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...

ACG

1) Some lenders will go through your bank statements with a fine toothcomb but the reality is most are only interested in your commitments and regular transactions. They are not interested in what you spend your own savings/cashflow as such.

2) Its unlikely they will want credit card statements. If you have balances outstanding (ie you do not clear them each month in full) then the balances will go down as debt and the that will impact affordability.

3) The loan will be taken in to account. The lower monthly repayments will probably help ffordability, but if your income easily supports what you need then it should not matter.

4) Doesnt matter. Do what your preference is.

5) Im not sure.

6) It can be an issue.

I know this may come across as biased due to my occupation but I think you would be wise to speak to a broker. A lot of the questions are surrounding debt and affordability and I think with the pay day loans on top there is the potential for this to go wrong.

Also even soft footprints, im not sure its wise to be doing too many checks, there are not that many lenders who do soft footprints. Have a mess around on the affordability calculators but I think you should speak to a broker.

FTB12

Hi Tunnix

I'm also a FTB and we used a mortgage broker, I couldn't recommend using one any higher!
It definitely made the process a lot easier and they would be able to answer all your questions.

Sorry I can't answer any of your questions but just thought I'd give you my advice About brokers!

Tunnix

Thanks for the responses so far - Really helpful!

We did actually see a Mortgage Advisor a few months back, although we really didn't find him overly helpful... Besides that, the lowest repayment figures he was coming back with were about £150 MORE than some of the rates we've found through our own research online...

:-/

libf

Tunnix wrote: »

Thanks for the responses so far - Really helpful!

We did actually see a Mortgage Advisor a few months back, although we really didn't find him overly helpful... Besides that, the lowest repayment figures he was coming back with were about £150 MORE than some of the rates we've found through our own research online...

:-/

That's one broker. Try another. Also, keep in mind that they know how to fill in the affordability calculators and such correctly. You may have been missing something...

ACG

Tunnix wrote: »

Thanks for the responses so far - Really helpful!

We did actually see a Mortgage Advisor a few months back, although we really didn't find him overly helpful... Besides that, the lowest repayment figures he was coming back with were about £150 MORE than some of the rates we've found through our own research online...

:-/

Were you eligible for the lender/product you found? Would you have passed affordability with them?

£150 a month sounds like a lot, there are normally groups of lenders in and around the same sorts of rates depending on what part of the market they are targetting so I would say if you have found a much lower rate there will likely be a few options, but it would come down to whether or not you fit their criteria.