Advice for a hopefully soon to be FTB

Moneylockdown

Hi all,

I have posted on the forum previously (a few months ago) and have joined into a few challenges along the way however would like some advice if possible.

At the beginning of August 2016 our rented property is no longer available and we will have to move out. We are looking at buying for then however I would just like some information if we are financially ready in the state of our finances (I have looked at the monthly commitments and we can afford on our current wages now) We are looking to go to a broker mid April to discuss our options as my husband has adverse credit - I would class it as adverse anyway - with a view to buy in July 2016.

I have a good credit rating, no defaults/ late payments or CCJ's however have a loan which has £4839 which will be at £3923 by June 2016 (minimum) and a mobile phone contract at £37 a month. No balance on a credit card. I currently earn £16,500 and have worked for this company for 3.5 years.

My husband however is a different kettle of fish. He has a default registered November 2011 for £128 which was settled in June 2012 and has late payments for a provident loan from March 2014 - November 2014 which was settled when realised (it was a loan taken out for a family member and unfortunately we learnt the hard way) He has a £38 a month phone contract and no balance on a credit card. He currently earns £19,000 however has only just been offered this job and therefore by July will only have been in the job 4/5 months.

We are looking at houses in the £140k range and will have 7-8% deposit. We also have a Save to Buy account with Nationwide which we save into.

I have various questions really:

1. Do we have a cat in hells chance or am I just hoping against all odds?

2. Is April the right time to go to a broker with a view to attempt to buy in July 2016?

And any other feedback that anyone has would be greatly appreciated.

I apologise for the reeeeaaalllyyy long post, I tried to break it down into paragraphs to make an easier read.

Thank you in advance.
:beer:

kingstreet

Moneylockdown wrote: »

Hi all,

I have posted on the forum previously (a few months ago) and have joined into a few challenges along the way however would like some advice if possible.

At the beginning of August 2016 our rented property is no longer available and we will have to move out. We are looking at buying for then however I would just like some information if we are financially ready in the state of our finances (I have looked at the monthly commitments and we can afford on our current wages now) We are looking to go to a broker mid April to discuss our options as my husband has adverse credit - I would class it as adverse anyway - with a view to buy in July 2016.

I have a good credit rating, no defaults/ late payments or CCJ's however have a loan which has £4839 which will be at £3923 by June 2016 (minimum) and a mobile phone contract at £37 a month. No balance on a credit card. I currently earn £16,500 and have worked for this company for 3.5 years.

My husband however is a different kettle of fish. He has a default registered November 2011 for £128 which was settled in June 2012 and has late payments for a provident loan from March 2014 - November 2014 which was settled when realised (it was a loan taken out for a family member and unfortunately we learnt the hard way) He has a £38 a month phone contract and no balance on a credit card. He currently earns £19,000 however has only just been offered this job and therefore by July will only have been in the job 4/5 months.

We are looking at houses in the £140k range and will have 7-8% deposit. We also have a Save to Buy account with Nationwide which we save into.

I have various questions really:

1. Do we have a cat in hells chance or am I just hoping against all odds?

2. Is April the right time to go to a broker with a view to attempt to buy in July 2016?

And any other feedback that anyone has would be greatly appreciated.

I apologise for the reeeeaaalllyyy long post, I tried to break it down into paragraphs to make an easier read.

Thank you in advance.
:beer:

The things I have highlighted are what is important. Sack the rest.

No-one cares about a loan balance. They want to know how much each month and for how long. If it's less than six months, they'll ignore it. If it's longer, it will impact on affordability.

Phone contracts, the same. If it's O2, perhaps half will be credit, the rest is airtime, so ignore.

Enter your figures in lender online affordability calculators. Most want only;-

credit card balances
loan payments
childcare costs
school fees
maintenance payments
cost of HTB equity loan (3%)
ground rent & service charges
travel card/season ticket loan

in addition to your gross annual salaries.

