Agreement in principle, surprised so low

itsthelittlethings

I recently got an agreement in principle which was less than half of what the Rightmove calculator had indicated I might be able to borrow based on my income. I put down that I had £500 in commitments, which is all my bills excluding food. Some of them I could get rid of though.

Would paying off all my debt and staying out of my overdraft make a big difference? Anything else I can do to improve it? Thanks.

Exodi

The first thing I wondered after reading the first paragraph was whether you had debt.

Certainly paying off all your debt and staying out of your overdraft would make a difference - the lender is working out your affordability and you'll obviously be able to afford more if you're not making debt repayments at the same time.

In general applying for a mortgage with an overdraft is not a good idea, I'd certainly prioritise getting rid of that.

MattMattMattUK

itsthelittlethings said:

I recently got an agreement in principle which was less than half of what the Rightmove calculator had indicated I might be able to borrow based on my income. I put down that I had £500 in commitments, which is all my bills excluding food. Some of them I could get rid of though.

Normally one does not account for bills within the commitments, though it does depend on the specifics.

itsthelittlethings said:

I recently got an agreement in principle which was less than half of what the Rightmove calculator had indicated I might be able to borrow based on my income. I put down that I had £500 in commitments, which is all my bills excluding food. Some of them I could get rid of though.

Would paying off all my debt and staying out of my overdraft make a big difference?

Staying out of your overdraft yes, if you are retularly going into your overdraft it shows you are not able to properly manage your finances. The debt yes, how much can vary depending on what kind of debt you have (e.g. interest incurring credit card debt and payday loans are the worst, car finance on a low interest rate has has less of an impact, though overall indebitness will also make a difference).

Have you applied directly with a bank, or spoken with an independent broker? 

itsthelittlethings

It was with a bank. I think I shouldn’t have put £500 as my commitments, I basically have no commitments, no childcare etc.

kingstreet

It depends on the lender concerned. Many use standard figures for usual outgoings and only require the inclusion of credit, car lease, childcare/school fees, student loan payments, ground rent/service charges and maintenance. Sone ask for everything. Lenders can be banks, building societies or finance houses so you could be more specific to enable us to check your inputs.

born_again

itsthelittlethings said:

It was with a bank. I think I shouldn’t have put £500 as my commitments, I basically have no commitments, no childcare etc.

Would paying off all my debt and staying out of my overdraft make a big difference? Anything else I can do to improve it? Thanks.

Are clearly commitments.

They will be looking at your income & then taking into account any debts alongside a deduction for normal living expenses.

Best bet clear off any debts.

ACG

Commitments is debt (ie loans/credit cards) or maintenance, not living costs.
If you have put £500 a month down on top of what you actually have, the agreement in principle is going to be off. 

itsthelittlethings

Thanks for all the comments, plenty to think about. Get the debt gone and get out of my overdraft first of all I guess!

Hoenir

itsthelittlethings said:

Would paying off all my debt and staying out of my overdraft make a big difference? 

Frequent use off an overdraft will suggest to the lender that you have little financial resiliance. I.E, an unexpected bill crops up or your income falls for any reason. A mortgage is a long term committment. 

itsthelittlethings

Just to give you some idea, the offer was not even double my salary.

Exodi

itsthelittlethings said:

Just to give you some idea, the offer was not even double my salary.

I'd imagine it's the overdraft... that's a enormous red flag to be honest.

Personally I wouldn't even think about a mortgage while you're still using it.