A couple of scenarios

Silverstar

So, I'm still waiting to find out if it's going to be possible for me to get a mortgage at all this time around. My broker is having trouble getting the smaller building societies to lend the amount I need, so I may just have to give up on that idea and lose this flat for now.

So ... I'm trying to put a fall-back position into place, and I was wondering if those of you in the know could let me know which of these would be the best option.

- My current salary is £42300
- I've just paid off the overdraft I have, but I also have around £7500 on credit cards, a lease purchase payment for my car that is £236 a month, plus student loan payments that come to around £200 a month. Those are my current debts.
- My parents are offering to gift me £25000 as a deposit for a flat.
- I'm looking at flats in the region of £125000-130000

I'm thinking of asking my parents if they would mind if I used £7500 of the deposit money to pay off the credit cards. I would then have no credit card debt and no overdraft.

The lease on my current flat is up at the beginning of July, and I have to find somewhere else by then. So, the way I see it, if I can't buy, I have a choice.

Scenario #1 - I rent somewhere else at a similar rent to what I'm on at the moment for six months or longer. I usually put aside £100-£200 a month anyhow, and if I've paid off the credit cards, should be able to up that to around £400 a month. Over the six months, I would be able to hopefully get the deposit back up to around 15% on the flats I've looking at.

Scenario #2 - rather than rent anywhere else, I go back to live with my parents for at least three months. If I'm living with them, I should be able to put aside around £1000 a month, and probably more, which would get the deposit up to 15% within a few months.

In each scenario, I would then be able to apply for a mortgage with a 15% deposit, no overdraft, no credit card debt, and with my only committed monthly outgoings being my car payment and my student loan.

Those of you in the know, does either of these scenarios seem like the better option to you? Do I need to wait a specified amount of time before applying again if I've corrected the overdraft issue and removed most of the debt? I have two searches on my report this time around so far. Does living with parents for a few months look bad to the lenders, or would they take that as a sign of me being serious about saving for the deposit?

Any suggestions welcome! Still holding out hope that it might work right now, but if I know I have a plan in place for if it doesn't, I'd feel better.

Thanks in advance.

Dave_Ham

Both scenarios look practical, although you cannot beat getting back with parents and saving like crazy.

Why are you struggling so much at the moment to achieve what you want?

Which lenders have you tried and why are you not getting what you want?

Silverstar

Hi Dave,

There's some info here - https://forums.moneysavingexpert.com/discussion/4552617 - about it, but what it basically boils down to is that I was living in my overdraft for a significant period of time. In January, I went over the overdraft by £4 for a day and was charged.

My broker originally tried Abbey, and it was declined because I have a low credit score with lenders who do that, apparently. I'm assuming the credit card debt or something like that, because according to my Equifax report, everything was green and there were no issues showing up.

She then tried the Coventry as she said they check, rather than score. They gave me an agreement in principle, so I put an offer in on a flat that was accepted. However, when my broker started looking at the bank statements for the full application, we discovered the overdraft issue. My broker spoke to the Coventry underwriters and they said that they would decline because of that.

She's now trying some of the smaller building societies that don't ask for bank statements so that the overdraft issue doesn't show up, but she says that they are less willing to lend higher multiples, and so she's having issues with affordibility on the amount that I want. She still has a few to try, but every time one says no, I get more disheartened, so I'm trying to look at my options and figure out what to do if I lose this flat.

Any suggestions would be welcome!

Dave_Ham

It sounds silly, but the answer is just get a better broker and before this one trashes your credit file with guessed applications.

Building Societies will nearly always want bank accounts as they manually underwrite the case.

Coventry and Abbey have decent products, but do not necessarily suit your situation (as you have found out)

Good luck

Silverstar

She's told me that she isn't applying any more, but rather, speaking to the underwriters before putting in any applications so that no more searches are going onto the file. I'm assuming that is possible?

Dave_Ham

Possible, but it is unlikely to make up for a shortfall in her knowledge.

Its hard to say specifically, but 30 minutes with your Experian/Equifax reports should tell a decent broker where to place.

There are opportunities based upon what you have said, but will always depend upon the detail of the reports. You either know what to look for or do not, underwriters and/or contact centres cannot give you this knowledge.

Fingers crossed for you though.

Silverstar

Thanks, Dave. I appreciate the luck.

Silverstar

She's now suggesting we try Skipton. Based on the information I've provided above, is there much possibility of this going through, based on how strict they are? Or should I just cut my losses with this broker and try somewhere else?

Dave_Ham

It is difficult to assess without sight of your credit files, although I like Skipton as a lender.

That said I believe they have to insure their mortgages about 75% LTV, which may preclude you. They also definitely take the anywhere between last 1 and 6 months statements, depending upon the initial underwrite.

Predominantly they rely upon Call Credit for their automated credit scoring system.

If you do go with it and get through, they request a fair few documents and are not the quickest.

Good luck

Silverstar

Thanks, Dave. Trying to get my Call Credit statutory report now to check what's on there, and can't get it to accept my information because it says it can't find me.

This whole thing gets more frustrating by the minute! Whoever thought buying a house was a good idea?

Ah well.

Thrugelmir

From an underwritering perspective the key points of your application are:-

1. No savings, deposit entirely gifted
2. Regular recent use of an overdraft facility.
3. Credit Card debt of £7,500.

Combined together do not make an attractive lending proposition.

You've tackle no 3. Now get to grips with 1 and 2.

Your suggestion of returning home therefore makes a huge amount of sense.