Mortgage approved for less than needed

redsky009

I have been looking for a house and after getting an approval in principle from Woolwich for enough to purchase the house, I put in the offer which was accepted. However, when my mortgage application went to the underwriters, they offered 40k less than needed.

I have a 40% deposit and my credit history is good apart from one "late payment" - my ex forgot to cancel a standing order on our joint account causing it to bounce, and one other recent "late payment" that was then removed by the credit card company because it was a mistake on their part. Apparently my credit score was low because of the late payment and that the council haven't processed my electoral role application yet (I've only been in my flat for a few months).

I have been on the electoral role for the past 7 years and have a spotless credit history over that period, apart from what I have mentioned above. Is there anything I can do?

Is it worth appealing the amount, or just move to another lender? I doubt the vendor will accept 20-30k less than I offered, and he needs to complete in the next 2 months so I don't have a lot of time to wait for another application to be processed.

Any advice would be appreciated!!

Thrugelmir

I doubt that its your credit record that has resulted in such a low offer.

Maybe worth confirming that your application has been processed correctly.

GMS

Is it an affordability issue? Woolwich require a set amount left per month after essential payments.

Could be that you are looking to borrow too much

Dave_Ham

This will be human error - yours or there's

Did you use a broker or Woolwich direct?

Did you include your commitments appropriately, dependents, income, overtime??

There will be answer

Gentoo365

You say "They offered you.....". So am I right in saying that they contacted you and explained that they could not offer the amount you applied for, and proposed a different figure?

If so they would normally give a reason, and it would normally be something about 'affordability' or 'existing commitments' rather than a default.

Edit - You can appeal, but if it is affordability and the difference is 40k I am not sure what you can say.

I do not know your situation so this is not advice. However if it were me I would consider asking if extending the term would make a difference (e.g. lower payments, affordability is easier to meet). I would then make overpayments when allowed to ensure that I could revert back to the required term at a later date.

I would also consider if the affordability is really an issue. If rates rise in a few years and all mortgages went up you may be stuck.

ftb-btl

This may be due to credit commitments elsewhere?

Based on the same income, before I cleared my debt most lender's affordability calculators said I'd be able to borrow circa £70,000.

Now that I have paid off and settled my loan and two credit cards this figure is circa £130,000. Same income.

Credit score doesn't usually effect how much they multiply your income by to work out maximum lend (well, not a massive amount anyway), but your commitments elsewhere do. In my experience, that is.

redsky009

Thanks for all the information. Some more information:

The mortgage broker applied on my behalf, I haven't see the Woolwich's offer yet as they replied direct to the broker, but the amount they have offered according to my broker is a bit less than 4x income. Apparently this is because my credit score was low/medium (due to the late payment and not being on the electoral roll yet). My credit score is now around 430, but I think with the electoral role, its should go back up to about 800 (that's what it was 12 months ago).

The amount I was looking to borrow was quite high, but I do have a large deposit. According to the broker, I am comfortably within the affordability criteria (the mortgage payments would be £10 more than my current rent). I don't have any real outstanding balances on credit cards or any loan commitments, dependants etc. so I'm not sure why I wouldn't fit into the affordability calculations.

I only went for a property in the close to 4.8x salary range because I had the offer in principle for that amount and the monthly payments were comfortably within what I can afford.

Do you think it's likely the broker may have made a mistake on the form?

Dave_Ham

Possibly...

I have not had a mortgage value decreased from Woolwich when given an AIP to full application.

Your challenge will be, if keyed correctly that if this is the home for you there will only be 1 or 2 lenders that will do the full 5 and typically there rates are slightly higher than Woolwich..

Good luck

GMS

Mortgage payments in relation to your rent has no bearing on the application.

Try putting your details into the affordability calculator:

http://www.personal.barclays.co.uk/BRC1/jsp/brccontrol?site=pfs&task=homefreeopenplanwealth&value=18695

Enter everything accurately and see what it comes up with.

redsky009

Thanks, just entered the details into the calculator (I think correctly) and it came up as "Affordable" with about £400 p/m to spare.

Thrugelmir

redsky009 wrote: »

I only went for a property in the close to 4.8x salary range

Depending on your salary that's a high multiple. If interest rates were to rise 2% - 3% would the mortgage be so affordable.