Preparing for first mortgage, adverse credit

gd55

Bit of a long one so thanks in advance for your time and input!

My partner and I hope to able to buy our first home together (both FTBs) in spring/summer 2024, so we're planning ahead and want to get ourselves in the best possible position.

Background:

His credit history is clear with no defaults etc and he uses a couple of credit cards that are paid in full, has a mobile contract etc.

My credit history is damaged. My IVA and associated defaults have all been settled and will fall off my report in September 2023. I am now working on rebuilding - I use a couple of credit cards that are paid in full, and I also have bank and mobile contract in good standing for several years.

We're saving as much as we can for a deposit and can only hope the market has calmed down a little by the time we're ready so that we can achieve a sensible LTV. We're both in solid jobs with good salary and bonuses, and also doing sensible adult things like paying into our pensions.

Questions:

1. How many months of previous bank and credit card statements do lenders look at when we apply and do they look at every bank and credit account? We live together but currently don't have a joint account - we will open one after everything's fallen off my file.

2. How strict do we need to be with our spending and for how long in advance of application? We don't fritter money away, but we do enjoy things like weekends away for a shopping trip every few months.

3. How long in advance of a mortgage application should we avoid making credit applications? I would like to enter the mainstream credit card arena if I can once my file is clear, which would be maybe six months before we're likely to start the house buying process.

4. Is there anything else we can do in the next 18 months to make our position as attractive as possible?

BigBoss

1. Depends on the lender. Use lender intermediaries sites to read exact policies. They are the sites that brokers use.

2. You need to show financial responsibility - use your judgement to determine what that is. Start now.

3. Generally avoid credit applications for at least 6 months before. 

4. Follow steps 1-3. Number one will give you the most information if you read widely. 

You may want to consider a broker, they're generally recommended for people who've had adverse credit histories.

gd55

Thanks BigBoss, most useful.
Yes we'll get a broker as the time draws near.

ACG

1. 0 CC statements, 3 months bank statements usually. 

2. It depends. If on the high street, it wont matter. If a little building society - 3 months. 

3. Minimum 6 months ideally. 

4. Keep on top of things, save, try to keep credit to a minimum. 

In theory you could get a reasonable rate mortgage now (circa 3% on a variable rate) with a 10% deposit. But I suppose there is no harm waiting it out for 6 months or more if your in no rush. 

gd55

ACG said:

1. 0 CC statements, 3 months bank statements usually. 

2. It depends. If on the high street, it wont matter. If a little building society - 3 months. 

3. Minimum 6 months ideally. 

4. Keep on top of things, save, try to keep credit to a minimum. 

In theory you could get a reasonable rate mortgage now (circa 3% on a variable rate) with a 10% deposit. But I suppose there is no harm waiting it out for 6 months or more if your in no rush. 

Thanks. Didn't think we'd have any mortgage options until everything falls off my file so that's interesting. Doesn't really matter as we're still working on the deposit. 

ACG

Once youve got the deposit, speak to a broker. 
You can then just keep an eye on rightmove and see if anything crops up. If nothing pops up at least you know you are ready to go and its a bonus. If it doesnt then you are no worse off. 

Assuming the world doesnt go to pot (more so than it already is), you will be fine whenever you are ready to go. 

gd55

Thanks again @ACG , that's incredibly reassuring and I'm going to supercharge our savings plan now!

simon_or

As a veteran of adverse mortgages (not something I've proud of and now well in the past!) everything ACG says above.

Definitely use a broker, even if you're going for a high street option. Not all brokers charge a fee and even the ones that do it's usually quite reasonable and often only payable once they get you an offer. Get a recommendation from friends, family or colleagues.

mnkone

I know this hasn't been updated in a few weeks, but just saw this after your comment. 

I would say as well as what others have already said, don't go into things too worries. My wife an I bought our house when she had perfect credit, with 2 credit cards and no debt, but it was at my worst with debt and defaults, yet with being honest with the defaults up front, we still got one of the best rates available on a long term fixed rate (high street bank). 

We went through a broker, but it was only a small charge.

We were asked for 3 months bank statements.
In regards to the credit applications, I consolidated some of my debt, about 2 months prior to applying for the mortgage, which I was told made little impact, as it was still the same amount owed, just on a better rate.
My record also showed a lot of payday loans in that last 6 months prior to applying (not proud of), which as I mentioned up front and was part of the reason I consolidated. 

gd55

mnkone said:

I know this hasn't been updated in a few weeks, but just saw this after your comment. 

I would say as well as what others have already said, don't go into things too worries. My wife an I bought our house when she had perfect credit, with 2 credit cards and no debt, but it was at my worst with debt and defaults, yet with being honest with the defaults up front, we still got one of the best rates available on a long term fixed rate (high street bank). 

We went through a broker, but it was only a small charge.

We were asked for 3 months bank statements.
In regards to the credit applications, I consolidated some of my debt, about 2 months prior to applying for the mortgage, which I was told made little impact, as it was still the same amount owed, just on a better rate.
My record also showed a lot of payday loans in that last 6 months prior to applying (not proud of), which as I mentioned up front and was part of the reason I consolidated. 

Thanks for sharing 😊