Do we stand a chance?

mileshogue

Hello lovely people,
My husband and I are looking to upsize following the birth of our beautiful son 18 months ago.
We currently have an interest only mortgage with GE Money, for 103,000. We are under offer for 140,000, and once we have covered fees will have 33,000 deposit. We have seen a place we like for 210,000.
Here are the facts:
- I have one default on my credit report. (Student debt after uni snowballed, I was training to be a teacher so had no income... went into a managed loan, which was settled 3 years ago)
- Our combined income is 59,000.
- We have a 10,000 balance on car finance, and a credit card balance of 2,000 (We relied heavily on this during my recent maternity leave)
- We have not missed a single payment on our current mortgage, or any of the above accounts.
- Our credit ratings were significantly worse when we were accepted for our current mortgage.
- Our credit ratings are now both 'good' with scores in the 900s.
- We have very little savings. Currently £300 due to a splash out on a recent holiday...

We were given an agreement in principle from nationwide, who have now come back to us to say they will lend to us, but only for 35,000 less than we need (145,000)
Their decision was based on affordability due to childcare costs on our current account statement. With childcare vouchers this works out as between 50-250 each month. (As I am a teacher we obviously don't pay for childcare during school holidays)

My question is, are we likely to get a mortgage for the amount we want?
The decision to move was quite sudden. Therefore our bank statements show that we have, like any other young family, been 'living within our means'. We pay all of our bills at the first of the month and then spend our disposable income until it's gone, with the exception of a couple of hundred that we put into a savings account each month. (Though as I mentioned above, we recently emptied this for a holiday)

I know that I still have a while before the default is cleared from my account, but I also know that we can easily afford this mortgage if we tighten the purse strings a little. We spend a lot on entertainment each month - sky tv, mobiles, clothes and family days out which we would naturally reduce in order to get our perfect house!

Do you think we would have been turned down by nationwide eventually at full application stage due to the default? Or is it simply the affordability factor? If so, can we appeal against this and explain we've been anything but frugal with our money - but would of course change this if our mortgage payments increased? Would we stand more of a chance with sub prime lenders if GE Money approved us the first time?

I don't want to keep looking and end up being turned down for mortgages, damaging our credit rating.
Do we stand a chance? Or should we start looking to rent instead and wait until either the default clears or we can prove that we are able to afford higher repayments?

Any advice or wisdom would be so gratefully received.
We just don't know what to do!

Thrugelmir

With only £300 of savings how do you propose funding the move?

What are your plans for repaying your existing interest only mortgage? Let alone repay an even greater debt.

ACG

There will be lenders available, but affordability could be an issue.

It may be a case of paying off more of your debts and putting down a smaller deposit but im sure if you go and see a broker they can do the sums to make it fit.

mileshogue

Thrugelmir wrote: »

With only £300 of savings how do you propose funding the move?

What are your plans for repaying your existing interest only mortgage? Let alone repay an even greater debt.

The sale of our current property will pay this off. The mortgage stands at 103,000, and we are under offer for 140,000. As i mentioned already, we would fund the move by using some of this equity, putting the rest down as a deposit on a new place.

ACG - Thanks for your comment. Would we need to pay off the car finance, or just reduce the credit card?
If we moved to renting for a while our rent for the size of house we need would probably be as much as mortgage repayments for the amount we need anyway. So in time, if we tightened our belts our statements would show that we could reduce the credit card debt as well as meeting higher housing payments. Is that right?
If so, would we have to wipe out the full balance on the cc? And how long would we need to do this until they would believe it's achievable?
Thanks for your help!

mileshogue

Would a guarantor help? My parents would be willing...