First Time Buyer - 90% LTV Advice Needed

Kit603

Hello,

My partner and I are currently trying to get on the property ladder and would appreciate any advice that we can get.

We have seen a property that we like and we have made an offer, which has been accepted today (subject to valuation and mortgage acceptance), of £102,000. The property has recently been valued by two estate agents at £110k and 112k so I don't think valuation will be a problem - I hope!

However, i'm quite worried about the mortgage acceptance side of things! We have saved enough for a 5% Deposit, Legal Fees, Product Fees/Valuation and Moving Costs.

We were hoping to get a better deposit and go for a mortgage towards the end of this year but now our landlord has given us notice (as he is selling the property) and we'd rather just buy now than move now into another rented property (having spent some of our deposit fund on estate agents, moving costs, up front rent/security bond etc) and then move in 6 months time again.

Applicant One
£25,000 Per Annum Salary
No Adverse Credit History
Experian Score currently 869 (Fair)
Current Debts/Credit Facilities: Interest Free Credit Card (Paid in full every month), Bank Loan for car purchase (£258 per month), Student Loan (£50 per month from salary), £2000 Interest Free Graduate Overdraft (I pretty much live in my overdraft because even though I do have the money to clear the balance in savings, I earn about £20 per month interest from the savings and I get no charge for being in my overdraft)

All current outstanding debt is up-to-date and I have never missed a repayment, or paid late, on any account. However, I did drop down to minimum payments on my credit card for about 6 months about 18 months ago, will that affect anything?

I have several settled accounts - Buy Now, Pay Later loan with Barclay's partner finance (TV Purchase from Tesco), Two mobile contracts (02/Tesco), British Gas etc

Applicant Two
£15,000 Per Annum Salary
Experian Score currently 795 (Fair)
All current outstanding debt (Loan for car purchase) is up-to-date but there were three late payments recorded on the account between 36 and 48 months ago.

We have used Moneysupermarket to find a good deal on a 95% mortgage and are currently looking at Mansfield BS and have made an appointment with them but we also have an appointment with a whole of market broker at the weekend to see what they can do for us.

We need to complete within 8 weeks - 9 at the absolute maximum. So i'd really appreciate any help/advice!


*UPDATE*

We now have enough for a 10% Deposit and fees, so we're looking at 90% LTV Mortgages now.

kingstreet

With 95% applications, you need spotless credit history. Although CRA "credit scores" are pretty meaningless, your "fair" rating is a little worrying.

Did you get an agreement in principle before you offered? You really should have got a decision beforehand, knowing you needed 95%.

Kit603

Thank you for your reply. What is considered as being "spotless"?

This has all come about very quickly - as I mentionned, with the landlord selling our house we've been given notice (10 weeks) so we're trying to find somewhere quickly whereas we would have otherwise waited to the end of the year to save a bigger deposit as opposed to the smaller amount we've saved so far.

We haven't got a mortgage agreed in principle but we did see a mortgage advisor with our bank a couple of weeks ago who did a mortgage toolkit that said we were very highly likely to be accepted for their best first time buyer rate. However, they only offered 10% deposit mortgages so this wasn't suitable for us.

I've spoken to the broker and the BS we're meeting with about our circumstances and credit history and they didn't seem worried but should I be worried that they'd process an application even if unlikely to be accepted or would they warn me?

kingstreet

Spotless means no negative credit information on your file.

From no late payments, right through to no bankruptcy.

I expect the lender will simply suggest you submit an application, "to see what happens." A broker may have a better idea of where to introduce this, but with so little 95% money around, lenders can afford to be very, very picky and still fill their allocations with absolutely spotless borrowers.

Try to avoid having too many speculative searches, as this may start to impact your credit profile after a few are registered.

Kit603

I spoke to my bank today, Natwest, and passed their affordability checks so they have done an agreement in principal and provided a letter to that effect without doing a search on my credit report. The product they recommended was the 5 year fixed FTB deal:-

5.29% Initial Rate, 4.7% APR (Overall cost for comparison) with £0 Product Fee and 10% OVerpayments allowed = £499.22 PCM

However, I also spoke to L&C Broker and they've recommended a 2 Year fixed deal with Nationwide:

4.39% Initial Rate, 4.2% APR (Overall cost for comparison), £99 Booking Fee, £400 Product Fee and £500 per month allowed on overpayments = £450.15.

Both products are based over 30 years and, because we're still young, I think that we can comfortably do this (22 and 25). We could afford the repayments over 25 years (approx £45-50 a month higher) and save around £16/17k interest over the product life, but i'd rather overpay on the 30 year mortgage term and have the flexibility to drop back to minimum payment than take a 25 year mortgage that i'm ok with now but might struggle with should circumstance change.

I'm also going to see a local no fees whole of market broker tomorrow.

Given all the information above, do I have much of a chance of being accepted? Would I be more likely to be accepted for NatWest since they already gave me an agreement in principal pr would I be as likely to be accepted with Nationwide? (Not sure what they're like as a lender). Also, as I bank with NatWest and they already have access to statements, evidence of income etc would the process be quicker? I would need to move in property by last weekend in March and i've been told Nationwide can take up to 6 weeks to complete mortgage offer?

Would I be more likely to be accepted for a mortgage (all other things equal) if I applied through a broker rather than going direct? Or is the chance of being accepted exactly the same?

Do the above seem like good deals or does anyone have any idea of better rates etc?

I'm still not sure whether to fix the rates for a longer period or not... I like the idea of security, but the broker recommended we take a 2 year deal and then swap every 2 years (as more equity is released in the house) to get better deals. What's the risk with this?

slapmatt

What kind of chain does the vendors of the house you want to buy have?

ViolaLass

Kit603 wrote: »

I'm still not sure whether to fix the rates for a longer period or not... I like the idea of security, but the broker recommended we take a 2 year deal and then swap every 2 years (as more equity is released in the house) to get better deals. What's the risk with this?

That interest rates could go up and you could spend a lot in fees every time you change.

bigadaj

ViolaLass wrote: »

That interest rates could go up and you could spend a lot in fees every time you change.

Aka broker getting regular repeat business, lovely jubbly.

Kit603

slapmatt wrote: »

What kind of chain does the vendors of the house you want to buy have?

No chain - they've already completed the purchase of another property and moved out so the house is totally empty.

Thrugelmir

Interest Free Credit Card (Paid in full every month),

How much do you owe?

Does the overdraft and the credit card balance equal the bulk of your deposit?

Kit603

Thrugelmir wrote: »

How much do you owe?

Does the overdraft and the credit card balance equal the bulk of your deposit?

It's a £500 credit card and I pay the full amount every month and then use it again because it's interest free - it currently has a zero balance.

My overdraft is £2000 - interest free and currently cleared as I got paid yesterday and haven't moved it to savings yet.

I have £10500 in savings (deposit) and 1000 (+2000 in overdraft) in my current account, which will pay fees and moving costs. Also have another two pay days between now and anticipated completion and I've been putting £500 a month away.