Adverse credit amount of deposit require

leereni

Just looked at a previous post and was wondering if anyone could approximate what percentage deposit is required for those with and good credit rating and those with a poor credit rating.
Thanks

CloudCuckooLand

One person's definition of good credit may be quite similar to another person's definition of poor credit, and different lenders apply different criteria, so its going to be difficult.

From going into overdraft once 6 years ago, to regular overdraft usage, loans of various types, through a single missed payment with a creditor, thru multiple missed payments with a creditor, onto failing to deal with missed payments leading to default(s), and beyond to ccj, dmp, iva, and bankruptcy.....there are just too many levels of "adverse" credit; even "Very Good, Fairly Good, Good, Average, Poor, Fairly Poor, Very Poor" doesn't cover it.

You can bet that if someone said "10% minimum for good credit, 15% for poor credit", some bright spark will come along with an example where they squeezed into a 10% deal on (what they thought was) poor credit, while someone else with (what they thought was) good credit got turned down at 10% - perhaps because it was HSBC's red-hot deal that they could pick and choose applicants for, for example.

The bottom line is that you should not reduce the amount of deposit because your credit is a touch better than you thought. You have what you have for deposit, so get the best deal you can.

Rather than a black/white consideration of good versus poor, perhaps focus on LTV thresholds. i.e. if you have 17% deposit, not much point putting the 2% in (except if the purchase price requires it). You have access to 85% LTV deals, that's the ballpark you operate in. Ditto at 12% for 90% LTVs, 27% for 75% LTV and so on...

If that "spare" 2% allows you to reduce a debt, or pay-off a creditor, that could knock-on to the affordability calculation in addition to the credit rating, giving a double-benefit.

leereni

Thanks for the above. The reason why I asked is because I'm unsure exactly when to look seriously at buying (I'm a first time buyer). If I was to apply for a mortgage and get turned down, would I have to wait 6 months or maybe a year to apply again?

GMS

omcornwall wrote: »

Thanks for the above. The reason why I asked is because I'm unsure exactly when to look seriously at buying (I'm a first time buyer). If I was to apply for a mortgage and get turned down, would I have to wait 6 months or maybe a year to apply again?

You could apply for as many mortgages as you like in a day but this would have an impact on credit scoring. It is best to apply for the correct mortgage rather than the cheapest one.

What is your situation? Do you have adverse credit? If so what is it and when?

leereni

Ok, well I've asked this question several times on this forum about my own circumstances.

I'm 32 years old. I've worked in the same job for the past 5 years. My salary is now £37000 plus overtime which normally comes to about £3000 - £4000 per year. I have little savings, however given my income and expenditure I am able to same £10000 in the next year. I have the following adverse credit history:

A default was recorded for £300 in 2006 (so by early next year this will be cleared from my file)
I was in arrears on a loan which was settled (2007)
I was in arrears in another loan up until about 18 months ago
For the past 18 months I have had only one late payment on a catalogue
I have a loan and credit card which combined I pay £300 per month for the past 18 months with no defaults.

Please let me know what you think my chances of getting a decent first time mortgage will be in about 12-18 months time given the above information. My girlfriend doesn't have a steady job, however no adverse credit and has £5000.

We are looking at buying a shared ownership property for about £200000 with a 40% stake which is obviously £80000 mortgage.
Thanks

GMS

The kind of lender who will look at historic adverse credit are not likely to do a shared ownership mortgage.

If you have 2 years of no adverse credit and keep your unsecured accounts up to date then you have a chance of a mortgage.

Deposit wise you would need anything from 10-20% but with an income of 37k and a partner who may be classed as an adult dependant you would not get enough to buy in the 200k bracket.

Could you not look at a cheaper property on a non shared ownership basis?

Looks like the deposit will be the difficult part for you.

leereni

Well I live in london so options are limited and even buying outside london is similar. Why is there no flexibility in the shared ownership market. Would you advise starting one of the new save to buy savings accounts? Please bare in mind I'm not looking at buying for at least 18 months anyway by which time my credit file will have improved.

leereni

Oh also I'm a key worker.

GMS

In 18 months time the mortgage market could be completely different. Impossible to say what will happen then.

Using one of the incentive accounts will not do you any harm but there are no guarantees of a mortgage when you come to apply. You need to put your money somewhere so if there is a chance of it helping then may be worth a go.

Keep in mind the banks will be happy to keep your money for their own gain but when it comes to them handing you a loan it is a completely different thing. Credit scoring and criteria will dictate what happens.

Try to build your credit score over the next 18 months. Make sure you are on voters roll. Use a credit card for some purchases but make sure you clear it every month. Likewise with any loans etc, keep them paid on time.

Save as much as you can for the deposit and have a look at the market at the time.

Good Luck

leereni

Many thanks for you help. You've responded to my posts before and people like me really value your advice. I may post again and ask for advice in 12 months.

GMS

You're welcome.