Mortgage refused by Nationwide

Lois_A

Hello everyone,

I thought I would post a notice on here in case anyone can offer some advice or throw some light on our situation..

We are a young couple looking to move in to our second home. We needed to borrow an extra £20K from Nationwide, which they said they could do in principle (in fact they said they could offer us alot more), to purchase our next house. We had an offer accepted on our dream home and I thought that arranging our mortgage with our current lender would be a mere formality...how naive I was. Our application was declined (for reasons we do not know) and at the moment is being re-considered by head office. As we are existing customers they are willing to consider us on an individual basis.

We are dispairing slightly as we are worried that this will mean a black mark against our names and do not hold much hope of the decision being turned around. We were told that it could have been declined for a number of reasons, including credit records and/or Nationwide's own internal credit scoring system. Having checked my Experian record there is nothing on there which puts me in a bad light and we are awaiting the info on this for my other half, however he is very careful so I cannot imagine this would be an issue.

Has anyone had the same experience or have any inside info, i.e. know what our chances might be of the decision being turned around???

Thanks all.

JayZed

What LTV are you looking for? How much do you want to borrow, and what is your income? What debts and outgoings do you have? There are so many different potential reasons for declining your application, it's impossible to comment without more information.

Lois_A

We need a 95% ltv mortgage and our combined earnings are just over £60K. We already have a 95% mortgage with them (for the past 2 and a half years). We can more than comfortably pay back the borrowing we have asked for, inclusive of the extra £20K. Any thoughts?

beecher

I expect it is the LTV which is the problem - you're at risk of being in negative equity very quickly so will be seen as a risk for Nationwide. Can you up your deposit to 10%?

Lois_A

I'm confused because they say they will offer 5% deposit option to all existing customers - why have this as an option at all? We have little hope of raising the extra cash - I don't think parents can help. Do you think having this extra £10K for the deposit would put us in a better situation?

JayZed

I agree, it's almost certainly the LTV that's the problem.

I know that the Nationwide website (http://www.nationwide.co.uk/mortgage/existingcustomer-moving/fixedinterest-rates.htm) suggests that they'll lend up to 95% to existing customers who are moving, but I suspect that in practice they're reluctant to do this in most cases.

If it's being reviewed by head office, it's not out of the question that they'll reverse the decision if it's well within your affordability ratios, but I wouldn't count on it.

Still, even if they do you might want to consider whether you actually want to take out a 95% mortgage at extortionate interest rates in a sharply falling market. You'll be paying close to 7% at a time when the base rate is the lowest in history, and you'll very probably be in negative equity within a few months.

beecher

Lois_A wrote: »

I'm confused because they say they will offer 5% deposit option to all existing customers - why have this as an option at all? We have little hope of raising the extra cash - I don't think parents can help. Do you think having this extra £10K for the deposit would put us in a better situation?

Having a 10% deposit would definitely put you in a better position, though even a 90% LTV is high and risks negative equity. Although you say you've found your 'dream home', there will be plenty more out there - maybe you should be looking at somewhere which only requires you to have a 90% mortgage, or lowering your offer on the one you've found?

No-one can advise you on what the head office decision will be though, so best to wait and see what they say.

Lois_A

Still, even if they do you might want to consider whether you actually want to take out a 95% mortgage at extortionate interest rates in a sharply falling market. You'll be paying close to 7% at a time when the base rate is the lowest in history, and you'll very probably be in negative equity within a few months.[/quote]

We will actually just stay on the variable rate (2.5% from 1st April) with the extra borrowing going on to the tracker rate, so we would be getting a good deal. I'm keeping my fingers crossed we will have some good news by the weekend. Not sure what we will do otherwise :huh: ...

Conrad

95% is very much reserved for the highest quality cases. I find most people have a perception they are the highest quality, but in reality this is far from the case.

Credit reports are only one part of an applicants overall profile. The list of determining factors that add up to a lenders internal score is too long to go into here.

One thing the underwriters will be lconsidering is your propensity to save. You state the mortgage will be comfortable, so an underwriter will wonder why if presumably your current smaller mortgage is so comfortable you have not managed to save a 10% deposit.

It might be overturned but Nationwide are incredibly strict at 95%. There is a high chance of negative equity which will be A MAIN FACTOR HERE. If you can demonstrate a propensity to save and a frugality or perhaps a certain income increase due shortly, this will give them some mitigation against negative equity.

Best of luck.

Sportbilly_2

Conrad wrote: »

Credit reports are only one part of an applicants overall profile. The list of determining factors that add up to a lenders internal score is too long to go into here.

Just out of interest- any idea if there's an online link to examples of these factors?

Lois_A

Thank you Conrad.

We did actually include details of our savings account balance over the last 6 months (not enough to make 10% dep), 6 months worth of bank statement and P60's and our latest paylslips in the appeal documentation. In addition we also wrote that my boyfriend receives a good yearly bonus, which for some reason the woman doing the application decided not to put in the application first time around....! She was obviously fairly confident it would not be needed which is strange.

Any thoughts on which bank would be best to try for a 95% ltv (I know these are virtually non-existent) or 90% ltv mortgage, should the applicaton be rejected at head office? Are we going to be blacklisted?