Excited to buy, but cannot get a mortgage agreement in principle, looking for advice...

Natrc

Hi everyone, my husband and I finally have enough in our savings to start looking for a house. We have been on a couple of viewings already (nothing we like so far), and today sat with a mortgage broker to discuss an agreement in principle. The broker seemed very confident, but after 2 hours of discussions with lenders, he couldn't get us an agreement in principle. He said it was because I have no real credit history, and because my husband has only been with his employer for 3 months. He said we could get an 85% mortgage, but it's been so hard saving up 10%.

For background. Both 24, I graduated last year from university and I am now working for the NHS. I have no previous credit, was going to get a credit card but was advised against it as we were hoping to buy in the next 6 months. My husband had a hard time during covid, we relocated for my job, and moving mid pandemic meant no work, he was self employed and took on some short contracts of work throughout the period (so he actually earnt), but has only just been taken on in a permanent role. 

I just feel super disheartened, we are desperate to buy and have somewhere of our own as we are sick of renting, but feel like despite having a deposit, I am being penalised for never being in debt, and my husband is being penalised for struggling with work (although he did work, he was just self-employed for a short period). 

I am now looking at our options. We are going to have to halt the house hunting as we don't have 15% deposit now, and my husband needs at least 6 months employment history with his current employer if we are going to get a mortgage with my no credit history. My question is regarding my credit, would it be worth me getting a credit card and starting to build up credit now and then start looking again in 6 months? Is that a bad idea? I'm so confused, any advice or reassurance would be massively appreciated.

moneysavinghero

Best thing is the put the house hunt on hold.

Get a credit card and start using that to pay for things and make sure you pay in full each month. This will build up your credit history. At the same time your partner will be building up his time in continuous employment. You will also be building up your deposit amount. All these things will be in your favour when you come to try again.

and my husband is being penalised for struggling with work

Not really being penalised. Just the banks wanting to reduce their risk - they would much rather lend their limited supply of money to people that are not struggling with work rather than those that are.

I am being penalised for never being in debt

Who would you rather lend £50 quid to?. That friend you have known for a long time who you know always pays you back? Or that new guy at work that only just started a few days ago and you don't really know anything about them yet?

MaryNB

Are you both on the electoral register? That will have a big impact. 

Natrc

moneysavinghero said:

Best thing is the put the house hunt on hold.

Get a credit card and start using that to pay for things and make sure you pay in full each month. This will build up your credit history. At the same time your partner will be building up his time in continuous employment. You will also be building up your deposit amount. All these things will be in your favour when you come to try again.

Thank you, I think this is probably the best thing to do.
My mortgage broker said that once my husband has been in work for 6-9 months it should be a lot easier, that will be around January 2022 (9months). If I get a credit card now, will the fact that I took out new credit 6 months before applying for a mortgage be an issue? Or would it be a good idea to build the credit during this 6 months?

SameOldRoundabout

It’ll be no issue if you’re paying it off every month. I’d do as above, build credit (a lot of people will pay for petrol or food on a credit card then pay off in full) and save for a few more months. 

moneysavinghero

The credit limit on your credit card will most likely by only a couple of thousand so this should not affect your mortgage application. Just don't get carried away and think that taking out loads of credit cards in a short space of time might help build a history quicker - this is the sort of thing that will set off the red sirens at the mortgage company. Building you credit history will help.

theoretica

I suggest you get a credit card and maybe with your own bank who can see how your account has been run for a while as you don't really care what the interest rates are (you aren't going to pay them) and you don't want your card application to be turned down because of lack of credit history.

AdrianC

Natrc said:

Hi everyone, my husband and I finally have enough in our savings to start looking for a house. We have been on a couple of viewings already (nothing we like so far), and today sat with a mortgage broker to discuss an agreement in principle. The broker seemed very confident, but after 2 hours of discussions with lenders, he couldn't get us an agreement in principle. He said it was because I have no real credit history, and because my husband has only been with his employer for 3 months. He said we could get an 85% mortgage, but it's been so hard saving up 10%.

So you CAN get an AIP... just not for 90% LtV.

For background. Both 24, I graduated last year from university and I am now working for the NHS. I have no previous credit, was going to get a credit card but was advised against it as we were hoping to buy in the next 6 months. My husband had a hard time during covid, we relocated for my job, and moving mid pandemic meant no work, he was self employed and took on some short contracts of work throughout the period (so he actually earnt), but has only just been taken on in a permanent role. 

I just feel super disheartened, we are desperate to buy and have somewhere of our own as we are sick of renting, but feel like despite having a deposit, I am being penalised for never being in debt, and my husband is being penalised for struggling with work (although he did work, he was just self-employed for a short period).

Look at it from the lender's PoV.
Applicants who only have enough saved up to be maxed out on the loan-to-value (95% is only with government guarantees). One applicant has barely got his feet under the table at a new job after a period without demonstrable employment history, while the other has no history at all.

