couple of questions on how things work

binerds81

Hi there

I would be grateful if someone could answer a couple of questions I have. I have £7500 deposit and earn £21500 (take home pay around £1,350 per month). I have had some defaults back in 2011 which were all cleared between 2011-2013 with the exception of 3 - as these did not show on the Noddle report I had. Recently I got my Equifax report found them and paid them this month, so next month's reports will show no outstanding debt at all. I have no loans or overdrafts but I have 2 credit cards which have been well maintained since I had them. All open/active accounts I have are in good standing except 1 late payment about 12 months ago for a catalogue company but I have now fully paid off and closed this account now also.

I have seen a shared ownership property for £49,765 and been accepted by the housing association to have it dependent on whether I can get a mortgage. My questions are:

1 - I have spoken to a broker who has said he thinks he can get me a mortgage with my past history and gave me a DIP up to £96,000. Will the chance of getting a mortgage be increased due to me needing a (relatively) small amount of borrowing, or does the total amount requested not play a part in the underwriter's decision? The mortgage would be on a 3.99% rate according to the broker and would be about £255 per month so well within affordability

2 - The deposit I have makes the mortgage 85% LTV - however this will use all of my savings with none left over for a small rainy day fund or for new furniture that I need as a first time buyer. Would offering 10% deposit (so asking for a 90% LTV make a big difference to the likely hood of getting a mortgage?

3 - I have heard that you can write a letter with your application giving the details of why I was in financial difficulty and missing payments and what I have changed to make things better now - do I write this now and ask to submit with my application, or wait to see if they ask for it?

4 - I read articles about the new rules meaning you have to go through a 2-3 hour interview process to discuss your lifestyle, outgoings and spending habits etc - is this with all mortgage applications?

I would be grateful for any advice or answers to the above, thank you.

betmunch

In answer to your questions:
1. no, its a yes or a no decision, either they will lend or they wont. Its worth checking the lender you are agreed with accepts shared ownership. Did you mention this to the broker at the time?
2. Yes, but not in all cases, you should speak to your broker about this.
3. I would wait until they ask, if they ask. Make sure your broker know exactly what happened.
4. Banks time scales are about 2-3 hours, a decent broker will do this quicker, depending on the questions you have.


Good luck

binerds81

Thank you for your help.

Yes, I have fully explained that it's shared ownership - but on this scheme there is no rent payable on the remaining share so that's good as it doesn't impact on affordability. And I have also been very up front about all my credit issues so I hope they know what they are saying when they say I should be ok with this particular lender, although I am a bit nervous as it is a major high street bank

Those last remaining defaulted payments that were outstanding were made this month so am I right in leaving things until 1st May to put my application so the lender will see this? Although, if the companies have not reported the payments to the credit agencies can I add proof of these payments to my mortgage application?

And lastly - should the worst happen and I get declined (which I know is a very distinct possibility) 1) Can I appeal and is it ever successful? 2)how long do I have wait to re-apply?

Thanks again

betmunch

You can appeal, but to do so you need to bring new info to the application. You cant just go "ooh, go on, you know you want to!"

As for applying again, you can try a different lender right away. If its wise to do so is another question. If you mean the same lender ask your broker when the lender would reconsider you.

Good luck

binerds81

Ok thanks very much! (it's due to waiting on some things dropping off my credit file - if they haven't been updated this month they most certainly should be by the following month and I thought this might give a different outcome if I get bad news. I would normally wait to apply in a couple of months if I could but this property is very hard to get hold of in my area so I need to try now before i lose it)

And just to confirm (sorry for being a bit thick) that it doesn't make any difference to my application being considered if I ask for a mortgage of £41,000 or £75,000 or even the maximum £96,000? I was kind of hoping that by choosing a property that was much more affordable that would go in my favour

Thanks!

betmunch

If the lender has been told the defaults are paid I dont think the change in credit file is going to make enough difference for a successful appeal. You never know though.

You are correct. You either get approved or not. If you are approved you can have up to the maximum they will lend.

binerds81

So if I put a full application in and the creditors haven't updated my file at the end of this month, but I include a letter/email from them saying it has been paid then this would be the same as waiting another month to have updated credit files?

Thanks

betmunch

Not quiet. Its the same as basing the appeal on the fact the credit file has updated to show them being paid off.

Ie. Its not new info to the lender.

Thrugelmir

binerds81 wrote: »

So if I put a full application in and the creditors haven't updated my file at the end of this month, but I include a letter/email from them saying it has been paid then this would be the same as waiting another month to have updated credit files?

Thanks

The lenders objection may be the time it's taken to settle the defaults. Not that they would say so. As it's not just about your credit report but how they view you as a potential borrower. The way you manage your affairs forms part of this profiling.

binerds81

thanks for the helpful advice - If I knew now how much credit reports and money issues and defaults all affected things for years to come I wouldn't have been so silly when I was younger and ignored the problems, letting them get worse. I suppose a lot of people are probably the same too so i try not to beat myself up too much!

I can only hope that the underwriters will see that I have been much better with how I have conducted my financial affairs in recent years and have realised the error of my ways (either that or a computer will beep "no" and that will be that lol)

audigex

binerds81 wrote: »

4 - I read articles about the new rules meaning you have to go through a 2-3 hour interview process to discuss your lifestyle, outgoings and spending habits etc - is this with all mortgage applications?

It can be significantly less, depending on how the first questions go. If it becomes very apparent very quickly that you can afford the repayments with ease, much of the rest can be flown through.

My advice is to get a list of your current and expected monthly budgets pre-planned with realistic estimates. Include savings and "spare/leisure" categories, and then you can quickly show that if necessary you can cut £100 from leisure activities and expect to save £300 a month (or whatever your numbers are), giving you loads of leeway even if your expenses went up.

eg I went in with a planner showing I had £x budgeted for the major bills, £y budgeted for fuel and car maintenance, £z for leisure, £200 for savings and therefore could afford a repayment of £whatever or at a push potentially £whatever+40% if the rates went up by 2%.

With that on a nice bit of paper, it was as simple as them copying the numbers across, breaking down the bills figure to check I was being realistic in my assessment and hadn't forgotten to account for heating (I basically added 20% to what I paid for a 2 bed flat, to account for the bigger house), asking if I ever spend much more on leisure and what I'd cut down if struggling and then ticking the boxes.