my husband and I are ftb looking to purchase within the next year. Our income combined is around 55k. I have 1 default that is over 2 years old my husband has a default that is almost a year old. We both have no missed payments on our credit reports for 6 months minimum and our scores are improving slowly. We have no CCJs and have other credit such as credit cards, overdrafts and car finance. Could we get a mortgage or will the defaults and our outgoings be detrimental to us?
The defaults are going to limited your potential lenders certainly, but much will be determined by your deposit. Lenders work to loan to values and this simply means the proposed borrowing as a % of the overall purchase price. If you were buying at £200,000 and borrowing £150,000 that would be deemed as 75% loan to value (and therefore a 25% deposit)
With relatively recent defaults and potentially missed payments outside of 6 months you will require an absolute minimum deposit of 15%, although could be more depending upon the absolute detail of your credit reports.
Hope this makes sense and helps..
Thank you for your reply. I have two defaults on my account. One is from March 2018 which was a virgin media account that charged me for equipment when we moved home (that we weren’t aware of!) it was £63, when I found it on my report in July this year I paid it in full. Another is an o2 communications default for £832 from may 2018. Would you suggest I pay this off to increase my chances? We are saving for a deposit now and won’t be applying for a mortgage until the end of the year at which point these two defaults will be well over 3 years old.
Whilst it is always responsible to repay this debt as soon as you can, it won’t avail you to improved mortgage products
You are still likely to require 15 percent deposit, although the world will hopefully look a lot different by the end of the year when you start looking