First Time Buyer - Advice Needed Please

klf121293

Hello,

My boyfriend and I are first time buyers looking to purchase our first home. We both have car finance agreements and some credit card debt used to pay for car insurance etc (total of around £3k between the 2 of us).

We hope to move into a new build home in December and have put a (refundable in needed) early reservation down on a property priced at £233,000. We will use the help to buy scheme so have saved up our 5% deposit and will then use the scheme so we have 25% to put down.

Our combined income is £51,000 - I earn £26,000 and he earns £25,000. However, he has shift allowance and overtime opportunities which easily boost his salary by up to £3k per year.

When calculating all of our expenditure with mortgage calculations, all of our bills, all current outgoings, all our food/petrol/general spending for the month against our incoming, we'd have £1100 left over each month which we could use for socialising, saving and paying off our CC.

My main concern is if the CC debt will affect our mortgage application? We both have good credit scores - no late payments or defaults. We both make payments every month but have been more focused on saving money for the deposit and so we have cash when we move in to furnish. We'd like to continue like this so we have a pool of money when moving in and then can pay larger sums off the CC when we've moved in. With the £1000 spare each month we could commit £500 to pay off the credit cards in 6 months.

Since the house is ready in December it has been advised we'd be looking at October time for starting our application.

Is there anything we can do to improve our chances of being accepted?

sal_III

Check the affordability calculator for the HTB equity loan and make sure you have enough income, as it's different from the Mortgage lender criteria. For instance the mortgage interest rate is "hard coded" at was in the region of 2.5% when I was going through the process few months ago (when I queried the high figure they told me this is to account for the inevitable rate rise). It then factors in your ability to afford the 6th year interest payments on the equity loan, even though they aren't due for 5 years and your income is likely to be completely different. It was also using some ridiculous numbers for the CC "debt" for example I had £300 balance at the time of application, my cc balance is repaid in full via DD each month, but the HTB affordability calculator was reducing my net income by something like £15/m for 25 years.

The most important bit when making the HTB application is to get all the details and numbers right on the first try. If you mess up something (like i did) instead of passing semi-automatically it will go to a human to check all the facts and becomes a nightmare to sort out.

Also bear in mind that not all Lenders work with HTB so make sure to mention that to the Lender/MB in advance.

klf121293

Thanks for the advice its much appreciated!

We've put everything through the HTB calculator to estimate all of our costs so we're confident we can afford the monthly outgoings especially as the years go on. My OH has a guaranteed pay rise each year with the scheme is on so after the 5 years he will be on £40k. I earn an additional 2.5% of my salary every 6 months on completion of some work so I should be on close to £30k within 2 years. The HTB affordability calculator confirms we have a large enough deposit and the right income/outgoing ratio.

We're just nervous about being approved for a mortgage - especially since we're going through HTB! All the checks and having to use specific lenders is a lot to get your head around.

sal_III

Get mortgage/decision in principle. It's easy enough process and costs nothing. You will need it in order to make a reservation for a new build anyway. If you get it, then it's more or less a matter or providing proof that the numbers you claimed are true to get the actual application approved.

kingstreet

klf121293 wrote: »

Since the house is ready in December it has been advised we'd be looking at October time for starting our application

Where have you heard this?

We are newbuild/HTB specialists and are now submitting applications for HTB and mortgage on December 2018 completions as you are expected to exchange contracts within 28 days and you need a full/formal mortgage offer to do this!

klf121293

This is how it was explained to us by the advisor at the development. She said with help to buy there is a 3 mont deadline to get accepted and exchange before things expire so we can’t do anything too soon to prevent this from happening. Putting our official reservation down in October time would give 3 months accounting for potential delays. Is this not correct?

kingstreet

It's three months from application (ATP) to exchange of contracts (ATE) and a further six months from exchange of contracts to completion.

Nine months in total.

klf121293

Thank you for this! We will definitely have to enquire with the development when they open tomorrow as the executive there advised that we wouldn!!!8217;t be hearing back for a few months. At the moment the property is only available for an early bird reservation, we couldn!!!8217;t actually put a full reservation on it but get first refusal when it is available (she advised this would be September/October) and that the build would be complete in December/January

kingstreet

You don't usually do an 'EB' for a release a couple of months before completion.

We saw EBs in Feb/Mar for December completions that we have to exchange in June/July where we now have full reservations.