Mortgage Virgin Advice Appreciated

PrettyKittyKat

Hey all,


I am after some advice on the nest first steps to getting a mortgage with my partner. I have tried searching the board to see if I could find a similar situation but as there are a few complications thrown in (and I am a mortgage virgin!) I am struggling, so I was hoping someone with more experience may be able to help! Sorry if some of my questions may seem silly – if you know of any other threads that may be of help please let me know . I am quite knowledgeable in other financial arrears but mortgages are a totally unknown area to me!

I am 29, having never owned a property/had a mortgage before. I live with my partner in a property that he has a mortgage on. The mortgage is up to date however we believe that there is likely to be no equity in it.

We need to move into a bigger property that we can jointly own and it be our ‘forever home’. We are at the very early stages but I want to have the plan in my mind so that we can achieve this as soon as possible, ideally towards the end of next year or the start of the year after. I have just done us a household budget so we can start saving as much as possible towards moving and I have got copies of our credit files to work on getting these the best we can.

This is where I am getting stuck:

I am a first time buyer, but my OH would be moving home.
I am employed with a basic salary and a yearly bonus based upon profit. From what I can gather online so far is that, as bonuses are not guaranteed, only a percentage is taken into account? Is that right? Or is it not taken into account at all?

My OH is a director of a limited company. It is only him working for the company although recently he has employed someone else. Last year he drew a wage of £9,000 and no dividends. It was his first full year in business so this figure will go up and I am trying to figure out how much we need him to be earning to get a mortgage we want (and can afford obviously!). I have read that some mortgage lenders would consider him with two years booked (which would be next year).

My credit file is fine – I have had loans, credit cards and bank accounts all paid on time. The only current debt I have is a personal loan which will be paid off Nov 17.

My OH’s credit file has some problems on there from before we met – past arrears, a couple of defaults (satisfied) and a CCJ from July last year (this was paid off in full and I have read on the credit reference agency website if we can prove it was paid off within 30 days then it will be removed, so I will look into this). All current entries on the credit file are up to date. He has no o/s debt other than his mortgage currently. We will be looking into getting him a credit card in the next few months that he can use to for example buy some petrol then pay off in full every month to show his ability to maintain credit.

We have no joint financial products so our credit files are not linked at all – and we will ensure this is not done until we apply for a mortgage jointly.

I understand the rules changed and it is no longer a simple x times your salary is what you can get for a mortgage, and is more based upon your income and expenditure and what is affordable. I watch our money closely so I have made a start on a household I&E.

I am confused about the deposit requirements. If I was applying alone I would be closed as a FTP so I am aware in some situations I would only need a 5% deposit. However as it would be joint with my partner I am presuming we would need 10% at least…. However a colleague said as he is moving home we might not need that much (??).

I have read on here about mortgage advisors / mortgage brokers – how some charge a fee and some don’t and some are ‘whole market’ and some aren’t and got a little confused! Given our complex circumstances would it be best to approach a mortgage broker to get advice? What is the typical fee to do this? I would love to know what mortgage we could get now and how big a deposit we could need, and how much we would need to be earning/have as a deposit for a mortgage of approx. £180,000 – is that possible for a broker to confirm now? Or do we have to wait till nearer the time when we are looking to move (my worry of that is not having saved as much as we need or be earning what we need to)?

Or I have noticed on Halifax’s website it says we can apply for a AIP online which takes 15 mins or so and they will tell us how much we could get as a mortgage currently – so I am wondered whether to do that as it is free?

Sorry for the long post but I wanted to explain our circumstances. J

Thanks for any help or advice that anyone can give!

ACG

1) Bonuses - usually around 50% are taken in to account.

2) Some lenders will average out the last 2 years and use that, others will use the latest years. Although if you want high street lenders then you should really look at averaging out to get his income. Some lenders will look to use wages + net profit (rather than wages + dividends) which can be higher.

3) Double check his credit reports before applyig anywhere. CCJs and Defaults will make a huge difference in who you can apply to and rates available.

4) Generally speaking between 4-5x income can be borrowed. Although it is affordability based, most lenders fall inside that box.

5) Forget being a first time buyer or not, it makes very little difference. You can still use a 5% deposit even if buying jointly. Although if you intend to keep the current property then it would prevent you from using the Help to buy scheme.

6) Brokers do vary in cost/experience/usefulness (you will see on here some people complaining about their brokers and others singing their praises). General rule of thumb is to avid estate agent based brokers. Personally I charge a fee on offer of a mortgage, the amount varies depending on the size of the mortgage (and commission) and work involved. Brokers can give you an indicative idea but I would wait closer to the time, the answers above should help you get a ball park of what is achievable.

Senior_Paper_Monitor

Only once possible answer here - sit down with an experienced mortgage broker.


The very great majority of brokers will not charge until they at least apply for a mortgage on your instruction.

PrettyKittyKat

Thanks for both of your answers!


ACG - I worked insolvency so I am hot on my credit file. Obviously we can't do anything about my OHs past mistake but we are focusing on doing the best damage limitation we can. We have just ordered stat reports from all three credit reference agencies to make sure we know exactly what's on there. Our intention would be to sell the current property. I didn't know we would still be considered for a 5% deposit, I jus presumed that was only for FTB's. That makes a massive difference in how long we would need to save for!


SPM: I think I will ask around the local area to see if anyone can recommend a broker for future use.

PrettyKittyKat

I have looked up the Help to Buy scheme and it seems the Help to Buy Mortgage guarantee would be suitable for us. The eligibility for this says we have to have had no accounts in 3 months or more arrears in the last 2 years, which we haven't. Or a CCJ - which my OH's is so first I need to look into seeing if he paid that off within 30 days, he seems to think he did.


It says it is open until Dec next year, so does this mean we need to have the mortgage agreed and the house purchased before this date? Wondering when we would need to start to application if we were to try to use this scheme - I am thinking maybe August time? This may be doable financially if we only need a 5% deposit.

Senior_Paper_Monitor

You appear to be looking at the HTB criteria - not the lender's (and that will be a combination of criteria and more the subjective profile).


You are correct that the CCJ issue is crucial.


This will not be easy to place with just a 5% own deposit - find a broker and talk to them.

getmore4less

How long will it take to save at least 5% + £5k for fees.

if more than a year then just start saving and cleaning up the credit.

A lot can change in a year.

You also need to get a much better idea of what you can do with the current place.

A broker will help with the things not to do that will make it harder when you are ready.

PrettyKittyKat

Saving the 5% and £5k fees should be do-able by the back end of summer next year. We wouldn't be able to save 10% till the year after though.


Yeah it was the HTB scheme criteria I was looking at initially, I am aware the lenders would then have their own criteria on top of this.


We are going to focus on saving, sorting out the CCJ and improving the OHs credit file then get some advise next summer . Thanks for all your help! I feel a little more informed now thanks to you all!