What are our chances - settled default

Homewownerwannabe

Hi everyone,

I've spent days looking through his forum and have found it so helpful!

My husband and I are seriously considering taking the leap and buying our first home.

My husband has one default on his record dating back to 2010 for £480 which was settled in full within 6weeks of finding out about it and has never missed a payment on anything since.

The mortgage application will be a single one in my husbands name.

He is in the Army and so we are going to be using his LSAP as our deposit and we are looking at using the FirstBuy scheme too. I know a lot of people on this forum don't look too favourably on this scheme but we will be looking at buying back the 20% equity from developer and government within the 5 years using part of my husbands lump sum when he leaves the Army.

Our outgoings (other than utility bills) are C/C, DFS hp and our car.

We are going to use part of our savings to clear the C/C and DFS sofa in September which will then just leave the car (£346)

The house we have found is not due to be starting to get built until Jan 2014 so would be looking to exchange in May/June 2014.

The value of the house is £176,950

My husband earns £35,000 and we are looking at a mortgage for £136,000 (75%LTV)

Are we going to find we have a lot of trouble trying to get a mortgage with this satisfied default on his record?

Do you think this would be possible to obtain a mortgage for this amount?

Many thanks in advance for any help/advice

ACG

The default isnt a major issue. It is an issue but not as big as you probably think due to the age of it.

Ive recently done a mortgage for someone using LSAP - that wasnt a problem either, although im not sure whether all lenders accept it or not.

There are 2 potential issues i can see...
Is there a reason why your both not going on the mortgage?
The other is affordability, your looking to borrow almost 4x your husbands income.Add to that the debts (HP, CC etc) and it could be a little stretching depending on how much they are.

Can you just explain how much you have debt wise and how much will be left when it comes to applying for the mortgage?

Homewownerwannabe

Hi ACG,

Thank you so much for replying.

The main reason it's not a joint application is because I haven't got good credit and am currently in a DMP paying this off. The other is that I recently became self employed (9 months) and my annual take home for the first couple of years is estimated at £4,000 p.a.

My husband debt wise has our car which we only purchased in October last year so there is still 3 and a half years left at £346 p.m.

The other debts are...

DFS sofa - £800 remaining (currently repaying £43 per month - was taken out over 4 years interest free credit in Nov 2010)

Credit card - £1700 (currently repaying £60 per month)

We are going to be paying both of these debts off in full in September which will mean our only remaining debt is the car.

Our utility bills will also be dropping in August as our phone contracts are up so we are going to go onto PAYG which will save us £80 per month and we are looking at reducing our Sky bill too as this is currently costing a whopping £119 p.m

From October once those two debts are paid and other bills reduced, the money left once car and utility bills have been paid will be just under £1100.

We are currently living in army accommodation and are paying just over £300 (inc C.T) so when we go ahead and buy, it will then free that money too so the money we will be left with each month will be just under £1400.

My husband is also looking likely to come off the board in April too which could mean an extra £200+ per month then too.

So when we come to be looking at getting the mortgage the money left each month after car repayment and utility bills would be between £1400-£1600

I am sooo sorry - I've just realised how much I've waffled on there lol!

Thanks so much for any help you are able to provide!

ACG

Haha, there is a fair bit of info there, which does help.

Have you got your credit reports?
Are you showing as financial associates of each other?
If thats the case doing it solely in your husbands name for that reason is pointless.

The DMP is going to be the biggest problem here i think. The rest could be doable, although i think you are probably stretching yourselves (in the eyes of the lender), which makes it a little more difficult.

I know this doesnt really help, but i think you need to get your credit reports (Experian, equifax and callcredit) and take them to a financial advisor as this could be quite a difficult case to place.

Its a little too complicated to give any meaningful answer, its all going to be very generic based on best and worst case scenarios which will make a huge difference in whats available - best case your not financial associates and you can get a normal mortgage at the other end of the spectrum it might not be possible.

Can you not use your deposit to clear your DMP and then look at somewhere cheaper? Im not saying to do this, but is it an option?

Homewownerwannabe

I know lol - I am so sorry for the info overload lol!

My credit report is poor but my husband's is great. I can't remember his exact score but it was very good.

We aren't associated financially at all. I have always been very cautious with this as I never wanted my husband to suffer for my silliness when I was younger so we don't have any joint accounts or loans etc.

I pay my DMP myself (£110 per month) out of the money I earn each month so this doesn't effect my husbands wage.

There is a possibility that my parents may look at giving us some money towards the house too - do you think we would be better off paying off the car with this sum which, after paying the DFS sofa and CC would take my husbands debts to zero, or would it be better to add that money to our deposit?

Would settling the car finance early be a bad thing for his credit rating?

If my parents decide not to 'invest' then it may be better for us to think about saving for another couple of years I think.

You really hae been very kind to take the time to answer my questions and it really is so much appreciated. Thank you so much

McKneff

I'm really curious as to how your Sky bill is so whopping.

Cancel some asap and throw this at your debts too.

Buying a Humax HD Freesat box for £200 (less than 2 months sky bill) will give you hundreds of channels, rewind, record, pause, everything that sky gives you. Obviously you wont get the Sports Channels but do you need them.
Thats a saving of over £1,000 in each year.

McKneff

Be careful with the parents money.

First you say 'give' then you say 'invest' big difference.

ACG

I wouldnt want to say what is best.
This could be possible to do, i think you should get your credit reports and go and see a broker. There is a lot here which is could go one way or the other, but i think you have a chance.

Thrugelmir

Homewownerwannabe wrote: »

We aren't associated financially at all.

You are married, and more importantly appear to be financially dependent upon him. The connection will need to be disclosed on the mortgage application form.

Homewownerwannabe

Thrugelmir wrote: »

You are married, and more importantly appear to be financially dependent upon him. The connection will need to be disclosed on the mortgage application form.

Oh sorry, I must have misunderstood the question. I thought they meant in the way of joint bank accounts/finance agreements etc?

On our credit references we aren't financially associated with each other in that sense.

Homewownerwannabe

ACG wrote: »

I wouldnt want to say what is best.
This could be possible to do, i think you should get your credit reports and go and see a broker. There is a lot here which is could go one way or the other, but i think you have a chance.

Thank you so much for all your help - i am going to have a look into finding a broker in Essex so we can make an appointment and at least then we will know either way what our options are.

Thanks again ACG!