Credit card debt first time buyer

baxdad1

Hi, hoping to get some advice. Myself and my partner are looking to buy our first property this year after renting for over 8 yrs. My parents have given us a chunk of money as a deposit which has been fantastic.

The only thing putting me off finding a home and applying is the fact I have almost £6000 on my credit cards outstanding. I make payments every month towards them. And have never missed a payment on them. Using the online calculators it seems that the lenders will still lend us a decent amount of money. Are these calculators accurate? And will lenders expect the credit card debts to be cleared before any mortgage is offered?

Any advice would be greatly appreciated.

lorien71

Hello! Good luck with your first purchase, I'm currently going through the mill of my first purchase with my husband!

I was worried like you about the credit card debt I had (a lot more than yours) but as long as you're paying it off and haven't missed payments, you should be fine.

The calculators are normally what the lenders go by in order to give you an agreement in principle before you put through your application, so they are a general tool to use, but accurate enough to tell you whether or not you'd be ok to apply.

Malmo

Credit card repayments will be factored into affordability calculations and hence lessen your borrowing power if you declare that the debt will not be settled in full before completion. If you declare and guarantee that the debt will be settled before completion then most lenders will exclude the debt when assessing affordability, but your conveyancing representative will be duty bound to the lender to check your declaration.

marsman802

Here's a first hand example.

I was accepted at full mortgage offer on DIP however at full affordability the underwriter came in 18% less due to the large nursery fees we have for our daughter (we pay circa £1500 per month). The online calculators assume a ballpark national average....I happen to live in Surrey so the national average clearly doesn't help us.

My broker pointed out the new nursery for the area will cost £300 a month less (they have current bank statements that show the current nursery fee) which then reset the offer to just 7% short.

There were a few other options to up the lending number but I can't be bothered to restart the app so will just pay more deposit from savings.

Luckily I have a the funds to makeup the 7% but I had a right fright first thing this morning.

It's fun this, isn't it?

betmunch

marsman802 wrote: »

Here's a first hand example.

I was accepted at full mortgage offer on DIP however at full affordability the underwriter came in 18% less due to the large nursery fees we have for our daughter (we pay circa £1500 per month). The online calculators assume a ballpark national average....I happen to live in Surrey so the national average clearly doesn't help us.

My broker pointed out the new nursery for the area will cost £300 a month less (they have current bank statements that show the current nursery fee) which then reset the offer to just 7% short.

There were a few other options to up the lending number but I can't be bothered to restart the app so will just pay more deposit from savings.

Luckily I have a the funds to makeup the 7% but I had a right fright first thing this morning.

It's fun this, isn't it?

That's a fright you shouldn't have had, how did £1500 a month on nursery fees get missed off the application?

I think you've been let down here and your broker is very lucky you bailed them out and stayed in good humour!

Thrugelmir

baxdad1 wrote: »

The only thing putting me off finding a home and applying is the fact I have almost £6000 on my credit cards outstanding.

Given the fortunate circumstances you find yourselves in. Maybe worth a few months of scrimping and saving every penny you can to reduce the debt. Starting home ownership with a sizable debt isn't ideal. As you never know what unexpected costs you may encounter.

BelfastFTB

Thrugelmir wrote: »

Given the fortunate circumstances you find yourselves in. Maybe worth a few months of scrimping and saving every penny you can to reduce the debt. Starting home ownership with a sizable debt isn't ideal. As you never know what unexpected costs you may encounter.

I totally agree with Thrugelmir. The fact your deposit has mostly been gifted will also show you're more likely to dip into credit than save up the £££s. A few years ago I looked at buying through co-ownership. I had virtually the same amount in CC debt as I had in savings. I was told I would be far more appealing to a lender if I had asked for 100%LTV.

You said you're making repayments - are these just the minimum payments or are they a good 20-30% off the balance? Have you had a balance for quite a while, have you amassed the debt recently or is it something you pay off chunks of, then stick it back on in new transactions?

Any MA, broker or eventually underwriter may analyse your spending, credit usage and saving habits. They'll also make hypothetical calculations. Such as, if you can currently afford repayments at 2.5%, could you afford them at 10.5%? Anything could happen over a 25-year period...

Good fun, isn't it?!

Mr.Generous

unless your costs are going to go down with a mortgage to pay for you are going to need to look at how and why you got into debt and how you will be able to afford your home and what changes you might have to make to be able to balance your finances. Think long and hard.

Debtslayer

Contact a good independent mortgage broker and they will advise you what you will be able to borrow; with and without the debt.
The debt will result in a reduction in the amount you can borrow.


I would definitely recommend using a broker anyway as a ftb; they are invaluable with guiding you through the process and will answer any questions you may have


Good Luck and don't let it put you off purchasing your own home

marsman802

betmunch wrote: »

That's a fright you shouldn't have had, how did £1500 a month on nursery fees get missed off the application?

I think you've been let down here and your broker is very lucky you bailed them out and stayed in good humour!

I don't think Platform had anything other than the ability to enter 1 under dependant on the DIP which built in their national average.
Our next lender was going to be Virgin who looked like they would offer 10-15% more than the original number but Platform was a touch better on 3yr fixes.

There's also a loan I wasn't intending to pay off but I could choose to if this still falls down but given the underwriter has been quite clear what will get it over the line (and I've supplied this eve) I didn't think it was worth starting all over again.

I know why they do all this but our circumstance means we'd have circa £3k disposable income each month after EVERYTHING has been paid for.

Just goes to prove how difficult these things can be

baxdad1

Wow thank you for all the replies.

Its definitely given me some things to think about. I am currently paying chunks off my credit cards so by the time I apply I would hope to have paid off 1-2 k off the balance.

I'll have to keep an eye on these forums to get clued up on the whole process.