First time buyer - advice wanted

[dinahthecat]

Hope someone can offer me some advice. I've changed my username for this post due to the personal financial information it contains.

DP are in our mid-20s with no children yet and no debt other than student loans. Not much credit history either but we're working on it. We want to buy our first home together in the next 12 months but there's a few things we're not sure about. If you can offer any guidance based on your experience, please do.

We're both starting new jobs soon (relocating - we're going to rent first). DP will be in a permanent position but I will be on a fixed term contract for 2 years, as I will be training (think accountancy, law, that kind of thing). I want to stay with the company once I've completed my training and that's the norm so hopefully it'll work out that way. My salary will go up once I've completed my training too.

Our combined income will be around £55k (pre-tax, etc.) when we start our new jobs so we feel confident that we can afford a mortgage. Will any mortgage companies take into account my income though when deciding how much we can borrow? If they just use DP's income, it'll be £32k. I guess that means we won't be able to borrow as much. Any idea how much we could borrow? (We will go to see an IFA in time but just want to get an idea.)

The houses I like on Rightmove are advertised around £165k. These are the sort of houses I can see us living in for a while - in good catchment areas for local schools, near good transport links, could live there happily for 10 years. I think the area is popular so I imagine we'll end up paying close to the asking price. Do I need a reality check? Is that more than the bank will lend us? Should I be looking for somewhere that's cheaper and 'good for right now' rather than somewhere that's going to be good for us for longer?

We have a decent deposit now (around £20k) but want to save more to get a better rate and also to cover SDLT, expenses, searches, fees etc. We're confident we'll be able to save up a reasonable amount in the next 12 months as we're both used to living on considerably less than what our new salaries will be.

We can hang on to buy but we're going to be paying around £700-£750 pcm in rent so I figure we might as well look into this seriously...

Any suggestions for first-time buyers? Would love a bit of hand holding!

DD has just in process of buying first house with husband. Had a 20% deposit. Both have good jobs, small student loans. Mortgage provider wanted P60, and 3 months wage slips, bank account and credit card statements.
They also talked about the cost of insurances, ie house/life/critical illenss/redundancy, any regular outgoings they already had, ie student loan. This put a picture together of what they could afford, and was very helpful. They could have borrowed up to 4 times joint, ended up borrowing 3 x joint in case rate goes up.
Credit rating was initially a bit of a concern, as they have lived at quite a few adresses, as student houses, then private rentals after graduation, then living with family for a few months to save. So although on electoral register for the various places, their latest change of adress hadnt quite caught up, but all ok in end. Quite difficult to build up credit rating. Always paid off credit cards, had a student overdraft which was heavily relied upon, now paid off. No loans or credit upon graduation (apart from student loans), so took out intrest free credit on a table and chairs just to prove could manage money. Also, having phone contracts, and rent coming off via direct debits helped. Your comment about still training may not turn out to be a problem, DD is in a paid job, which is effectively a training job, (NHS) but is a job that will be continuous, as training can go on for many years!!! It did not seem to be a problem. Regarding asking prices, they knew they were going to have to make a number of compromises, as housing so expensive here. So when a house came along with quite a few things on their wish list, they ended up paying full asking price to be sure of getting it, as houses are moving so quickly all of a sudden. Good luck!!

things to think about:

you can afford a mortgage at the moment. What happens if the rates go up again? (check recent history to see what they could go to).

what happens if one or both of you loses your jobs?

you say no children yet. What happens re childcare/earnings if you have kids?

not show stoppers, not impossible, just things to factor in.

Thanks both of you for your helpful comments.

If we are able to borrow 4 times our joint income, I think I'd err on the side of caution, as theforgetfulone's DD and her DH did, and borrow 3 times. I didn't think about it beforehand but the houses I like are on at £165k, which is bang on 3 times our earnings. (They need a bit of work but are all habitable and could do it piecemeal.) If we can get one for a little less, that would be great but I'm comfortable with £165k. I don't think I'd be comfortable going much higher for the reasons you raise, specialsubject.

In case it's relevant, no children yet but we would like 2 eventually. We have no plans to have children for at least the next 2 years, (more likely 3 - and even then I'd only be 27 so no rush if things weren't looking good for whatever reason). By the time that rolls around I will have qualified too and seen a jump in my income of around £10k. (I plan to continue working but even if I went part-time I'd still be earning approximately what I will be starting on so think it's doable.) DP is also a professional so I think we both have decent earning potential to afford the sort of house/lifestyle we want. We're both very much at the beginning of our careers and I feel both in the kind of jobs where there's room for wages to increase with experience.

As for job security, we're in very different industries so unlikely we'd both be out of work at the same time. Feel optimistic about our employment prospects.

Definitely don't want to overstretch ourselves so I think I'll stick to looking at around £165k.

me and dh just bought our first home. the mortgage is just in dhs name as I am newly self employed and have poor credit rating. we alway intended though to have sole mortgage to make sure (as far as possible) that we could still afford repayments of one of us lost our job or I (hopefully) go on maternity leave again.
the bank gave us 4.5 times dh income and we had a 10% deposit. we had to take out the max in order to afford to buy somewhere (and even then we have bought a do-er upper and negotiated hard on the price). our repayments are the same as our rent for the last 4 years so we are comfortable with the payments. plus dh has just had a pay rise and another expected soon-ish so we should be covered in 2 years when our fixed rate ends if interest rates go up.