FTB Advice

sarah539_2

Hello,

Looking for some first time buyer advice!

My husband and I have not been actively looking to buy a home however we have suddenly found one (for a very low price, 100k, needs a lot of work) and are thinking of applying for a mortgage.

We have a great situation, between us we have over 4k a month coming in after tax, of which less than half of that is bills, childcare, travel, car payments, shopping etc.  We have 400 a month going into help to buy isa's, 800 into a savings account, 100 into a child's savings account. We have a 15% deposit plus savings for renovation. All sounds fantastic but when we printed our statements I am not sure this comes across very well! Over the past 3 months of lockdown we have spent quite a lot of money on, well, !!!!!!. Load of amazon purchases, bought so much home learning stuff for my daughter to do as my daughter is at home, I ended up paying for two lots of online grocery shopping bills as my elderly parents were shielding but didn't have online accounts (I live 200 miles away so couldn't do it for them in person). We were paying 620 a month for a holiday which we have subsequently cancelled and been refunded for.

We also frequently used our arranged overdraft, completely out of habit rather than moving the money which is just so stupid and last week we reduced it to £100 to stop us using it for no reason (as we have the money, just didn't move it over). Also, for the months of May and June my salary was 80%, not furloughed just temporarily reduced to deal with the effects of covid. This returns to normal from the 1st July.

Do lenders pay so much attention to the spending habits such as these or do they just take into account the essential outgoings? We would not have been so extravagant had we known that we were to apply for a mortgage. 

Will they be happy with a letter showing that the overdraft has been reduced? Will this even matter? 

I have a signed letter from my HR department regrading the 2 month wage decrease, will these suffice to explain the pay slip difference?

Or despite all this, should we just wait til October in order to provide better looking bank statements? 

jamielutz1987

@sarah539_2

1. Discretionary expenses such as the ones you have listed should not have an adverse impact on your affordability for mortgage purposes.

2. Using an arranged overdraft as per T&Cs should not be an issue.

3. Assuming you will apply for a mortgage only after 1 July, the letter from HR should suffice to explain the temporary dip in income.

You have mentioned net income of 4k monthly which indicates a gross of 60k+ between you. For a property costing 100k, that should be more than sufficient borrowing power (based on income).

If you have less than 15% deposit, then it may make sense to wait till October, so there are more 90% LTV products in the market. If your LTV will be 85% or less, then now is as good a time as any. Your bank statements being "better looking" in October is unlikely to make any significant difference.

dimbo61

So have you got a deposit ?
How much ?
Do you earn enough ? I would think so if you take home £4,000 a month.
Going into your overdraft is a sign of poor  money management !
With lenders now asking for at least 10% and maybe 15% deposit you need to save and stop spending.
Live the MSE way by checking every penny you spend on Everything.
A property needs to have a working kitchen and bathroom in order to get a mortgage ! 
So does this house have a kitchen/bathroom ?

sarah539_2

@jamielutz1987
Thank you very much for the reply. We have a 15% deposit, potentially we could have 25% but we are hoping to keep a good lump of it aside for the renovations.
Your reply helps a lot, thank you. 

jamielutz1987

sarah539_2 said:

@jamielutz1987
Thank you very much for the reply. We have a 15% deposit, potentially we could have 25% but we are hoping to keep a good lump of it aside for the renovations.
Your reply helps a lot, thank you. 

No worries, glad it helped.

I'm sure you are aware, the property will need to assessed by the lender's valuer as habitable for it to qualify for a mainstream residential mortgage. Generally speaking, cosmetic issues are ok, structural issues (hole in the floor, semi collapsed roof, visibly unsafe wiring, etc) are not. It may not stop you from getting a mortgage but you may need a bigger deposit and to look beyond the mainstream lenders.

sarah539_2

The house is fully functioning so to speak, just all extremely dated so I don't see there being any issues to that regard (fingers crossed)!