90% LtV has been the absolute maximum they will lend anybody for quite a while, with even that not available at all for a period. To qualify for that, you need to be pretty much their optimum borrower. They're happy to lend to you - they just see you as slightly higher risk than they'd like, in order to risk 90% LtV...

You're 24. You've barely left education and established yourselves in real life. There's really no rush.

Orchid12

Do you have any direct debits in your name? Like mobile phone etc. I would have thought that would help with your credit history too. 

Also what about the government guaranteed 95% mortgages? Did the MB say anything about them? 

Natrc

AdrianC said:

Natrc said:

Hi everyone, my husband and I finally have enough in our savings to start looking for a house. We have been on a couple of viewings already (nothing we like so far), and today sat with a mortgage broker to discuss an agreement in principle. The broker seemed very confident, but after 2 hours of discussions with lenders, he couldn't get us an agreement in principle. He said it was because I have no real credit history, and because my husband has only been with his employer for 3 months. He said we could get an 85% mortgage, but it's been so hard saving up 10%.

So you CAN get an AIP... just not for 90% LtV.

For background. Both 24, I graduated last year from university and I am now working for the NHS. I have no previous credit, was going to get a credit card but was advised against it as we were hoping to buy in the next 6 months. My husband had a hard time during covid, we relocated for my job, and moving mid pandemic meant no work, he was self employed and took on some short contracts of work throughout the period (so he actually earnt), but has only just been taken on in a permanent role. 

I just feel super disheartened, we are desperate to buy and have somewhere of our own as we are sick of renting, but feel like despite having a deposit, I am being penalised for never being in debt, and my husband is being penalised for struggling with work (although he did work, he was just self-employed for a short period).

Look at it from the lender's PoV.
Applicants who only have enough saved up to be maxed out on the loan-to-value (95% is only with government guarantees). One applicant has barely got his feet under the table at a new job after a period without demonstrable employment history, while the other has no history at all.

90% LtV has been the absolute maximum they will lend anybody for quite a while, with even that not available at all for a period. To qualify for that, you need to be pretty much their optimum borrower. They're happy to lend to you - they just see you as slightly higher risk than they'd like, in order to risk 90% LtV...

You're 24. You've barely left education and established yourselves in real life. There's really no rush.

Thanks for replying, helpful advice to hear. We are keen to buy for a number of reasons, firstly we are paying a lot in rent for a property that is not what we really want, and also family keep telling us the longer we wait the more money we will have to pay for a house (prices in our area are climbing very very steeply). Although I may have only left university last year, I was on a vocational degree programme, so my last 3 years at university were me basically working on the job, I have also been renting with my husband for 3 years now, so despite my age and recent graduation, I don't feel like I am, or think like I a recent graduate. My husband on the other hand has worked since he was 16, and so he is very very keen to buy 6 years into working full time. I hope that adds a bit of context to why we are so keen. 

Listening to you explain the mortgage concept from the lenders point of view, I now understand things a little better. And yes we can get an 85% LTV, but the rate is still quite poor due to my husband's job and my lack of credit. My husband does have history of a stable income over the past 12 months with only 2 weeks out of work for unpaid holidays whilst he was self employed, but because of covid it's scanty and our broker explained that this makes him looks high risk.

Thanks for the advice - looks like we need to carry on saving and I need to get some credit built up. 

AdrianC

Natrc said:

and also family keep telling us the longer we wait the more money we will have to pay for a house

Family aren't buying. You are.

(prices in our area are climbing very very steeply).

Will the current SDLT-holiday fuelled market last? Who knows? I certainly wouldn't bet on it.

This is also a good indication that you may not want - or be able to - buy with a 90% LtV mortgage.
In a lot of areas, properties are being downvalued from accepted offers. Not in itself a showstopper, so long as you aren't right at the edge of your affordability, with no wiggle room for the LtV to be adjusted downwards in line with the valuation.

Although I may have only left university last year, I was on a vocational degree programme, so my last 3 years at university were me basically working on the job, I have also been renting with my husband for 3 years now, so despite my age and recent graduation, I don't feel like I am, or think like I a recent graduate. My husband on the other hand has worked since he was 16, and so he is very very keen to buy 6 years into working full time. I hope that adds a bit of context to why we are so keen.

Which is all very nice, but doesn't help prove to the lender that you're nice safe borrowers.

Remember, these checks are ultimately for your benefit. If you fall into arrears and the property's repossessed, nobody wins. If the LtV is very high, then there's the risk that the amount raised from a repo sale won't cover your debt.

My husband does have history of a stable income over the past 12 months with only 2 weeks out of work for unpaid holidays whilst he was self employed

Lenders usually insist on three full years accounts from the self-employed.