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

GeordieGeorge

I understand how keen you must be to get on with it, but as others have said, a few months improving your credit file might make sense.
A lot of people jump into the first suitable house that they see, but you now have the luxury of being able to have a really proper look around before diving in, to work out what’s ideal. Arrange some viewings, go for a walk around the areas that you are considering, both in the day and at night, to get a feel for them, and when you are in a position to go ahead you’ll be in a great position to make a quick decision.

Thrugelmir

Natrc said:

 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.

You've moved area and your husband has changed employment. Now just 3 months history. The past has gone and has no bearing on how the lender will view your application. 

AnotherJoe

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%.

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. 
 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.

OP, whoever advised you not to get a credit card, that was no doubt  well meaning but very poor advice.

A cc with a low limit wouldn't have damaged your ability to borrow,  and paid back every month would have given you a track record of successfully paying back debts.

So yes, get one.

And set up a direct debit with the cc company so its paid automatically in full every month (both because thats a good thing and because you dont want one missed payment to screw you over)

Natrc

AdrianC said:

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.

I agree - i dont think the stamp duty holiday fueled market will last either. I was speaking with my broker and some estate agents over the past week, and they havent seen the market this busy with both sellers and buyers in many years. They have all also said that this amount of market activity will not sustain, and over the next 12 months a slow down will happen. 

I agree with the LTV and downgrading, it seems sensible to save more than the 10%. We are looking in the 125-200k range (and sadly most of the areas we like dont fall within even that budget, so we are already making a massive compromise like most FTB's), 15% on 150k would be maneagble over the next 6 months, but to save 30k for that upper range would be hard, and we would have no money left over for renovations and moving/legal costs. We know many many people who have managed the 10% deposit with 90% LTV, so I think we are going to continue to aim for that, and keep in mind that we may need higher (and hence will continue to save). 

Can I also ask about the downvaluing and how that works. If you offer a price, and they value the property for lower than that price, does that automatically mean the lender will only loan you the properties value and you will have to find a larger deposit? I understand why (i.e. if your property gets repossed they need to sell to recouperate the money), but how can I plan for this as a buyer without saving way over the 10% deposit? Is it about looking at house prices in the area and not getting sucked into bidding wars and bidding way over the houses actual value? would be helpful to get some insight. 

Natrc

GeordieGeorge said:

I understand how keen you must be to get on with it, but as others have said, a few months improving your credit file might make sense.
A lot of people jump into the first suitable house that they see, but you now have the luxury of being able to have a really proper look around before diving in, to work out what’s ideal. Arrange some viewings, go for a walk around the areas that you are considering, both in the day and at night, to get a feel for them, and when you are in a position to go ahead you’ll be in a great position to make a quick decision.

Thanks for the comment, I agree, having the luxury to really look around at the areas and the market etc. is a real positive part of taking a bit more time to save. 
At the moment we are considering quite a few areas. We have a couple of top areas in east cheshire, but to afford housing in these areas it would mean being at the top end of our budget and compromising on important things like parking and outdoor space/indoor space. We are looking at more affordable areas, but are just finding them a lot less desirable. I think taking our time ove rthe next 6-8-12 months to really look at all local areas, find what is within budget and is in an area we like, and then go from there. 
Thank you for adding this perpective. 

AdrianC

Natrc said:

Can I also ask about the downvaluing and how that works. If you offer a price, and they value the property for lower than that price, does that automatically mean the lender will only loan you the properties value and you will have to find a larger deposit?

They aren't "lending you the property's value" in the first place - that would be 100% LtV... But, yes, they calculate the LtV as being against the lower valuation - because that's what they believe it's worth.

You offer £200k, and have £30k equity saved, so £170k mortgage required = 85%
The lender's valuer's opinion is that the house is worth £180k.
They will view that £170k mortgage as 170/180 = 94% LtV.
To bring that down to 90% LtV, you'd need to reduce the borrowing to £162k, so £38k equity.

Natrc

AnotherJoe 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%.

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. 
 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.

OP, whoever advised you not to get a credit card, that was no doubt  well meaning but very poor advice.

A cc with a low limit wouldn't have damaged your ability to borrow,  and paid back every month would have given you a track record of successfully paying back debts.

So yes, get one.

And set up a direct debit with the cc company so its paid automatically in full every month (both because thats a good thing and because you dont want one missed payment to screw you over)

Yes looking back, the family who advised against it were doing so from a place of kindness (as in they didnt want me to even risk any debt), but also from a place of little to no knowledge in the current credit system or housing market. I should have listened to the people who told me to get one, but hindsight is great for a reason
I bank with santander, and have done an eligibility checker and they have told me I would be approved for their everyday basic credit card with a limit of £3600. Is this to much? Should I ask for a lower limit (is that even a thing). I reckon I will spend around 200-400 on the card max each month, so need around £500 limit. Also is 6 months really enough time to build my credit but not have the credit card application affect my credit score? Its so complex and as you can probably tell, I am so lost. 

moneysavinghero

It you are going to be spending £400 a month, best not to get a £500 limit as it makes it look like you are maxing out your card all the time. Better to get a £1000 limit and never get close to maxing out that limit.

Natrc

moneysavinghero said:

It you are going to be spending £400 a month, best not to get a £500 limit as it makes it look like you are maxing out your card all the time. Better to get a £1000 limit and never get close to maxing out that limit.

Good point, thanks for the advice. Ill apply for my card today. 

[Deleted User]

Accept whatever limit they give you. £3,600 isn't much, but it's certainly a lot better than nothing.