Chances of a Mortgage after a Debt Relief Order (DRO)?

Danny026

Hi everyone

Me and my partner are FTB looking to get on the property ladder currently private renting, any information regarding our issue would be greatly appreciated.

We have seen a few brokers and they all seem to agree, that they can get us a deal for the amount we need with our CURRENT income and expenditure. At the moment this is still subject to credit checks and were the worry comes.

As mentioned there is an issue, my partner had debts of approx £10,000 which she could not afford from a previous relationship. She was cleared of those debts in April 2011 via a DRO (Debt Relief Order).

She has paid for a credit check and it all shows green except for the bank she owed money to (approx £4000) she has been in touch with them and they said they will look into updating their records and call us back next week. (I am aware legally they do not have to do this)

I earn £18,000 a year (full time) I do receive commission but as this can vary substantially (£150-£500) I do not really want to factor this into account (I have a very good credit history according to my bank). My partner earns just over £8000 a year (part time)

When approaching brokers/banks etc we have been looking at borrowing 85% on a purchase price of £100,000 as this fits in our budget nicely and will not overstretch our monthly outgoings. To make up the other 15% I have a deposit of £15,000 (apologies as this is obvious, I just want to make sure you know everything) which I have managed to save.

Now you know the facts, my question is before we try and get an offer in principal I would like any information you can offer because as I understand it, if we fail on our mortgage application that will then go on both our credit files and effect the credit history further.

Firstly, is this correct?

Secondly, realistically what are the chances of even getting a mortgage with my partner's history?

Thirdly, I guess this will be answered by the above two reply's but should I look at trying to get a mortgage just on my own?

Any advice you have would be greatly appreciated as we have seen a house we are interested in which is in budget and we have also found a mortgage we also like the repayments for and the next step of getting this agreed in principal (credit checks etc) has my stomach in knots and could destroy our dreams of owning our own home.

Many thanks in advance

Dan

Danny026

Apologies, my partner has just corrected me it is a Debt Relief Order not Recovery Order DRO

Thrugelmir

except for the bank she owed money to (approx £4000) she has been in touch with them and they said they will look into updating their records and call us back next week. (I am aware legally they do not have to do this)

A default is a default.

Unfortunately as in any line of business. Customers that settle there bills are the ones that count.

So suggest you leave a period of time for the dust to settle. In the intervening period behave impeccably. As time will heal.

kingstreet

Danny026 wrote: »

Hi everyone

Me and my partner are FTB looking to get on the property ladder currently private renting, any information regarding our issue would be greatly appreciated.

We have seen a few brokers and they all seem to agree, that they can get us a deal for the amount we need with our CURRENT income and expenditure. At the moment this is still subject to credit checks and were the worry comes.

As mentioned there is an issue, my partner had debts of approx £10,000 which she could not afford from a previous relationship. She was cleared of those debts in April 2011 via a DRO (Debt Relief Order).

She has paid for a credit check and it all shows green except for the bank she owed money to (approx £4000) she has been in touch with them and they said they will look into updating their records and call us back next week. (I am aware legally they do not have to do this)

I earn £18,000 a year (full time) I do receive commission but as this can vary substantially (£150-£500) I do not really want to factor this into account (I have a very good credit history according to my bank). My partner earns just over £8000 a year (part time)

When approaching brokers/banks etc we have been looking at borrowing 85% on a purchase price of £100,000 as this fits in our budget nicely and will not overstretch our monthly outgoings. To make up the other 15% I have a deposit of £15,000 (apologies as this is obvious, I just want to make sure you know everything) which I have managed to save.

Now you know the facts, my question is before we try and get an offer in principal I would like any information you can offer because as I understand it, if we fail on our mortgage application that will then go on both our credit files and effect the credit history further.

Firstly, is this correct?

Some lenders carry out a full credit check which leaves a "hard footprint" on your credit file. This can be seen by other lenders when they carry out a check. One or two searches is perfectly acceptable in finding the right mortgage.

Other lenders leave what are known as "soft footprints" which aren't visible, although it's questionable whether these checks are as valuable as we've seen a few cases recently where soft checks for an agreement in principle ended up with a decline at full application.

Secondly, realistically what are the chances of even getting a mortgage with my partner's history?

I'll own up to not having come across a DRO yet, but I don't see why lenders' attitude to it should be any different to an IVA or bankruptcy. These issues would make it very difficult to get a mortgage, impossible in the case of bankruptcy until discharge has taken place a minimum of one year from the order being given.

Thirdly, I guess this will be answered by the above two reply's but should I look at trying to get a mortgage just on my own?

I believe if you intend to buy now, this is the best option. A mortgage in joint names would invariably mean a mortgage with a lender charging higher rates.

You might wish to obtain copies of your credit file from all three Credit Reference Agencies to ensure there's nothing hiding in the reports you haven't looked at. Not all information will (necessarily) be found on each of the three reports.

Any advice you have would be greatly appreciated as we have seen a house we are interested in which is in budget and we have also found a mortgage we also like the repayments for and the next step of getting this agreed in principal (credit checks etc) has my stomach in knots and could destroy our dreams of owning our own home.

Many thanks in advance

Dan

I don't know how much time you've spent researching lenders on the basis you apply alone. You need an income stretch to 4.7x your income, excluding the bonus/commission and not many lenders will offer this. Using the Halifax affordability calculator, assuming you have no dependents and no other credit commitments you can borrow;-

£89,855 over 25 years assuming you get an A pass on their credit score
or
£89,490 over 30 years assuming a B pass
or
£86,985 over 35 years assuming a C pass.

You may need to manipulate the term of the mortgage to get the £85k you need. It's not perfect, but you can of course make overpayments to reduce the term later or if you move or remortgage you can address the issue and reduce the term at that time.

By comparison, Nationwide's calculator indicates a maximum of only £69k and Abbey's suggests £65k for a low credit score, £85k for a medium or high score. Approaching the right lender at the outset is essential in avoiding unnecessary credit searches.

Your broker should be able to plan this with you.

Danny026

kingstreet, WOW!!

That really has helped! I cant thank you enough for taking the time to help!

kingstreet

Hopefully you can move forward with a little more knowledge and confidence, mate.