First Time Buyer advice

chris980

Hi,

Myself and my girlfriend are currently looking to buy our first home in the next year or two. We are in the process of saving every month for a deposit and hope to have around £10k by the middle of next year at the latest. We both work in finance and between us bring in £38k. However, when I was younger, I took out a couple of credit cards and a store card which was used to buy a laptop. I am close to clearing these debts and currently have a 'fair' (833 I believe it is) credit profile according to credit expert. My girlfriend also has a couple of credit cards, but doesn't miss payments and should have a good credit rating (we haven't checked).

1st question - When I pay my debts off, how much (if any) can I expect my credit rating to increase?
2nd question - are we likely to get accepted for a mortgage and if so, would it be a regular lender or would we have to target sub prime lenders?

We know as soon as the debts are cleared we will be able to afford the payments on a mortgage, and hope that lenders will see that too.

Any help or comments greatly appreciated.

ViolaLass

How much are you hoping to spend on a house? i.e. what would your LTV be?

chris980

We would probably be looking in the region of £100k, but not sure if that is unrealistic or not.

herbiesjp

Having credit cards and a laptop on finance does not mean subprime.

Only if you had problems with these i.e. missed payments/defaults, would you then have problems in getting a mortgage.

10% deposit is the minimum.

Anything more i.e. 15%, 20% 25% could mean opening up more options for you in terms of lenders/rates.

Clearing your debts will mean maximising your mortgage potential - however based on £38k you have plenty leeway on the amount of mortgage that you are looking for.

chris980

we are hoping to get more than a 10k deposit together but at the minute we are aiming for 10k and see how we cope with that. Also, I hope to get a pay rise soon and my gf qualifies next year so should hopefully boost her wage by a few k.

If we were to go for a new build (which there are a few developments in our area at the minute), would you recommend the equity share schemes they offer?

Thanks for your help

CloudCuckooLand

Those equity schemes are really for the short-sighted or financially challenged, in my opinion.

You have a deposit target, decent wages. Keep it simple and buy a whole house. Get up to 15% deposit if you can, for better deals. Keep your credit record in good shape.

Don't buy one;

Where the service charge goes up without warning.
Where the Housing Association makes you get valuations for each stage of purchase, or to sell.
Where a remortgage is harder because less lenders do shared equity.
Where the Housing Associaton gets first say over applicants you wish to sell to.
Where you have to fund 100% of the maintenance, while only owning 50% (or whatever) of it.
Where you cannot rent it out, should the necessity arise.

etc, etc.

In my opinion.