

Lenders see this as a 'deposit' meaning we will apply for a mortgage of 44k without any deposit of our own, to make a total of 78k.

BitterAndTwisted

You should be absolutely debt-free before you consider buying this house. Please be aware that as soon as you apply for the RTB1 form from your Local Authority that they will suspend all modernisation and improvement works (possibly even routine maintenance and repairs), so you might find that you'll need funds set aside to carry out some works almost as soon as you've bought the place. Don't forget that running and maintaining a home entails quite a lot more than just being able to afford the mortgage repayments.

Considering how much debt you're in right now I'm rather surprised at your ambition on taking on the responsibilities of being a home-owner when you appear not to have been able to run your finances responsibly in the past.

3000BC

I am only in £4500 of debt. I am almost debt free.

The rest of the bad debt was from years ago. Some accounts I had forgotten about from a previous address. They only came to light when we applied for this first mortgage a year ago. The majority of accounts were from home shopping catalogues and credit cards around £50-£200 pounds. I moved house and had a lot going on, so they became overlooked. Stupid, I know, but thats what happened.

I am well on top of it now, learnt my lessons, and take my responsibilities very seriously.:A

On a seperate note, I notice that some of these accounts are duplicated on my credit report. Why is this? Is it bad?

BitterAndTwisted

Being "only" £4500 in debt means you will have to earn about £7000 before tax to make the repayments from. That's not an inconsiderable sum to find from an average annual salary! Sorry, but I find it really difficult to understand how debts can be "forgotten about". A sensible person would arrange to have their post redirected when they move.

Given that you claim there's 16 years of residency attached to this RTB discount I suspect that it's not you who has lived there all this time, but your partner because if those debts were 16 years old they would have been written off a very long time ago and would not appear on your credit-record. I hope to God that your partner is aware of how reckless you have been in the past: I wouldn't want to be sharing any discount or a financial future with someone with your history. You're giving every appearance of being something of an opportunist, to put it mildly.

3000BC

Get down off your high horse. Your judgemental attitude offends me.

The discount is accrued for the duration of a tennancy with a local housing authority irrespective of the address of the tennant. The 16 years could include 15 address and still have the same discount.

But you knew that didn't you.

The debts were both our responsibility, but in my name.

"I wouldn't want to be sharing any discount or a financial future with someone with your history." - Probably why you're BitterAndTwisted.

I bet you ask people you meet for their credit rating to see if they are worthy of your presence.

You're giving every appearance of being something of a patronising, self righteous, lonely person, to put it mildly.

mostlycheerful

You’ll probably have to wait till you and your partner have both got 6 years of clean records before you’ll be eligible for a mortgage. Since credit crunch hit on 9th Aug 2007 mortgage lending to debt defaulters has mostly been unavailable and continues to be so. As you are already finding.

So, some possible ways of getting hold of the £44k that you want :

1 Saving.
Can you reduce your spending and start saving? For reducing your spending study the debtfreewannabe board and the old style board on this forum and do everything suggested, particularly buying cheap reduced food bargains, cheap bog roll, changing utilities to cheaper, cut out all non essential expenditure, only use free entertainment of which there’s vast amounts available everywhere all the time if you look for it. Watch every penny. Keep a spending diary. If you look after the pennies then the pounds will look after themselves.

2 Increase your income
2.1 Up your income
For increasing your income study and do all the ideas on the up your income board on this forum and one or two or three of them will be winners for you.

2.2 Work
Get some evening and weekend part time jobs, anything you can get. Bar work and telephone market research jobs and cab driving and all sorts of freelance sales jobs etc can be fitted in around normal 9-5 M-F jobs.

2.3 Sales
Start selling on ebay, amazon, loot, car boot sales and market stalls. Millions of people make good money doing this once they put the work in and get into their stride and you’ll be surprised how lucrative buying and selling can be. It can often generate a lot more income than ordinary wage slave labour so give it a go, you only live once and you can get started in the evenings and weekends without having to give up your ordinary day work. It doesn’t particularly require much intelligence or luck, it’s mostly just hard work so go for it, get stuck in. There are a million products you can be selling and you’ve only got to find one or two or three good ones to crack then you’re well away. Once you’ve tried 5 or 10 or 20 lines you should eventually find some good repeat sellers that aren’t already too saturated and then it’s just hard work churning out more of the same. If you set your mind to it you can make that £44k and a whole lot more in just 6 or 12 months if you pull out all the stops and get serious about it. It’s a bit of a learning curve but, as I already say, it’s about putting in lots of hours and trying lots of things then repeating the successes once you find some.

2.4 Lodgers
Consider living in the living room and renting out your bedroom(s) to a lodger or two or three. Or the other way round, move into the bedroom, or one of them if you’ve got 2 or 3, and rent out the living room. Plenty of people do this and although it’s a pain it’s doable and it’s only for a while till you get yourselves forward and achieve your objective of buying the place. You soon get used to it and if you choose nice lodgers then they can be more of an addition to your life than a chore. If you had an extra £60, £80 or even £100/£150 a week coming in off a lodger or two or three then that would quickly start to make a big difference to your finances. And then once you’ve bought the place keep the lodgers going for the first few years, it’s the time honoured tried and tested way that millions of people get all or some of their borrowing repaid. And it beats working, hands down.

3 Borrowing
3.1 Off family and friends
Do you know anyone who can lend you either the whole amount of some of it? A couple of family members each lending/giving you £15k and three friends lending you £5k each would be £45k. Savings are generally offering low rates of only at best about 4% and mostly a lot less than that at the moment so perhaps if you offered them a token thank you extra 1% ie total 5% then possibly they may find it attractive to lend to you.

3.2 Your cleared credit cards
Now that you’ve repaid a lot of your debt do you still have any borrowing available on the credit cards? Yeah, that’s a flaky dodgy mostly very expensive way to borrow money to buy a property but lots of people do it if they can’t do it any other way. If you can pull £5k or £10k out of them then that’s £5k or £10k towards the £44k and £5k or £10k less that you need to raise from savings, extra work, lodgers and or borrowing off family and friends.

Hope this helps your thinking and or decision making. Good luck.

Hammyman

3000BC wrote: »

A combination of the above?I really don’t know what to do.

In the current climate, you will probably have to wait until they've dropped off your credit file completely even though some of them have been settled. Mortgage companies are wanting any reason not to give one. We had one refused recently because my wife had a few late payment marks for literally being a few days late making a payment to a catalogue she was a rep for.

neverdespairgirl

3000BC wrote: »

I am only in £4500 of debt. I am almost debt free.

It's very unlikely you'd get a half-decent mortgage rate with that kind of credit record, anyway.