Before we apply - advice

Needanewhouse

I got a 70k mortagage in 2009 with 0% deposit through the LIFT scheme on a low wage, since my wife and I racked up some credit card, loan and card debts.

So now looking to move to a house from the flat we are looking at 150k house and have a 5% deposit (7.5k). I took a 20k loan and my wife a 10K loan 6 months back to consolidate all debt (both 5 years). Therefore we pay out £393 and £200 in loans.

Our wages are now are £37k (mine) and £15.5k. So we bring in about £3500 per month net, with roughly £1000 of unavoidable outgoings (loans, gym, sky etc). Most online calculators say circa 200k mortgage would be offfered.

The advice i am looking for is
1. Would lenders frown upon the £30k (little less now) loans value or would they just look at the monthly outgoing? Will they question what these loans were for? If so are we better to say current cars instead of debt consol?

2. What i the best way to go for 5% mortgages nowadays? Help to buy is sold out in my area for the current year so will be looking for conventional 5% mortgage, should i use a broker? Are lender criteria stricter on 5%?

Many thanks for your help in advance!

tvfreek

the scoring on 95% mortgage is fairly high and strict.

Here's a tip - put down a 5.5% deposit.

This stops the computer from invoking it's critera parameters based on a 5% deposit and will help you a little.

A few brokers don't know that either btw

Thrugelmir

Needanewhouse wrote: »

with roughly £1000 of unavoidable outgoings (loans, gym, sky etc).

Lenders view so nothing personal. Unavoidable isn't the word I would use. Given you've run up £30k of debt. Your credit file will most likely indicate that you've no real control over your personal finances with steadily increasing debt levels. So consolidation was the answer not the solution to your problems. Looking now to borrow more even money now will almost certainly be declined.

Needanewhouse

Thrugelmir wrote: »

Lenders view so nothing personal. Unavoidable isn't the word I would use. Given you've run up £30k of debt. Your credit file will most likely indicate that you've no real control over your personal finances with steadily increasing debt levels. So consolidation was the answer not the solution to your problems. Looking now to borrow more even money now will almost certainly be declined.

Thanks, wont take anything personal.

for gym and sky maybe i should have used the word "commited".. as they are in contracts

Our experian credit expert files both show up at excellent 960+ with several 'satisfied' accounts on each and only the loans outstanding, beleive it or not the debts have actually got better in the last 18 months with better wages and control from 40k, to 30k 6 months ago. Would the lender question further if i told them that these were car loans?

Let_Us_See

[QUOTE Would the lender question further if i told them that these were car loans?[/QUOTE]


Yea, a little bit of fraud never hurt anyone. Did it?

Needanewhouse

Let_Us_See wrote: »

[QUOTE Would the lender question further if i told them that these were car loans?

Yea, a little bit of fraud never hurt anyone. Did it?[/QUOTE]

Thanks for that, however +50% of this was actually car debt anyway.

What i am asking is, will lenders be care alot about the size/reason of outstanding loans if its the only debt, or will they care more about the monthly payments for the loan and affordability?

Zoology_Dragon

I don't know if they will ask what the loans were for but I wouldn't lie about it. Besides, that's a lot of money for cars, do people really borrow £30k for two cars? I'm just wondering if it would even be believable.

Needanewhouse

Surely people do for cars priced +£30k?

I will be open about the mix of these loans... i am getting really worried now that the size of these loans could jepordise our chances of approval, i know it was silly but these were poor choices in our youth, we both now have excellent credit scores.

Would banks not see that our current credit scores show we are now in control and that the loans we are paying off are historical??

if they took affordability & credit score we would get it im sure, could they knock us back based on these loans?

somethingcorporate

People that buy £30k+ cars are on better money (or are a financially illiterate and shouldn't be loaned tens or hundreds of thousands for a mortgage!).

AdrenalineJunkie22

Just having a good credit score doesn't mean you can handle your debt. They will see on your credit history that you've built up the debt over time and then that they were suddenly cleared with a huge amounts and then a loan open at the same time.

If you've cleared £10k in 6 months then it may be worth holding out for another 6 months or year and getting the debt down as moving house has its own extra costs, removal vans, decorating etc....

To think the banks will ignore £30k worth of debt is extremely unrealistic and to brush it off as small amount of money is extremely worrying.

Speak to a broker but chances are it will affect the amount they will lend you

Sorry to be a party pooper

ManicRower

Please do not take this as me being rude, but if I were a lender I'd see:


Debt at approx 30k/65% of total household income (which you say is decreasing so well done for that) ran up whilst having a mortgage of £70k. You now want to basically double your mortgage.


Sky/Gym contracts which suggest (to me at least) you are not particularly worried by the level of debt or seriously trying to increase your level of savings.


A 5% deposit, therefore tighter underwriting criteria with regards to debt/credit, a limited 'pot' of money to lend and (probably) a lot of people wanting said money who represent a lower risk than yourself to lend to.


Do you have additional money to cover stamp duty/legal fees etc? If not, these costs will also eat into your deposit.


I'm not an expert but I think you may struggle at 5%.