What kind of deposit do we need? And will we be approved for a mortgage?

by abisides 17 August 2012 |

5 comments | Love

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I am self employed bringing in a salary of around £20K, which is increasing yearly. My accounts are now being managed by an accountant. I also temp, and am paid by PAYE, which tops up my earnings by around £5K. My credit record is spotless.

My partner is in the forces, earning approx £28K, with a small payrise yearly. He had poor credit some years ago due to late payments (never failed payments) and we have taken steps to acquire him a credit card, spend sensibly on it, and improve his rating. He is registered with Experian and monitors the improvements.

We have no loans (except my student loan) or debts, except his overdraft which carries a fixed charge of around £30/month.

We have an ISA and are saving £7K/year for the next 3 years, so around £21K plus whatever else we can put in. We would like to buy a property in the region of £150-170K.

- Is this a large enough deposit?

- What is the likelihood of us acquiring a mortgage, as I'm aware that self-employed persons are less likely to be approved?

- And will his poor credit history be a problem, even though we've corrected the issues?

Any advice you can offer would be great, as different sites give varying advice about deposit amounts for married couples in our situation.

Many thanks.

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879

MikeGG1 posted
If you are talking of buying in 3 years time, there should be no problem.

Self-certificated self-employed loans have mostly gone, but you will have at least 3 years of audited accounts. You are also after less than 3 times joint income.

The poor credit history for him would be a problem now. When were the late payments? They are timed out after 6 years. With another 3 years of mending his record, things should be a lot better.

You will have more than enough for a 10% deposit. Depending on his credit history, it might be better to wait another few months for a 15% deposit.

So far as the credit card is concerned, set up a Direct Debit for the full amount. Payments will never be missed or late, provided that there is enough in the account to cover the payments at the due date.

There is little point saving in an ISA when you have overdraft charges. First priority should be to clear that overdraft. In any case it would count against the mortgage.

Mike
Posted on 17 August 2012 | Love 0 loves Report
132

yocoxy posted
One more piece of advice, cancel that credit check registration - waste of money. Just get the occasional credit check every few months if you really need to know. There's no need to pay a monthly fee.
Posted on 17 August 2012 | Love 0 loves Report
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Mally posted
In respect of credit checks, register with noodle.co.uk. It's free and you can get your full credit report any time you like without cost.

As for your future mortgage, I wouldn't get too involved in the ins and outs of what is required, what level of deposit to save etc too much as over the last few years lenders have changed their criteria on a very regular basis so it is impossible to guess what will be required by a lender in 3 years time, or what will constitute a good deposit to get e decent rate, although I feel it will still be the case of the more the better..

I suggest you just concentrate on saving and improving your partners credit rating and in 3 years time do your research into mortgage availability and lender requirements.

Another way to improve your credit rating is to make sure you both show on the voters roll.

Steve
Posted on 18 August 2012 | Love 0 loves Report
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Stargazer posted
As Mally says, things change so fast that the lending criteria for mortgages are likely to be very different in 3 years' time - just keep saving for the deposit, the more the better.

Just one correction...the free credit report site is www.noddle.co.uk (tried the posted link but it didn't work). I've just signed up with it and it took less than 5 minutes. You need to give them details of a credit card to verify your identity but they state that it will never be charged.
Posted on 19 August 2012 | Love 0 loves Report
879

MikeGG1 posted
Things never stay the same and that includes the cost of houses. There could well be further falls in price, especially away from SE England, depending on the economy. However, if the economy manages to get going again and you want to be in the SouthEast, then prepare to jump quickly, but I don't expect much to happen in that direction much before your timescale.

Lending criteria have fallen to reasonably sensible levels. 4 years ago they were stupid.

Mike
Posted on 19 August 2012 | Love 0 loves Report

What kind of deposit do we need? And will we be approved for a mortgage?

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