Mortgage with a 5 year old default

Dda37

Hi everyone, first time posting here. 

Me and my partner are in the process of buying our first home, we are FTB with an offer accepted on a home worth £225k with a deposit totalling around £13k so we are looking at around 94% LTV. 

I have some poor credit history dating back to 2015/16 when I eventually went on a DMP, nothing major with debts totalling around £3k, all were paid within 12 months so by end of 2017 and I haven't had any money problems since. I currently have a HP agreement for £350 a month and circa £1500 on a credit card. Haven't missed a payment or anything like that in around 7 years however one of the old debts was a barclays overdraft of £180 which they defaulted when I closed the account and added it to the DMP, the account was never in arrears before this either. 

I'm worried about how much an effect this 5 and half year old default is going to have on me getting a mortgage because my score still shows poor although this is the only negative on my file, other than credit card utilisation but this has been massively paid down over the last couple of months. 

Sorry for the long post, any advice appreciated. 

Thanks, D 

AFF8879

I think you might struggle at 94% LTV. How long would it take you to save up an extra £10k to push you over the 90% threshold? Even that wouldn’t be plain sailing, with Santander having just made their affordability checks more stringent in response to the cost of living situation with most mainstream lenders possibly following suit…but it would be an easier sell than 94%…

Dda37

Thanks @AFF8879 - at the moment it would probably take us 18 months to save another £10k, but as we've had an offer accepted and started the ball rolling that isn't really the route I'd like to go down. 

We've had several AIPs agreed which I know isn't a guarantee of acceptance but they do a soft check so surely a good indication that we don't instantly fail their criteria... both mortgage brokers we've spoke to haven't been negative about it at all but im just conscious of applying and being declined. 

Our current combined DTI ratio is around 18% without the mortgage and would be around 40% with the mortgage if that counts for anything. 

From what I've read online, a lot of lenders don't take much notice of a default if it is over 3 years old, is this not accurate? 

Thanks again

K_S

@dda37 One 5+ year old default shouldn't necessarily scupper your chances of a 95% LTV mortgage. On top of that you've have multiple mainstream DIP passes (assuming it was all keyed in accurately and as per lender criteria) which is again a definite positive.

Background debt of 18% of application income isn't huge to be honest and by itself should not be a huge issue.

Can your application still be declined after a positive DIP? Yes it can but at this stage you have as much assurance as you can get. I would recommend that you consider using a broker to minimise the chances of a decline or picking the wrong lender, the MSE guide here can help you find one. 
https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

Dda37

Thanks @K_S that really put me at ease...

Today we've had a couple of mortgage illustrations offered to us through our broker from Barclays after we have passed on the intermediary system. Barclays have also carried out a hard search this afternoon before these came through, so that's looking positive im guessing ? 

Thanks, D 

K_S

@dda37 Definitely looking positive. An illustration/KFI doesn't require any kind of checks but if Barclays has done a hard check that indicates that an intermediary DIP has been done.

S_

Hey

wondering if you can give an update on your success with this application? Am
about to go through an application with a default coming off in July and am worried it’ll have an impact on being accepted. 

Dda37

S_ said:

Hey

wondering if you can give an update on your success with this application? Am
about to go through an application with a default coming off in July and am worried it’ll have an impact on being accepted. 

Hello - last update I had was the 16th April which was the property valuation being arranged, I think this is a good sign 🤞

Our application went in just before Bank Holiday weekend which has probably delayed it a little. 

I'll update as and when I hear more. 

D