Applying for first mortgage

hannhol

Hello - I hope someone can give some advice about my situation. My fiance and I are hoping to buy our first home this year. We are thinking that we will have to apply for a mortgage based only on his salary because although I am employed I am currently on a short term contract, and whilst I hope to be moved to a permanent contract at some point this year the time frame is still uncertain and having had my contract renewed for the third time, we really do not feel we can put things off any longer.

However we have both saved about 50% of the deposit each, and I am keen to be included even if I can't apply for the mortgage. How does it work in this situation? Any thoughts and advice appreciated as I want to start to get my head around the process before we start talking to banks etc (probably in May).

kingstreet

Short-term contracts which have been renewed several times will be accepted by some lenders.

Here's the criteria section for one major lender;-

Fixed Term Contracts

Where a job is only for a set period, although the contract may be renewed or extended. You should always check if your client is on a fixed term contract. If they are, please provide the following information with the application which the mortgage approver will use to assess the likelihood of continued further employment.

length of time with current employer;
if the contract has been renewed before;
remaining term of the current contract;
if the current contract is likely to be renewed and, if so, for how long;
the prospects of obtaining alternative employment in the same type of work at a similar salary
whether the contract is connected to a specific project

At least a 12 month track record of working on this basis is required.

hannhol

Thanks for that, we will definitely mention it to any prospective lender, however I have been told that because I am only being given contracts of 6 months at a time it does not bode well. At point of application I'd only have aboutt 4 months left I'd only have my word for it that the contract would be renewed.

kingstreet

hannhol wrote: »

I have been told that because I am only being given contracts of 6 months at a time it does not bode well

From whom have you sought advice so far? A lender rep may tell you their sole policy and suggest others do the same, as they often (erroneously) believe their way is the only way and there is nothing different.

An independent or whole market broker will be able to discuss the case with the different banks and building societies and find out which lenders will lend and what products they have to offer.

If shopping around lenders ensure they do not carry out speculative credit searches, as these will impact later, if you have too many.

hannhol

I had a quick chat with my bank (the co-op), but nothing formal (ie no credit search). A mitigating factor is that our combined salaries takes us over £250k (even at a conservative estimate) and we do not want to exceed the 3% stamp duty threshold (we are buying in London so easy to do). So it's not really a problem to not have my salary not considered.

But I think you are right, it might be best to have a chat with a broker, my fiance is just keen to go straight to a lender to save on fees.

kingstreet

Lenders don't like applications where part of the deposit is being paid by someone who won't be named on the mortgage. If you aren't party to the mortgage, you can't be party to the ownership.

However, I can't see why you can't be a mortgage applicant and owner, even if your income isn't taken into account, as long as affordability is not that badly dented.

hannhol

Hi Kingstreet - thanks for your thoughts, I think that is what I couldn't quite understand, could I still be a mortgage applicant, if my salary is not taken into consideration because the contract issue turns out to be a problem. There's no reason why I wouldn't want to be named. Affordability is not an issue, and we have managed to save a good deposit.

Thanks again for your thoughts, we are going to make an appointment to see a broker, and this has helped my fiance understand this is the best thing to do.

kingstreet

You can. Many lenders then treat you as a dependent, which is a bit rich, but as long as it's still affordable I'd recommend you be party to both mortgage and purchase.

Crashandburn

hannhol wrote: »

But I think you are right, it might be best to have a chat with a broker, my fiance is just keen to go straight to a lender to save on fees.

You may find some brokers don't charge fees and chose to be paid only by the lender. Always best to establish this up front and your fiance could find himself getting advice with no extra costs incurred.