First time buyer - mortgage application

rainbowkate

Hi there,

I'm looking to buy my first property with my boyfriend this year - we have a decent combined salary and deposit, however I'm concerned about the actual mortgage application process.

I've had some problems with HSBC repeatedly cancelling my direct debit to pay my credit card which, although it has now been fixed, took my card into arrears and meant that 6 payments in the last year were listed as late. The arrears are now clear, and I'm paying a lot more than my minimum each month.
The last two months have been paid on time, and I've checked my credit score, which has gone from poor to fair in this time. It's also the only outstanding debt I now have, and the outstanding balance is £900 so it's not huge.
However I'm thinking that I shouldn't try to apply for a mortgage for at least another two months to ensure I have at least four 'clean' months under my belt where no late payments are listed?

I'm seeing a mortgage advisor in a couple of weeks, but wondered if anyone could give me advice on this in the mean time.

Thanks in advance.

RK

shonzyd

I think they will look at any late payments in the last 12months so it may pay you to wait a while longer. It also depends what ltv you were looking at, whats the house price, and your deposit?

rainbowkate

Ah didn't realise it would go that far back :-/ thanks for the advice.

house price is £179,000
Deposit: 35,000
Combined salary: 69,000

rainbowkate

Would late payments usually result in a straight up decline?
My other half has never taken out any credit before, loans/overdrafts/credit cards only has a mobile phone contract so I'm concerned he would be seen as high risk also.

shonzyd

Think you may need to get copies of all of your credit reports from the 3 Credit Reference Agencies and check all the info on them first (experian, call credit, equifax). Get the £2 statutory ones rather than signing up to a subscription

at the figures you've quoted your looking at around 81% ltv. If you saved the extra 1% it will open more deals for you.

Im not a mortgage advisor but you will have options. I would suggest you use a broker to find you a deal rather than randomly applying to lenders by yourself.

There are brokers on here who im sure will be able to offer better advice than i can.

Good luck!

kingstreet

You'll need longer with HSBC in my opinion. You'll need to speak to them to gauge your chances, if they are your selected lender.

If you are looking at other potential lenders, a higher deposit will also help allay any concerns over late payments. You mention arrears. This may be serious if payments were missed, rather than being paid late, but within the following month.

A broker may be a good idea. Avoid estate agency advisers, who may only work to a limited penal of lenders.

rainbowkate

Thanks for taking the time to reply.

Yes the arrears occurred through late payment fees. It was basically because the bank cancelled my direct debits, I was away for several months and they forwarded my statements to the wrong address. I made manual payments but a couple were one or two days out so classes as late payments and got charged for those.

I'm beginning to think I won't get accepted at all this year and should try and wait until early next year instead, as I imagine this would result in a straight decline. We could also save an extra 5-7k to add to the 35k.

I was going to pay off the credit card in full this month but figured this might actually do more damage than good.

I will definitely look into contacting a mortgage broker. A friend of mine who had lots of debt and late payments managed to get a mortgage for a higher value house with a lower deposit a few months back so I'm hoping I can still get some kind of mortgage deal.

kingstreet

What is actually visible to a lender looking at your credit history?

As suggested, obtain copies of all three if you have not actually done so yet and don't shelve the idea until you are sure waiting will be necessary.

Why did the bank cancel your direct debits? If there are sufficient funds, they should be honoured. Would these payments have taken you overdrawn, or over your agreed limit? Was HSBC the credit card provider as well?

The statements were sent to the wrong address? Were they sent to a different address to the one you stipulated, or was it wrong because you had not updated it with them?

I'm trying to establish if these arrears occurred because the bank failed to act on your instructions, in which case you may have grounds to complain and have the account corrected, or if you were culpable in not giving the correct instructions, or having insufficient funds in place on the correct days?

rainbowkate

The bank cancelled my direct debit due to insufficient funds for one payment - had never happened before - which was in turn due to virgin taking my bill out twice. Wasn't notified about this being cancelled, so missed one payment, then realised, paid, and reset DD ovber the phone.
But it didn't get set up. I have no proof that I did this though, bank quite simply said I didn't.

So the insufficient funds is my fault.
Address is also my fault.
HSBC is credit provider as well as my bank, yes.

I don't think I'll be able to successfully complain about DD, I think I just need to accept I let my finances get into a mess last year and need to make sure do as much as I can to improve my credit report and not let it happen again.

All other bills/mobile phone contracts, rent, absolutely everything has always been paid on time without problems, but I realise the credit card problems is what is going to cause problems re mortgage for me.