Mortgage novice questions

lazy&indebt

Hi everyone.

Firstly, please ignore my username... I set it up years a go and aren't quite as lazy or in debt as I was!

My partner and I are currently saving for a deposit on our first home. Joint income before bonuses is £63k and with bonuses it reaches £75k

We both have perfect credit scores, no missed payments etc. he has lived in the flat for 6 and a half years (he has an interest only mortgage on it) I moved in 5 years ago but moved out last year for 6 months and moved back in August last year. My name is not on his mortgage. We are both on the electoral register.

I am hoping we will save a 10% deposit and are looking to spend at most £180,000

My debt is a car on finance (£126 per month taken out in April this year) and credit card debt of £2282.68 on 0% until next November against total available credit of £15,950

My other half has a loan finishing in January that costs £250 per month (we aren't looking to buy until March next year) and credit card debt of £3325 on 0% until Sept 2016 against total available credit of £15,000

I am trying to be organised by ironing out any little problems we could possibly encounter when we come to apply for a mortgage and I wondered if anyone could give me some pointers of what to check? Things like making sure addresses are 100% matched on all documentation etc? What 'silly' reasons are there for lenders rejecting an application? Or maybe even not so 'silly' reasons!

Thanks in advance.

Mortgage_Mark_2

Not sure about 'silly' but allow 5% of credit card balances as a minimum monthly commitment - lenders don't just take '0% deals' into account and will always err on the side of caution, which is why you'll see many of us brokers recommending paying off CC balances above other commitments if there's ever a choice.

£63k basic incomes against potential mortgage borrowing of £162k is fairly comfortable, less than 3x joint incomes and total monthly credit commitments (worst case) of £656.38 is not too much of an issue, I wouldn't have thought.

Well worth finding out any potential quirks about the properties that you see (construction type, tenure etc) as these are the things that many people overlook, and don't go getting credit searches done for the sake of it, speak with a broker who can present you with the options available prior to doing that, just to protect your credit profile.

lazy&indebt

Thank you Mark. When you say to allow minimum 5% per month to pay off CC is that when we make an application for a mortgage we would allow at least 5% of the debt as an outgoing? To prove that we are paying of more than the minimum each month? Sorry, I know nothing about mortgage applications!

Mortgage_Mark_2

lazy&indebt wrote: »

Thank you Mark. When you say to allow minimum 5% per month to pay off CC is that when we make an application for a mortgage we would allow at least 5% of the debt as an outgoing? To prove that we are paying of more than the minimum each month? Sorry, I know nothing about mortgage applications!

Yes, lenders will do a calculation in the background (some lenders publish the actual figures that apply, to brokers) for essential expenditure (cost of living + committed expenditure), and as part of this they will take a certain percentage of credit card balances as a minimum payment. Some take 3%, some will take whatever you tell them is the monthly payment, others take 5%, even though it's incredibly unlikely that your minimum payment is anywhere near 5%.

Thrugelmir

Lenders can now see credit card balances that are 0% balance transfers.

The sensible thing to do is to repay the balance over the duration of the 0% period. As much for your own peace of mind as anything else.

Mortgage_Mark_2

Thrugelmir wrote: »

Lenders can now see credit card balances that are 0% balance transfers.

The sensible thing to do is to repay the balance over the duration of the 0% period. As much for your own peace of mind as anything else.

They certainly can - but that doesn't mean they will apply a minimum £5 or whatever monthly payment to them...

Thrugelmir

Mortgage_Mark wrote: »

They certainly can - but that doesn't mean they will apply a minimum £5 or whatever monthly payment to them...

The data now available enables lenders to profile people even better. With balance transfers in particular, lenders can detect people that juggle between cards. In effect never really repaying their debts at all. Just rolling them over.

All of which will indicate a sign of weakness should financial distress strike. As this category are highly unlikely to have savings of any substance.

Far too much focus on affordability as long as the next pay monthly cheque rolls in. When it doesn't arrive. Then it soon hits home at an individual level.