Mortgage question

[cg88]

Myself and dh have been renting for over 13 years now, I have a low income and dh is self employed and his profit isn't very high after all of the overheads involved in his business. We pay almost £800pcm in rent and after covid we are having to look to downsize which is fine but there's not a huge amount out there that's much cheaper.
I've been looking at houses for sale and based on a 25 year mortgage of a £120k house it would cost us £400pcm, much more plausible and we'd actually be working towards owning something as opposed to throwing away money. My question is will mortgage lenders only take into account our income? We can prove that over the last 13 years we have been able to pay our rent on time as well as all of our outgoings, never missing a payment and having basically zero debt.
We don't have family we could move in with whilst we save and we also have a 5 year old so need to be relatively close to her school too.
Any advice would be appreciated!

Do you have a minimum of 10% deposit? You won't get a mortgage without one. Then it will depend on income, lenders will generally lend you roughly 4 x your annual income. They wouldn't take into account the fact that you have been paying rent for donkeys years either

They will look at your credit history, size of deposit and LTV. Loads of calculators online.

They will look at your credit history, size of deposit and LTV. Loads of calculators online.

This. Good luck!

To do the Maths, a 10% deposit would be 12k and you’d borrow 108k. You might be able to raise that mortgage if you earn a quarter that so 27k/year between you.

You could speak to a mortgage broker who can go over your finances in detail and help with Agreement in Principle. That will tell you what you can borrow.

Our earnings aren't 27.5k a year, we almost have a 10% deposit but it's not looking likely we'd qualify for a mortgage then which is so frustrating as we could more than afford one!

It would be worth speaking to an independent advisor as lenders have different lending criteria so they would be able to advise a lender who you may match the criteria with. Ask friends/local Facebook groups for recommendations.

If you can save and increase your deposit to £20K eventually then the income levels won't be so high (this assumes the house price stays the same).

@Sunnydaysarethebestdays

It would be worth speaking to an independent advisor as lenders have different lending criteria so they would be able to advise a lender who you may match the criteria with. Ask friends/local Facebook groups for recommendations.

Definitely see an IA. It's disgraceful that tenants pay more to rent a property than they would to be buying it. Also, maybe shared ownership would be worth looking into?

Most lenders no longer use the strict income multiples but work out your actual affordability.

So if you can comfortably afford the repayments, which will be stress tested against a higher interest rate, then you have a good chance of getting a mortgage.

Is there any way you could increase your own income

Speak to a mortgage broker OP. I highly recommend London and country (brokers recommended by Martin lewis). They are a fee free whole of market broker. This means they will charge you nothing (they make their money from the lenders when they refer clients) and will be able to look at a wide range of mortgages. They will know which lenders are most likely to lend to you in your specific circumstances and will deal with the application on your behalf.

We used them when we bought our house a few years ago and were in specific (but short term) tricky circumstances and they were fab.

They will take into consideration your credit history. They won't care that you're currently paying double in rent. Find a good broker.

I agree that it's disgraceful that the fact that you've been paying £800 a month will count for nothing - if your rent was the same as your potential mortgage, you'd have loads saved already. I used London and Country for our first mortgage - they helped get us on the ladder. Good luck.

I'll have a look at London and Country thanks for the recommendations!
I've looked at increasing my income but my a pay rise in my job isn't an option and due to childcare it's not an option. Shift work wouldn't work because dh's job is antisocial hours and because his income pays the majority of our bills it wouldn't make sense for him to work less. I'd also be unable to work evening and weekend jobs for the same reason. Will get onto a financial advisor and go from there. Thank you for all the replies

Generally they will have a calculator, they'll put in your income and outgoings and it will either pass or fail. Around 4x income is the general rule, though some lenders can go up to 5x but unlikely on a 90% mortgage.

Don't forget that interest rate are very very low at the moment and although it's been so fit quite some time, it could very much go up at some time and you'll see your mortgage go up significantly.

Also take into consideration the cost of repair and maintenance.

Although ownership is certainly a great idea, its not always the huge saving from renting that people assume.

You need advice from a broker who has access to a wide range of products and has knowledge of lending in different circumstances.
The thing that sticks out to me here though is that you might not need to move when you income reduces. Have you checked wether you will be entitled to help with your rent costs through universal credit?

Has your DH been self employed for at least three years? When we first looked into getting a mortgage, via mortgage broker, we needed to provide tax office docs showing profit for at least three years. DH had only been self employed for two years so no bank would consider. After three years though it was fine, and we got our mortgage.