Mortgage for recently self employed

Clarita

Hi,
I am looking to buy my first flat with my boyfriend. He earns £30,000 + ~£2,000 bonuses. I am newly self employed for only 2 months. I am doing exactly the same job as I was before earning £22,500 and predict I'll earn at least £25,000 (this is the reason I decided to leave and go it alone). I'm a sole trader and don't have an accountant as I have very few expenses (tube & bus travel and a bit of stationary) so it doesn't seem worth it.

I've spoken to a few mortgage brokers in the last few days and while all have told me we'll have problems, the solutions vary. One told me that if we could stump up a 15% deposit (rather than the ~7% one we currently have) it would be much easier. London & Country I just spoke to said there's no way I could get a mortgage at all for at least 6 monts or a year no matter what deposit we have (even if my parents could garantee it on my behalf).

Sorry this is a long one but I'm really worried now. L&C pretty much told me anyone offering me a mortgage at all is being unscrupulous.

Should we just resign ourselves to living at my parents' for another year?

Thanks for your help in advance

PS. Just to add; both our credit histories are completely clean (never had any credit cards or loans) but both have the standard student loan.

herbiesjp

What prices are you looking at?

Would your parents be happy to be a guarantor for you?

There may be options available, however it will depend greatly on your scenario

Clarita

We'd be looking at ~£250,000. We've seen somewhere nearby for £279,000 which would be ideal but obviously quite a bit more!

I think they would be. They'll be comming into quite a bit of money from the sale of my Grandad's house soon and I know they're keen to help out with increasing our deposit. Obviously it would be preferable to be able to just use our money but if we needed they would be willing to put in a portion.

The main problem seems to be that I've only been self employed a short time.

herbiesjp

YOur short self employed period will indeed cause you problems with most lenders. HOwever there are some that are more flexible.

If your parents did put down some extra funds, how much would they help you with?

What do each of your parents earn, as if they are guarantors, the lender will base any mortgage amount on their earnings/liabilities as well

Clarita

It could be as much as £75,000 but I'd like to not borrow so much from them as that if possible.

My mum is self employed (finding it hard to get much work at the moment so not earning much). My dad is early retired with a very good pension and lots of savings, etc.

I'm a bit unclear about self cert mortgages. Would this be route I could go down?

PasturesNew

Taking the worst case scenario.

£280,000 house you fancy.
£20,000 your 7% savings
£8,400 stamp duty required
£1,000 solicitor/searches required
£1,000 mortgage arrangement fee required
£600 survey

Cost to buy: £8,400+£1,000+£1,000+£600 = £11,000

£280,000 house
£9,000 deposit (now just 3.2% deposit)
£271,000 mortgage required

Using an arbitrary figure of 8.5% on an interest only mortgage, for high risk (could be more!), your monthly mortgage would be about £2,200

OH's takehome pay, including £2k bonus is £1952.
If you do earn as much as you say, your takehome pay is £1555

Total potential income: £3507
Less mortgage interest: £2200
Remaining: £1307

But you're new to self-employment, so there are the issues over you building up the business and cash flow.

While the figures above would be possible for a couple with established and regular earnings, you're really over-stretching the boundaries.

There has been a credit crunch: this means lenders are scared to lend to people who aren't a "safe bet".

Your potential mortgage could be nearly 6x your joint salaries. Roll time back 20 years and the typical lending for a couple would be 2.5x joint salary (ESTABLISHED salary).

From the £1307 left after the mortgage is paid, you can wipe out £300 for your basic bills.

Best bet is to stay where you are and "pretend" you have a house. That means from your salary each month save £2200+£300.

Then see where you're at in a year.

House prices are dropping. Next year you will have a bigger deposit, house will probably be cheaper, mortgages will be easier for you to obtain, you'll really know how much you are earning self-employed.

Good luck

Clarita

Thanks PasturesNew, I thought that would be the overall answer - stay where we are and save like mad!

Shame is, in London ehere we are and would need to be, prices aren't dropping, just slowing down a bit. We'll keep a look out for anything that's a bargain and save in the meantime.