Odds of getting approved for a mortgage?

dude7691

Hi There

I'm 21 at the moment and looking to buy a house in the 120k region, in around 4 years time. Would have around 75k deposit saved by that time. Not currently working in an employed position, just saving as much as I can from student grants and got a few other informal bits of work but nothing much. Anyway, hoping to get a job 6 months before I buy, would this be sufficient for a mortgage lender do you think? Would be working full time minimum wage, so about 16.3k a year gross. I am looking to borrow 45k over as long a term as would be practical (thinking 30-35 years) and then just saving whatever I can to pay the majority of it off after my fixed term ends (I estimate I could pay it off in around 8-10 years without difficulty), hence the longer timeframe as I fully intend on paying it off early, but just want to raise my acceptance odds (as then monthly outgoing is less relative to income). 

I would have about £650-700 a month after bills in this situation (I'm very frugal) so I obviously know I'd be fine paying it off, and have a 10k emergency fund. However, I know banks generally don't like younger applicants and lending has tightened up massively since 2008. 

So in summary, would this situation be a near certainty to get approved? I fail to see how a yearly outgoing of around £2000 a year (gotta include the interest, that's for the full mortgage term including the 30 years on SVR) would be rejected when I've got around 14k net. Last thing I'd need is to save all that money, keep it safe (not invested) over the next 4 years only to find I can't buy as that's a massive opportunity cost.

Thank you  

Petriix

It's entirely feasible that you could get a mortgage after only a short period of employment. Some lenders only require 3 months payslips or just an employment contract. If you went in together with a dudette (or dude, or whatever) then you could borrow much more. Payments on a £50k mortgage over 30 years are around £180 per month at current rates.

Best thing is to build up a good credit history. Take a credit card and pay it off in full every month and stay out of your overdraft. Don't miss a single payment on anything.

Then speak to a broker when you're starting to look for somewhere to buy. There are also some decent affordability calculators online which can give you a ballpark figure for what you might be able to borrow based on your income. Good luck! 

Meh123

Honestly I’m not qualified and I don’t think anyone knows what criteria will be in 4 years time, however it sounds like you have a dedicated plan and it all sounds very hopeful. Well done to you for being so organised with your future!!  ......Meanwhile my 20 year old is upstairs eating ice cream and playing animal crossing 😂😂😂😂

FTB_Help

Keep saving and keep house goal in your mind, but don't forget to enjoy your life and your money, travel loads and make great memories to look back on. One thing to note, as it sounds like you're saving your student grant you prob have student loans to repay? Getting a job for min £16.3k is uncertain, especially in this current climate, if you do, you need to factor in student loan repayments, pension deductions, meaning take home pay will probably be around £1k-£1.15k per month so bear this in mind. And finding a property for £120k (not sure where you're looking to buy) might be the price in the area you're looking at right now, but in 4 yrs who knows where the market will be. Be realistic, in 4 yrs time you might be disappointed with your take home pay or properties out there in the £120k range, but dont let this put you off, all i can say is keep saving a reasonable amount each month as you sound like you'll be in a much better position financially and mentally prepared than most 25 year olds in 4 years time

dude7691

Petriix said:

It's entirely feasible that you could get a mortgage after only a short period of employment. Some lenders only require 3 months payslips or just an employment contract. If you went in together with a dudette (or dude, or whatever) then you could borrow much more. Payments on a £50k mortgage over 30 years are around £180 per month at current rates.

Best thing is to build up a good credit history. Take a credit card and pay it off in full every month and stay out of your overdraft. Don't miss a single payment on anything.

Then speak to a broker when you're starting to look for somewhere to buy. There are also some decent affordability calculators online which can give you a ballpark figure for what you might be able to borrow based on your income. Good luck! 

Thank you! 6 months would be better for me just so I feel settled in my job. Yes of course, I'd just rather keep my financial affairs separate from anyone else. Yep that's about what I had budgeted, and easily payable for me. I'm extremely good at budgeting. I'd be putting a lot of cash aside as well in view to paying it off in 10 years. 

Yep, I've had an Aqua credit card for the last few years, but I've done a lot of bank switching offers which has dragged my score down a bit, not that that'll matter in 4 years time. Never missed any payments on anything, but they're only small as I generally work to not spend much. 

