Lots of Mortgage Questions for FTBs! Help us please! :-)

Tunnix

Hey all,

We're hoping to buy our first home within the next few months but have tons of questions and really hope some of you may be able to answer some.

Our situation: We currently rent our home and a few months ago, the Landlord asked us if we would be interested in buying it. We absolutely love the place and of course said we were definitely interested. We have submitted an offer directly to him which he is currently considering and would be using Help to Buy (Mortgage Guarantee) with a 5% deposit.

We have completed a few AIP applications online (making sure they were soft credit check only), and had a few offering us an AIP straight away, but they automatically changed the 5% deposit we said we had to 10%. There were also two banks who it said they couldn't provide an AIP online as the online system is only setup to work with a minimum of 10% deposit.

My partner and I have fairly decent credit scores (around 880 on Experian) and an annual income of £49,000 so we're fairly confident however as we'd have a 95% LTV mortgage, there are LOTS of worries and questions about the whole process that we have, and we'd be really grateful if anyone, can answer any of them :-) So here goes:

1. We understand that we need to have minimum activity on our previous 3 months bank statements before the actual application, but just how will this be viewed considering our 3 months will likely be the 3 months before Christmas... There will of course be lots of little purchases in store and online for various gifts, but surely a mortgage provider cannot assume that these are our normal monthly spending habits?

2. Every mortgage provider we have spoken to or researched so far has said that on applying, we will need to bring with us, 3 months worth of bank statements, but none have mentioned Credit Card statements. Will they request these too, to examine in detail or will they just take the credit card payments in to account?

3. I have a loan with my bank for which I currently pay just over £200 per month - This loan has 2 years remaining until it will be completely paid off. As part of the banks 'affordability check' we understand they will need to 'stress test' us at 5-7% in case rates go up in a few years time... Will they take into account that this loan will be paid off in 2 years time and that should interest rates then rise, we will also be £200 better off each month? If they would not take this in to account, our thinking is that we might be better to extend the length of the loan a little to bring the repayments down to, say £100 per month, so that we have a better chance of passing the affordability tests?

4. I have 3 credit cards and we have a join credit card together also, however one of my credit cards (with my bank) is a student credit card I had from when I was a student at university. The card only has a limit of £250. For a better credit score, am I better to keep the card (and have an additional £250 added to the amount of 'available credit I'm not using') or to close the account in case it looks bad that:
a) it's a very small limit
or;
b) I have 4 different credit cards...

5. Due to our landlords circumstances, we have a bit of a deadline to work towards as he needs to sell by this date. This may mean that we would be approx £2,000 short.... If we absolutely had to, would we be better to make our application with £2,000 outstanding on a credit card or £2,000 in to our overdraft. We understand that neither of these situations are ideal, but it would be useful to know which is the lesser of two negative factors in the eyes of the Mortgage Provider...

6. Around 16 months ago, we (very stupidly) took out a couple of Pay Day loans to help with some emergency car repairs, and paid them straight back. We've read that some mortgage providers will not even look at anyone who has taken a Payday loan out in the past 6 years... Does anyone know who 'these providers' are and how much truth there is to this? Would this have also been a factor in giving us an AIP as we have not had any issues with the AIP but wonder if the PayDay loans may be an issues once it comes to the actual application?

We'll probably have a few more questions to add, but for now, we'd be REALLY grateful if anyone could provide some advice to any of the questions above :-)

Thanks so much in advance...

G_M

Here: Mortgages & Endowments

Dhrucku

1) Correct, you'll need the latest 3 months available bank statements. These are usually available online for free for the first time you request, a fee thereafter. They will understand that the statements will reflect a Xmas period, but if you apply within the next few weeks, they'd be perusing over the July/August to November period. They'd usually cover spending habits on a call with you directly rather than relying solely on a seasonal period of bank statements. As long as you're open and upfront with maintaining that these are not regular spending habits, they'll take it into consideration.

2) There will be a request for Credit Card statements alongside bank statements if there are payments coming out of the bank statements to pay off the CCs. Best to have them lined up just in case. Remember the bank's want an overall view of the incoming/outgoings of your capital.

3) £200/month sounds like a student loan? I wouldn't worry about this too much, like you said you could always lengthen the period to get a lower repayment. You could always do this and once you get comfortable, start overpaying - this gives you flexibility

4) Keep it, don't default over - no need to change anything so as to bring it to attention.

5) Both are as "bad" as each other. I'd clarify with the mortgage providers, they'd know this shortfall and would question as to where these funds would be coming from.

6) As long as there was no complications around this, I'm pretty sure this wouldn't impact on your ability to get what you need

Key here is transparency. Yes you've made some slight errors in previous spending, but the best thing you can do is give a good record of future intentions and your recent track record of good financial discipline.

MM64

Hi,, in your situation I would defiantly see a mortgage broker. If you "google" mortgage brokers for your area, check the reviews you should find a good one.

Book an appointment and take all your paperwork, bank statements and credit card details with you. Don't try and hide or be selective with what you tell them. (They are on your side).

A good broker will give you a good idea of where you stand at the end of the meeting and all being well will get you the mortgage deal you want.

By the way if you see a deal that you like by all means take that along and show them on the day.

Good luck.

AlistairM

Something you might want to do is go to the post office and get a certified copy of your passport or drivers licence, or at least make sure they're up to date because you'll have to post them (any holidays coming up?).


Also look for your P60 and your council tax thing (name escapes me)


Get hold of utility bills you have with your names and addresses in it. If you have electronic bills, ring and ask for a one off physical bill.


If you haven't done so already work out how much you spend on everything in a year typically (groceries, utilities, loans, holidays etc) and put it in a spread sheet or similar


Your broker/bank is going to ask for things like this, it will make life easier to have them ready to go.


Don't forget that as well as needing money for a deposit you will also have to pay transfer fees, possibly mortgage fees, legal fees, survey fees, search fees and stamp duty.

Mossfarr

Go to your bank and ask for an appointment with their mortgage advisor or their financial advisor - this is a free service in most of the high street banks. They give really good advice and you are not under any obligation to take out a mortgage with them. Also, as they already have access to your bank statements you don't need to take any paperwork with you!
Speak to your Landlord about the shortfall of £2000 you have - he may agree to 'gift' this to you in lieu of the rent you have paid. (google gifted deposits).
Not a good idea to use credit cards to make up your shortfall - there are a lot of unexpected costs when buying so you could end up deeper in debt that you can comfortably manage.
Do all your Christmas shopping on your credit card and pay it off at the end of the month so only one payment is going out of your bank.