First time mortgage - advice please

stephg20

Hi everyone 

I am looking for some advice on a first time mortgage. I am currently in a bit of debt but that will be cleared off in the next 4 months or so. The debt was due to a large decrease in my finances meaning I had to take out a few credit cards a few years ago, they defaulted but in the last few months I have had a large pay rise so have been concentrating on clearing this as quick as I can. 

My credit history is quite poor at the moment due to this and I currently have a car on finance as well with high APR which I will be looking to overpay on. 

It will be quite a while before I do apply for a mortgage because I want to get the debt and the car paid off first of all but I just wanted a little bit of active. 

How long will it take my credit file to repair itself and how can I aid that after the debts are clear?
As a single mum would it be harder for me to get a mortgage judging on the fact I have been in debt previously?
I am on considerably more money than I was on this time last year but most of it is overtime and bonuses? Would that be taken into account?

thanks everyone

Whats_your_forte

Debts are not an issue on a credit file. It's how they have been managed that is the main issue. You mentioned that there were some defaults before. The first port of call would be to establish what dates these were defaulted on and then put together a plan to settle these as a settled default looks better in the eyes of a lender. What lenders don't like is you settling defaults as a knee-jerk reaction to obtaining a mortgage.

If you are running things like credit cards at the moment, then always be wary of the balance vs the credit limit as lenders do not like credit facilities that are extensively used so if there is a way of spreading the debts across a couple of cars rather than appearing fully utilised on one card, than that may be better

Lenders can use overtime and bonuses to support a mortgage application as long as they have been received for a sustained period of time. It may be worthwhile getting in touch with a broker to establish how this would work and indeed how different lenders would assess your income as some would let you use 50% of the extra payments, some would let you use 60% of these payments and there are a number of lenders out there that will allow you to use 100%. By using a 100%, you may be able to find a lender that will allow you to borrow the amount required

stephg20

Thank you very much

The credit cards defaulted more than a year ago and they will be paid off in the next 4 months. I would be looking at getting a mortgage for at least another year or two on top of that due to saving for a rainy day and then saving for the deposit itself. Would it disadvantage me being a single mum at all do you know?

ACG

There are a lot of ways to answer your question...
Being a Mortgage broker and not a priest, there is the option of putting the money you are using to clear your defaults towards the deposit instead. 
Being a morally correct mortgage broker, you are obviously doing the right thing and it probably will help to improve your chances of getting a Mortgage. Its quite nice to be able to say to lenders, yes there are multiple defaults, it all hit the fan but the applicant has done the right thing and cleared their defaults - It gives us a better chance of swaying an underwriter and also gives us more options. 

A lot depends on what you want, once your defaults hit 2-3 years old your options start to increase and all being well the rates will come down. You will probably need a minimum 10% deposit but possibly more, possibly a 5% will do the job when the time comes.

We do a lot of bad credit mortgages and we see people with anything from arrears through to 15 defaults/CCJs throught o bankruptcy. You seem to be on the tamer end of what we see so I would be confident there is an option even now if you had the deposit in place. 

Whats_your_forte

The single mum statement really isn't an issue on mortgages. Its income and credit file that should be your focus. Most lenders will use the Office for National Statistics in order to work out their affordability models so your status has already been taken into account. As said, focus on getting the credit files corrected and those defaults settled