Usage of Credit Card before Mortgage Approval

TheSpectator

Thing is the mortgage company doesn't really care that you think you can manage, they won't take a to be returned tenancy deposit into account. Lenders assume the monthly repayment on a credit card debt will be 3-5% per month of the balance. 

Sounds like you were pushing affordability to the max and increasing your credit card at this time would probably be unwise.

DaffyDuck316

Hmm, this makes me feel uneasy, but good to know. Well I had to use the CC for disbursements and a survey. I'll aim to pay it all off when I get paid (before it is due) and also keep my mortgage deposit together. It will be very tight but I just don't want to give up now.

annetheman

Hi OP, I also had a similar dilemma after upping my offer in an emotional spur of the moment decision - long story short, my broker advised I asked a relative just in case. It is far better as an upfront and declared gift, so 100% does not affect anything at all in terms of underwriting and you don't have to stress about credit reports etc.

The tricky part is that like you, I will be able to earn the money through salary during the conveyancing, so may not need the gift, depending on when we complete.

We agreed sale 31st October - if we complete 20th December, I will use my dad's gift. Yes, I know I am being very ambitious lol...
If we complete on or after 20th January, I do not need any gift at all. 

So it's a 'just in case'.

So because my dad may gift me for the fees, he has signed a gift declaration from my solicitor and handed over his bank statements for AML checks. Dad is in a great position to help as he is a semi-retired doctor, mortgage free, has mum's pension as she passed away, his own good pension and savings etc etc.

Do you have any relative in a stable financial (vanilla so they pass AML checks!) position who might be able to gift you the money instead?
And do you have any inkling how far along you are, what dates different milestones have been passed etc?

DaffyDuck316

Wow, that is so nice to hear from someone who is in a similar position. I'm curious, will your gift cover all of the fees? As in solicitor fees and mortgage advisor?

I believe I could ask my boss if he knew there was a good chance he would get the bulk of his money back as like you it would be a 'just in case' scenario.

I very much appreciate your advice, especially if it will be the key to getting everything approved.

I believe my completion will be in the same kind of time scale as yours, possibly 20th December but that would be ambitious. I have a surveyor booked for Wednesday, so that is where I am at currently. Keep me posted if you are successful, best wishes.

annetheman

No problem. 

No, my dad will gift me £1,300 and I’ll need about £9,300 extra for my completion statement. 

The new house is £65,000 more than the house I pulled out of end October, I will have to deplete my savings which I didn’t have to with previous house. I have enough for deposit and need to now save £4,000 in November and December each, total £8,000 towards completion statement. 

Obviously if we complete in January I’ll save another £4,000 and not need any gift at all. 

It’s looking way more likely it’ll be January as everything shuts for 2 weeks over Christmas and NY (consider this with your dates of course) but it is reassuring to have a back up and 100% a great idea to ask if you can! All the best of luck. 

DaffyDuck316

Hi annetheman!

Good to hear from you. That is certainly a lot for you to save for each month. I hope you are able to manage it Ok. Some friends of mine say they are concerned about my health from working extra hours, but for the most part I feel ok.

For me there is a delay with the sale. I thought the seller had sorted through the probate paperwork, but there seems to be some kind of hold up anyways. It takes the pressure off of me for now. My mate says don't worry anyways, because I can pick my own completion date, but I don't want to disgruntle the seller by setting a date too far down the line. As there is a delay, I have not yet asked my boss for a gift, but I appreciate having the idea as a go-to should I need it.

DaffyDuck316

I think one of my concerns is that only one lender is willing to give me a mortgage (in principle), and I worry they may change the goalposts, or maybe the older I get, the less amount of time they will give me to pay off the mortgage, and therefore they are willing to lend me less and less. But I probably worry too much about things that are seemingly out of my control.

annetheman

DaffyDuck316 said:

Hi annetheman!

Good to hear from you. That is certainly a lot for you to save for each month. I hope you are able to manage it Ok. Some friends of mine say they are concerned about my health from working extra hours, but for the most part I feel ok.

For me there is a delay with the sale. I thought the seller had sorted through the probate paperwork, but there seems to be some kind of hold up anyways. It takes the pressure off of me for now. My mate says don't worry anyways, because I can pick my own completion date, but I don't want to disgruntle the seller by setting a date too far down the line. As there is a delay, I have not yet asked my boss for a gift, but I appreciate having the idea as a go-to should I need it.

Hi DaffyDuck316 !
I am paying no bills/rent/mortgage now so can pour almost all my pay into the savings - living on a tiny budget but comfortably with very kind dad - very, very grateful!

Delays are inevitable in my experience, so glad it actually works out for you! I agree with your mate - propose the earliest possible completion date that allows you to save what you need.The crux is that you are financially dependent on a paycheck in between now and that date to be able to complete, so there is no other option that doesn't jeopardise the purchase.  

The seller could be disgruntled but accommodate anyway, or could be thrilled because for personal reasons later is better! Don't worry, the EA will help negotiate the date so everybody is happy to compromise - it's in their financial interest to do so!

DaffyDuck316 said:

I think one of my concerns is that only one lender is willing to give me a mortgage (in principle), and I worry they may change the goalposts, or maybe the older I get, the less amount of time they will give me to pay off the mortgage, and therefore they are willing to lend me less and less. But I probably worry too much about things that are seemingly out of my control.

Do you have a mortgage broker? A broker will be able to find options that you will not, including for longer term mortgages - highly recommend speaking to a fee-free broker to see if you have more DIP options.

E.g. I thought Virgin Money would be my lender and they were offering less than I needed hence the need for help from dad. Now, through a broker I am going with Accord, DIP obtained and full application approved pending valuation for £35k more - so no longer need any help. 

All the best of luck!

DaffyDuck316

Hi annetheman,

I hope you are well and on track with your savings.

Yeah, I got my offer through a mortgage broker and they told me they could only find one lender.

I am so anxious at the moment. I thought my mortgage application would be accepted or rejected based on my credit card activity. What I didn't see coming was that my mortgage could be approved with a possible special instruction that my credit card needed to be cleared. I didn't know that was a thing. So now my mortgage has been approved, this has triggered an invoice from my mortgage broker. Apparently the mortgage offer comes in the post so I just have to wait and see and hope there are no special instructions.

I think if worst comes to worst I can ask my boss for a gift (it is nearly Christmas), it probably would have saved me a lot of stress if I was brave enough to ask for a gift in the beginning, but damn if it falls through now and I have paid for survey/disbursements/broker fees, I'll be so depressed.

EssexHebridean

You realise your boss will have to sign a declaration that they understand that the money is a gift and so is not repayable? Are they going to be happy with that? You also understand that if your intention is to in fact not have a gift, but a loan, that is mortgage fraud as you will then be making a false declaration to your lender?

not trying to throw a wet blanket over things, just wanting to be sure you fully understand the situation, and the risks involved in relying on such a plan. 

(I would also suggest that there will be questions asked about a “gift”  from someone who is also your employer - that’s not a usual source of a gifted deposit.