Will my previous debt affect mortage application?

N

nancy77

Guest
My fiance and I are planning to buy a house together and we are trying to suss out if we will be able to get a mortgage.
Unfortunately I have quite a high level of debt which I have built up over the years on personal loans and credit cards. I have been steadily paying this off over the last couple of years and it now totals just over 12k. My parents are willing to help me out and give me the money to pay back these loans which is so good of them. I will then be debt free but have no savings because all my spare cash over the last few years has gone into paying back the debt.
My fiance has an excellent savings record and has more than enough saved to cover a 15% deposit on our home.
My concern is whether my previous debt and lack of savings will hold us back from buying our home.
 
Hi, you would need to clear the existing debt before applying, they will pretty much deduct the monthly cost of this debt from your income meaning you would have less to pay a mortgage with every month. The banks will do a credit check on your history so it depends how poor your credit score would come back. In my experience applying for a joint mortgage it doesnt matter who "owns" the savings they will be viewed as the joint savings, so if you have more than enough saved overall you should be fine on that front.
 
Yes pay off the debt before applying. Have you missed any payments over the last few years? If so, this will affect your application, if not, you should be fine. The savings will be viewed as jointly owned.

Evidently the bank will take into account many factors when considering your loan application ie earnings etc. Will they be clear to the bank?
 
Thanks for the replies.
Yes I will clear all the debt before making the application. Should I wait a little while after I clear debt to make application or do you think we am ok to do it straight away once debt is cleared?
I have made all my payments so there should not be a problem with my credit score. Yes we will be able to provide bank statements, p60 etc to back up our incomes.
Fingers crossed this will work out for us, I know how hard it is for people to get mortgages at the moment.
 
No need to wait after paying off existing loans. You should keep closing statements in case a Bank asks for proof of loans repaid. Otherwise you can apply on the basis of having no additional loans. Your bank statement will show loan repayments, so you will need to provide evidence that the loans are fully repaid. A good repayment track record is a positive in any application.
 
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