Single parent: Am I eligible for a mortgage?

How much could a single mum who has recently been divorced borrow to buy a home for her family? Darren Polson offers some expert help

The Question

I would like some advice about my eligibility for a mortgage. Here are my details. I am a 45-year-old woman with two children, and I am recently divorced.

My husband was the sole owner of our family home but ran into debt, so once the house is sold, I will be entitled to a very small amount of equity. I think it will be around £20,000.

I work part-time as a teaching assistant and earn £14,000 a year. I receive child benefit for each of my children at present. Property prices in my area for suitable homes are £200k or thereabouts. I have a good credit profile.

My husband, from whom I am separating, has a bad credit rating. His history of financial mismanagement does not bode well for child maintenance purposes. What are lenders looking for when they assess eligibility and do I fit the bill?

Darren’s Answer

You are certainly not alone in facing these challenges, and it’s great that you’re looking at your options early.

Lenders will assess many areas to provide the maximum loan you can borrow, such as your credit score, income and outgoings.

From a credit profile perspective, you said you have a good credit profile. Your ex-husband’s credit rating shouldn’t impact you, unless you’re still financially linked (e.g. joint bank accounts or loans). If you are, you can check and request a financial disassociation from him via Experian, Equifax or TransUnion.

Regarding your salary, lenders will generally be able to offer you a loan which ranges from three times your annual income to five and a half times, but some will also include other income such as benefits in addition to your salary.

Once your income is considered, lenders will then look at your outgoings to assess affordability, such as:

• • Financial agreements (loans, credit cards, hire purchase and overdrafts)
  • Property costs (such as utility bills and council tax)
  • Work-related expenses (car, fuel, insurance, phone and internet costs)
  • General household expenditure (food, clothes, childcare and school fees)

When assessing affordability, the lender will ask for evidence of income as well as your commitments, for example –

• • Proof of income – such as pay slips or tax returns
  • Bank statements – from all your accounts but focused on where you pay your bills so they can see your expenditure

In terms of a deposit, you mentioned around £20,000 equity. This is great but also keep in mind other costs such as legal fees which will be part of the purchase.

There are other options available to support you such as:

• • Shared Ownership
  • Shared Equity / Help to Buy
  • Guarantor or Family-Assisted Mortgages

The good news is, there are options available. I would advise speaking to a mortgage broker who can guide you through the process.

The first step will be a Decision in Principle where a lender will check your credit score and affordability to outline how much you can borrow; a broker will do this for you.

Meet our expert…

Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over three years and every week he answers YOUR mortgage questions.

If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.