First Time Buyer

sheppod

Hi All,

Me and my partner as pursuing purchase of a new build property on the government scheme FirstBuy (please no comment on this, it works for us). We are looking at purchasing a property at £150000, with a 5% deposit coming from our self and a 20% coming from the scheme. We applied for an agreement in principal from Natwest for a shared equity mortgage at £112500, through an IFA everything was OK at this stage. We have just got the final decision from an Underwriter (7 weeks later) which has reduced our offer from 112500 to 103000. However, we have had no adverse credit, our credit score is good, and everything which was submitted at the AIP stage was validated by our supporting documents. They have not given a reason for this, can a bank just do this without giving a valid reason. We don't know were we can go from here as our IFA doesn't seem to be much help.

Thanks
Sheppod

lee111s

Yes they can unfortunatley. It's their money and they can pick and chose who they lend to and how much they are going to lend.

sheppod

Thanks for the reply but surely they have to give a reason. Or can they do what they like?

kingstreet

If it was my case, I'd want to know the reason the mortgage amount was scaled back. We check carefully and use affordability calculators before submitting an application. If I had an agreement in principle in hand and the final documentation backed up the information submitted at that time, I'd not be best pleased.

Do you have a dependent, not mentioned at the AIP stage, or something else not used at AIP which forms part of the full app?

Have you tried running the data through the NatWest affordability calculator yourself?

http://intermediary.natwest.com/tools/calculators/calculator.asp

hamster2013

sheppod wrote: »

Thanks for the reply but surely they have to give a reason. Or can they do what they like?

you can push for a reason but it will most likely be based on your afordability and what they feel the value of the property is

kingstreet

£30,000 equity loan?

At the AIP stage did the broker know you were going shared equity route?

Did you know 3% of the equity loan has to be taken off affordability with NatWest on shared equity cases?

Government Backed Shared Equity Schemes

We lend on the government backed shared equity schemes. We require a 5% deposit from the applicant (please note that this is 5% of their share providing it takes the overall lending below 75% LTV). 3% of the equity share will need to be factored in on the affordability calculation as a monthly commitment for FirstBuy, My Choice Homebuy, Homebuy Direct & the First Time Buyers Initiative (e.g. if receiving £25,000 then x by 3% and divide by 12 to give you the monthly commitment to be entered). Please note that we do require you to send in the letter confirming the client's eligibility from the housing association. We do not currently offer a remortgage product on shared equity.

By my calculation, 3% of £30k is £75 per month, which would cause a reduction in mortgage amount of £4,500 where a lender is offering 5x income.

sheppod

kingstreet wrote: »

If it was my case, I'd want to know the reason the mortgage amount was scaled back. We check carefully and use affordability calculators before submitting an application. If I had an agreement in principle in hand and the final documentation backed up the information submitted at that time, I'd not be best pleased.

Do you have a dependent, not mentioned at the AIP stage, or something else not used at AIP which forms part of the full app?

Have you tried running the data through the NatWest affordability calculator yourself?

We have checked on a number of occasions of which they come back with a figure of 118000 with our dependent. At the time of application my OH was pregnant of which Natwest was well aware. Its a new build property so the valuation is not an issue. The only thing I have been told is that they were taking into consideration a charge in which you start paying on the 6th Year on the equity scheme (1.75% on the £30000), but as the mortgage we applied for was specifically for the scheme, I cant see how this would change things.

kingstreet

1.75% is rent on the unowned share of a shared ownership property under what's now known as Homebuy. You are applying for Firstbuy, shared equity, not shared ownership, so it should be the 3% I mentioned above.

sheppod

Hi, yes 3% is the value the lender uses, however only 1.75% is payable from us at year 6.

kingstreet

It's only 1.75% for year six.

Each year it increases by RPI + 1%. The lender's decision on how affordability is affected is going to be based on a more realistic idea, rather than just the rate payable for one year.

TBH 3% doesn't cover the amount you have been hit by - £9,500, so there must be more to it than that.

What was the output from the affordability calculator?

sheppod

I agree however they are unwilling to tell us this. The affordability check comes out at 118000. Thanks