mortgage advisors please advise!

moneywise22

Hello,

My hubby and I are thinking about buying our first house together (first time buyers). But we have a couple of problems as follows;

I have had defaults in the past ( 5 years ago so still on credit report).
I was self-employed for 4 years and just incorporated business so just started paying myself a salary. I am an accountant and do my own accounts, but I am not certified so they wont accept them.
we have large loans outstanding, although our payment history for the last 5 years is excellent!
we have moved a lot (renting) and i know that doesnt look good when you apply for credit.

We have been thinking through our options, ideally we would like to buy a house jointly as I earn £40k (my income from self-employment was £40k and i have just started paying myself a salary of £40k). The main issues are proving my income and my defaults. i know it was 5 years ago but we even had trouble opening a business bank account recently! and when we rent a property we even have to have a guarantor!!

We thought maybe we should apply for a mortgage in hubby's name only. He is employed on £18k. We could pay him a salary from the business instead of me so he earns a total of £58k. He has got very good credit!

This is really depressing me because we want our own place and could definetely afford a mortgage no probs. we pay £900 in rent per month which we feel is a waste of money. we would like to buy a house for between £150,000 and £180,000. we know if we go to a specialist to try to get a joint mortgage they will charge us extortionate interest rates.

Please advise anyone!!!

toonfish

how much deposit do you have?

moneywise22

we can get around £10,000 though as little as possible is ideal so we have funds to save for emergencies etc.

The other option we have thought about is buying a cheap property around £60000 in hubbys name to rent out to just cover the mortgage repayments or even a bit more so that hopefully that property will gain in value and we can eventually borrow against the equity in that one to buy a house of our own to live in.

I really dont know whats best.

UK007BullDog

If you cannot prove your income then it would have to be a true self cert. You would need at least 15% deposit.

HAve you pulled a credit report on yourself and your hubby to see what the matter is regarding your credit record?

Then go and see a good local broker also read the guides on this site.

HelpWhereIcan

moneywise22 wrote:

I have had defaults in the past ( 5 years ago so still on credit report).

Depending on how many and their size, there should be 'high street' lenders willing to ingnore the defaults.

moneywise22 wrote:

I was self-employed for 4 years and just incorporated business so just started paying myself a salary. I am an accountant and do my own accounts, but I am not certified so they wont accept them.

Most lenders should still accept your returns to the IR (SA302) as proof of income, even if they will not accept the accounts you drew up. Not sure I would see this as a problem and would not think that it would mean you would need to use a self cert deal/lender.

moneywise22 wrote:

we have large loans outstanding, although our payment history for the last 5 years is excellent!

Again, depending on their size and monthly payment, there should be lenders willing to do the amount you need.

moneywise22 wrote:

we have moved a lot (renting) and i know that doesnt look good when you apply for credit.

Does not help with a credit score, but again will not be the end of the world.

moneywise22 wrote:

We have been thinking through our options, ideally we would like to buy a house jointly as I earn £40k (my income from self-employment was £40k and i have just started paying myself a salary of £40k). The main issues are proving my income and my defaults. i know it was 5 years ago but we even had trouble opening a business bank account recently! and when we rent a property we even have to have a guarantor!!

Cannot comment definitively without knowing more, but you should be ok in joint names. Are the defaults paid off? How many and how much were they for? These points are more important than the fact that they are there.

moneywise22 wrote:

We thought maybe we should apply for a mortgage in hubby's name only. He is employed on £18k. We could pay him a salary from the business instead of me so he earns a total of £58k. He has got very good credit!

A good option to have, but I would exhaust all other avenues first. Have a word with a whole of market broker who has experience of placing cases like yours on the high street rather than automatically assuming that you should be with a non conforming lender/deal.

hope this helps

moneywise22

Thanks for all the advice.