Enter car allowances, large town allowance with basic.

Commission, bonus and overtime has to be evidenced over a longer period and usually only 50% will be taken into account.

Some lenders will take some tax credits and child benefit into account, some don't.

Consult an independent broker as early as possible as they may be able to give you tips to improve your situation a few months before you will come back and start to look seriously.

ThePants999

Regardless of what lenders will think of your credit history, 7-8% is very low for a deposit. Just to check, is that after accounting for the thousands of pounds of costs involved in buying a house?

Moneylockdown

kingstreet wrote: »

The things I have highlighted are what is important. Sack the rest.

No-one cares about a loan balance. They want to know how much each month and for how long. If it's less than six months, they'll ignore it. If it's longer, it will impact on affordability.

Phone contracts, the same. If it's O2, perhaps half will be credit, the rest is airtime, so ignore.

Enter your figures in lender online affordability calculators. Most want only;-

credit card balances
loan payments
childcare costs
school fees
maintenance payments
cost of HTB equity loan (3%)
ground rent & service charges
travel card/season ticket loan

in addition to your gross annual salaries.

Enter car allowances, large town allowance with basic.

Commission, bonus and overtime has to be evidenced over a longer period and usually only 50% will be taken into account.

Some lenders will take some tax credits and child benefit into account, some don't.

Consult an independent broker as early as possible as they may be able to give you tips to improve your situation a few months before you will come back and start to look seriously.

Thank you for your advice.

Will contact broker in the next few weeks and will check out more affordability calculators.

Moneylockdown

ThePants999 wrote: »

Regardless of what lenders will think of your credit history, 7-8% is very low for a deposit. Just to check, is that after accounting for the thousands of pounds of costs involved in buying a house?

We have a seperate pot for the costs of buying the house. I know 7-8% is low but our save to buy account with nationwide offers 5% mortgages so we are hoping to be eligible.

Moneylockdown

Would I be best throwing at spare monies at the deposit instead of the loan like I am trying to do? So that the deposit is more 8-9%?

kingstreet

The monthly payment for the loan is what determines its cost in affordability terms.

Unless you can cut the cost, or get it down to within six months payments, you would be better off getting to 10% deposit, or more.

csgohan4

Hit the debt free wannabe forums and cut any excess you don't need. The phone contracts seem eye watering.

littlegreenfrog_2

I would move into another rented flat (consider a cheaper flat or even a studio if you can) and focus on paying down your debts and putting as much money aside as possible. Track what you're spending and try to identify where you can make cost savings. (I agree the mobile phones sound extremely expensive but you will be stuck with those until the end of your contracts. If your contracts are coming to an end soon, keep your existing phones and move on to a cheap as chips SIM-only plan and you could save at least £50 a month between the two of you.)

If you both make a real effort, after 6 months or a year of renting somewhere else and saving as much money as possible, you will be in a much better position to buy. The ideal would be if you could pay off your loan and save a 10% deposit.

Consider your job too - any chance of going for a promotion or another job somewhere else with a pay rise?

Good luck.

ellyp95

Hi,

I'm a first time buyer currently awaiting on the application coming back.

When we were speaking with mortgage brokers and banks before we started making offers, each one of them told us that even with the 5% help to buy scheme, it is so much better to put a 10% deposit down if you can. There were numerous reasons but the one that stands out to me for your current situation is the fact that only having a 5% deposit, backed by the governments scheme, is a lot stricter guidelines/criteria and so harder to be accepted for the mortgage.

Hope this makes sense and helps x

Moneylockdown

Thank you for everyone who has taken time to read and respond.

I will look to bump up our savings to try and give us the best chance and will stop over paying the loan as it won't be paid off by summer even with over payments.

We aren't looking for help to buy from the government but looking at nationwide who our savings are with as they offer 5% mortgages with this savings account.

I agree about the phone contract but we are tied in for 1 more year and they are with o2 so won't allow to lower tariffs.

Thank you all again.