Mortgage Denied - Advice Needed Please

Skyler

Hi Everyone, this is my first post and I've registered purely to gain some advice from those in the 'know' so to speak.

We are in the process of selling our property and have an offer accepted and we are due too complete soon. We have seen a property that we like and we need to move fast as it is a repo and currently has a bid accepted.

The property that we are interested in was sold in 2004 for £219k it is currently on the market for offers around £214,500. The current offer accepted is £193k.

I needed to make sure we had a mortgage offer in place before we put an offer in on the property as it needs to complete in 28 days. I contacted L&C as a mortgage broker to find a mortgage that would be suitable.

The sale of our property will mean that we have a deposit of around £63k we were going to go to a maximum of £210k so that would mean a loan of £147k. This would give a LTV of 70%. I currently earn in £35k my husband is retraining so only my income would be used for the mortgage.

We applied for a mortgage with A&L and initially it wasn't denied or referred it was passed straight through to the underwriters. Today I found out that they have declined the mortgage due to our credit score.

Having checked both our credit scores my Husbands is coming back Excellent and mine is Fair. The thing that is adversly affecting my credit score is that I have a number of open credit arrangements which have a high value and I'm currently using 81% of my available credit.

I have no missed payments or CCJ's, I am on the electoral role and I have less than 2 credit searches in the last 6 months. The mortgage application was the latest search so I now have 1 search registered.

Both mine and my husbands outstanding financial committments will all be paid in full when we sell our property. The only financial committment we will have will be the mortgage.

The mortgage broker said he would speak to A&L on Monday and appeal against their decision. What I'd like to know is how likely are they to change their mind? We need to move quickly if we are to have a chance of getting this property and I'm really worried that I won't be able to get a mortgage.

I understand that I have a lot of outstanding financial committments but these will be paid off and we have what I consider to be a substantial deposit for the new property.

Any advice that you can give would be greatly appreciated thank you.

TEDDYRUKSPIN

Although you have not stated how much you owe in credit card amount, I can crudely calculate in my head that you do not fit the bill with A&L. They will have declined you on the basic of over-committed and not fitting their affordability criteria.

How much do you owe on the credit cards? How much is your minimum monthly payment? Do both of you have credit card amounts outstanding?

Do both of you have loans? Personal loans, car loans etc. If so how much are you paying each month?

Do you have children? If so how many? Are they in nursery school?

Your credit report will be fine. You just can not borrow £147k! That is why they have declined you!

Your broker will have no say in this and will definitely not be able to overturn this decision!

Skyler

Thanks for your reply, it isn't really what I wanted to hear, especially as we will be clearing all our outstanding financial committments when we complete on the sale of our property.

We did stipulate on our application that the credit would be cleared prior to us taking out the mortgage and our mortgage broker seemed to think that it wouldn't affect us adversly.

I guess we'll just have to wait until we have sold our property and paid off all our debts then apply for a mortgage once the credit reference agencies have updated their records accordingly.

Now where's the best place to deposit £63k until we need it for our house purchase?

aloiseb

Maybe they were being a bit optimistic, thinking that the credit card bills would be ok. We had similar problems last summer, when we were trying to remortgage at a fixed rate (ha ha! wish we hadn't bothered, at the moment) We wanted to take out extra to do an extension, and no, they would barely let us have the remortgage.

Now we are all squashed up together!...but so far anyhow, roof remains over our heads.

Hope you get yours soon - good luck.

TEDDYRUKSPIN

So you are clearing your credit cards upon sale? Right? Unfortunately companies who are doing very badly in the market would like this cleared beforehand. Unfortunately due to the market many people do not pay off the debt before moving in as the company does not have the obligation to force you to pay it off. I have seen many customers who promise to do this, that don't.

Banks and building societies are getting meaner. Get your advisor to try other companies. Just remember! The advisor will not be able to quote certain companies like HSBC.

Skyler

TEDDYRUKSPIN wrote: »

So you are clearing your credit cards upon sale? Right? Unfortunately companies who are doing very badly in the market would like this cleared beforehand.

Yes we are, it would be financial suicide not to. We are selling our property for £210k and have a £92k mortgage on it, we are using some of the sale proceeds to pay off outstanding debt and as it is a commercial property we need to reserve some money for capital gains tax and money to reinvest in another business which my husband will start once he has retrained.

There is no way on earth I would leave the debt outstanding, what is the point in buying a property where the repayment would be £700 a month and you would still have payments going out on loans etc for another £700. My salary simply wouldn't cover the bills and we'd end up in a situation where the property would be repossessed.

As I've said to do that would be financial suicide.

Skyler

TEDDYRUKSPIN wrote: »

The advisor will not be able to quote certain companies like HSBC.

So basically your saying that only a sub prime mortgage lender would be suitable?

I thought that Lenders liked to see that you had a healthy deposit and that you could afford the payments?

We passed the affordability test for the mortgage based on my salary alone with all of out debts paid off in full.

So with our debts paid off where is the risk. The lender would have a house which only has a 70% mortgage on it. Even if house prices decreased further a £200k house is never going to fall below £147k even in the current financial climate.

There's no way I'd put myself in a position where I was paying an interest rate of 15% plus. I'd rather wait, pay off all our debts and then apply again later.

We went to see at least 4 mortgage advisors who all told us that our debts wouldn't be a problem as we were paying them off from the proceeds of our sale. They said that a lender might stipulate that they wanted proof that they were going to be paid off prior to the mortgage going through. I'd quite happily give all of our debt information to our solicitor and let them pay it off with the proceeds of our sale to make sure that the lender knew we weren't going to have them once our mortgage was in place.

Why didn't our original mortgage application get denied at the first stage instead of going straight through to the underwriters??

I take it that you work for a mortgage company then?

Skyler

TEDDYRUKSPIN wrote: »

I can crudely calculate in my head that you do not fit the bill with A&L. They will have declined you on the basic of over-committed and not fitting their affordability criteria.

What does fit the bill with A&L then, alternatively who else might be a preferable Mortgagee?

Skyler

Does anyone else have any advice to offer?

Thank you

herbiesjp

You need a "true" whole of market adviser to look at this for you.

Income multiples/affordability calculators may well be tight on your sole income especially as some lenders will take into account the total number of people living in the property (that includes adults and children)

The score you get with the lender, also dictates what income multiples they will offer - so although it may seem ok at the outset your overall scenario could tip you into a lower banding for multiples.

You should not be looking at sub prime lenders for this - your first port of call will always be mainstream lenders

Skyler

We have 2 children, 12 & 8mths old.

I receive CSA maintenance for the 12 year old, would they take that into consideration?

Are L&C not a whole of market broker? What I don't want to happen is to apply for another mortgage only for it to be turned down.

My total income each month is £2200 (net income) and the mortgage which we were applying for would have been £700 does this sound like it wouldn't have been affordable?

Sorry to ask so many questions I'm just trying to gather as much info as possible so I can try and sort this out as quickly as I can.

Thank you for your advice