I have 2 defaults from 2001 and no i havent paid them off yet. I was making repayments bu instalments but then found out the balance is made up of charges which i am now reclaiming by taking them to court. The hearings are in March and hopefully i will win and get the balance w/o and a refund and may or may not get the defaults removed. I have asked for the judge to rule the defaults have to be removed if i win the cases.

Basically I ended up with defaults because i left my ex and he then refused to help pay any debts. (Forgot to say we also had our house repossessed because of this, but that is not on my credit file. This was in 2002).

I am earning so much more now. My hubby and I rent a large house and have got credit between us, loans totalling £15k in joint names with our current bank, and £6k in hubbys name only. we also have car finance of £26k in hubbys name (taken out in May 2006) and I have a leased car in joint names of £16k.

whatever we try to do, if we apply for something in my name, even a bank account we usually get declined.

do you need any more info?

danjberry

how much are the defaults for?

have you received your SA302's from the IR

moneywise22

the defaults were £8000 and £4000, but the balances are now £2000 each.
I stopped paying them 6 months ago when i filed a county court claim against them.

I had 4 years self-employment and then I incorporated last year. I only have 3 years statements from the IR which show my self-employed profits growig nicely but nowhere near the £40k i earned in the 4th year.

HelpWhereIcan

moneywise22 wrote:

the defaults were £8000 and £4000, but the balances are now £2000 each.
I stopped paying them 6 months ago when i filed a county court claim against them.

It will help if you keep all of the correspondence regarding these together and be prepared to provide it to a lender as a explanation of why they have not been repaid.

I would suspect it would be better to await the outcome of your actions and until the defaults are showing as repaid/removed.

moneywise22 wrote:

I had 4 years self-employment and then I incorporated last year. I only have 3 years statements from the IR which show my self-employed profits growig nicely but nowhere near the £40k i earned in the 4th year.

Depending on what the figures are, you may still be ok. When is your year end?

How soon will you be able to submit a return for year 4 and get the SA310?

Some lenders take the last year's figures, some the average of the last 2 and others the average of the last 3. I would suspect you need a lender that will use the last year's figures and if you cannot support it with an SA302 or SA310, then you may be able to evidence the increase to an underwriter using your business bank statements.

The main problem though will be the level of your credit commitments as a lender will want to be satisfied that you can afford the mortgage alongside them. Sometimes where you are able to show enhanced affordability e.g by showing that you have paid the commitments and a rental payment at least equivalent to the proposed mortgage payments for at least 12 months; the underwriter may be able to exercise some discretion. If you want a lender that may do this, it will help if the situation with the defaults is sorted first.

moneywise22 wrote:

(Forgot to say we also had our house repossessed because of this, but that is not on my credit file. This was in 2002).

If the mortgage was in joint names, a lender may still uncover it. Lenders have a number of shared resources (not least the Council of Mortgage Lenders' Possession Register) that may record the repossession even if your credit file does not (especially if the lender submitted a MIG claim). If you submit an application knowing that you had a repossession, be prepared for the possibility that the lender may uncover it as part of the underwriting process or even for your solicitor to uncover it as part of the searches they do for the lender.

Having said that, even if it is uncovered, you may find that once it is 6 years old, it will no longer affect you. So, when in 2002 was it?

From what you have posted so far, I strongly feel that you may be better to wait until the situation with the defaults is sorted and the repossession is 6 years old.

In theory a couple of months, but a couple of months that could save you a lot on your mortgage deal.

Even if it turns out to be a year, it is a year to get extra deposit, more favourable tax returns and rebuild your credit. Try to remember that it does not mean that your mortgage will automatically be more expensive even if property prices rise.

i.e A £150000 mortgage on a 'near prime' rate of 5.79% would cost you 947.29 on repayment over 25 years.

A £160000 mortgage on a prime rate of 5.25 could cost 958.80 pm.

Your situation is far too involved to get definitive advice on a forum so I would advise approaching a broker or two to see what they come up with. You can always post the results here for people to give the once over before you sign up.

hope this helps