Self Cert - Income Verification

bobbyrabbit

Myself and my wife have just applied for a Self Cert mortgage through Northern Rock with a 15% deposit. This will make our mortgage amount around £260000.

Northern Rock have asked for a reference from our accountant, we are a both self employed. To our amazement NR have asked for 3 years accounts Gross and Net figures. Now, call me old fashion, but I thought the whole point of a self cert mortgage was that you didn't have accounts to hand or your figures showed low earnings etc..

I have been self employed for 19 years and my wife 16 years, unfortunately my earnings for the last 3 years have been below average for me, but my wifes has improved. But, with all us self employed we like to show the lowest net figure we can!!

We have been paying rent of £1000/month for the last 3 years, so would have thought that would have been a good a reference as any from our letting agency and of course our good trading years and solvency would have been enough from the accountant.

Is this standard practice on a self cert mortgage that building societies can see your accounts, I thought that defeats the whole point. Will there be any damage credit wise or reapplying with another BS if this is turned down? Or is our little panic a bit premature?

AndrewSmith

bobbyrabbit wrote: »

Northern Rock have asked for a reference from our accountant, we are a both self employed. To our amazement NR have asked for 3 years accounts Gross and Net figures. Now, call me old fashion, but I thought the whole point of a self cert mortgage was that you didn't have accounts to hand or your figures showed low earnings etc..

Self cert only means that you do not have audited accounts to prove your income. They can, and many do, ask for an accountants letter or reference to prove your trading status and length of time etc. Have they actually asked for audited accounts or are they merely asking you for the figures?

I have been self employed for 19 years and my wife 16 years, unfortunately my earnings for the last 3 years have been below average for me, but my wifes has improved. But, with all us self employed we like to show the lowest net figure we can!!

This may be the reason they are asking to see accounts or accountants letter, in as much as if you have been self employed for 19 years they would wonder why you do not have accounts to prove your income. Self certify is usually for newly self employed individuals who have not yet completed a full set of 3 years accounts.

The fact that your income has dropped is irellivent, self certifying does not change the amount you earn. Under the law pertaining to mortgage fraud a broker or lender may not use income other than that which is declared for tax purposes to the inland revenue.

We have been paying rent of £1000/month for the last 3 years, so would have thought that would have been a good a reference as any from our letting agency and of course our good trading years and solvency would have been enough from the accountant.

It depends really but don't forget that the lender can ask for any information or clarification it so wishes, and can refuse or decline a mortgage without reason or explanation. My gut feeling is that they are concerned that someone trading for 19 years does not wish to provide their accounts.

Is this standard practice on a self cert mortgage that building societies can see your accounts, I thought that defeats the whole point. Will there be any damage credit wise or reapplying with another BS if this is turned down? Or is our little panic a bit premature?

Yes it is quite common actually. Self cert is not a guarantee that they will not ask for income proof, as it says in the declaration you would have signed, do not declare income that you either do not have and the lender reserves the right to ask for income verification (bank statements, accountant letter etc).

There may be possible damage to your credit file by applying top multiple lenders however the biggest risk you run is if you apply to more than one lender and declare a different income figure on one or all of the applications. Lenders do communicate with each other for exactly that reason.

Lipstick_2

Hello. Your panic is not premature and I would caution you about taking your application further.

Did you apply direct to NR or through a broker?

Do take care at this stage and ensure that you take proper professional advice before proceeding in any direction.

Luv

Lipstick

dwight-van-man

NR currently offer two routes which can be used as self cert. The first is proper self cert under which scheme they will ask for an accountants letter to confirm that the new mortgage payment is affordable - it will not ask for trading figures. This leads me to guess that you are using the other option which is Fast Track. Many people refer to this as self cert and use it as such, but it isn't - it's a processing facility more than an underwriting facility and simply allows an applicant to get a loan without verification of income under certain circumstances due to the lower LTV which generally presents less risk. The reasons NR have asked for trading figure will be one of the following: your application got a low credit score (fast track up until Friday past being only available to high or medium scores); you input yourselves as being first time buyers (fast track being available only to movers or remortgagers); or you input declining net profits, as this would prompt an underwriter to question the business performance.

However - you should have been made aware of the need to verify income at dip stage as NR now offer a Fast Track Guarantee, which basicaly menas that all the random checking etc is done at dip stage, so if the dip came back syaing Fast Track was available, they now guarantee not to reverse this at full app stage unless the details on the app differ from those on the dip. If this is the case, and you are going through a broker, get the broker to contact his/her BDM. If you went through a branch or NR Direct, ask for it to be escalated to a team leader.

Hope that helps a bit....

Lipstick_2

Hello bobbyrabbit,

Have you applied direct to NR?
Have you used a mortgage broker?
Can you identify which mortgage you have applied for?

1) Fast Track?
2) Self Cert up to 85% LTV?

Luv

Lipstick