That's great, just ran nationwide's one and it said £73k would be appropriate for me  

Thank you for your help. 

dude7691

Meh123 said:

Honestly I’m not qualified and I don’t think anyone knows what criteria will be in 4 years time, however it sounds like you have a dedicated plan and it all sounds very hopeful. Well done to you for being so organised with your future!!  ......Meanwhile my 20 year old is upstairs eating ice cream and playing animal crossing 😂😂😂😂

That is true, if lending tightens up more, then I might just decide to not bother or just buy outright in a few years more. I've been running it for 2 years! Managed to save nearly £35k over that time, just doing the odd bit of online work, informal cleaning and house renos for friends/family and my grant  

Haha There's absolutely nothing wrong with that  

Thank you kindly  

dude7691

FTB_Help said:

Keep saving and keep house goal in your mind, but don't forget to enjoy your life and your money, travel loads and make great memories to look back on. One thing to note, as it sounds like you're saving your student grant you prob have student loans to repay? Getting a job for min £16.3k is uncertain, especially in this current climate, if you do, you need to factor in student loan repayments, pension deductions, meaning take home pay will probably be around £1k-£1.15k per month so bear this in mind. And finding a property for £120k (not sure where you're looking to buy) might be the price in the area you're looking at right now, but in 4 yrs who knows where the market will be. Be realistic, in 4 yrs time you might be disappointed with your take home pay or properties out there in the £120k range, but dont let this put you off, all i can say is keep saving a reasonable amount each month as you sound like you'll be in a much better position financially and mentally prepared than most 25 year olds in 4 years time

I shall do, I am working on that. I've given myself like £15 a week just for leisure now as I know doing nothing for myself will only kill off my motivation. I'm really hoping to travel a lot during my 30's. I feel pretty happy generally the way I am now though, I see my 20's as a period for building strong foundations. It's mostly a grant, £4500 a year of it is, the other £933 is a loan + £1548 loan for tuition fees. I'm studying with the open uni, so my total debt should come out to just under 10k, which is pretty great! Also earning 16.3k, shouldn't need to make any repayments for a while. As for the pension, I'll probably opt out of a company pension scheme unless employer is contributing and matching well, I'd rather manage my own investments otherwise. Of course, an employer match would be worth it, although I might opt out until after I get my mortgage if that's the case. Then opt back in once I've been approved. Thanks for that, I hadn't considered it. 

I'm looking to buy in Swansea, and have factored that in. I'm currently looking at properties in the 100k region, assuming 4.5-5% a year growth between now and then, as I know anything more will likely be out of the budget, come 4 years time.

Yep, even if I choose to just continue renting and then choose to invest, it's still a great start to a decent nest egg for later on. Thank you for your advice!  

K_S

@dude7691
Big picture, you will be aiming to buy a 120k house with a 75k deposit, so looking to borrow 45k at <40% LTV.
Expected income around 16k with a full time employment history of at least 6 months.
Looking to borrow less than 3x income, assuming no dependents, debt or other major outgoings, no credit issues, and form of income being steady, as of today you would not have any issues at all getting the mortgage you need.
I hope that helps.

dimbo61

If you get offered a pension from any employer you just say Yes please no questions needed.
Very important to start saving into a pension as you get FREE money from your employer and tax relief on top.
Even auto enrollment type pensions will pay double what you pay in plus interest built up over many years.
If you are good with your hands and wiling to attend night school courses on building, bricklaying, plumbing and electrical work you could make a good career out of property development.
Sometimes life gets in the way of our long term plans.
Hopefully your open university course may lead to a well paid career

MWT

dude7691 said:

Managed to save nearly £35k over that time, just doing the odd bit of online work, informal cleaning and house renos for friends/family and my grant

... just take care with the 'informal' earnings as you get closer, as you will have to show the source of your funds at some point and undocumented, untaxed cash deposits will be a problem...

FTB_Help

Agree with mwt, you may need to prove where you got your deposit from.

And if you've done some informal work i.e untaxed, then it might raise bigger issues, if its gifts then you'll need a signed letter to prove money gifted etc