Lenders and proof of deposit

tednol

Hi there,

My girlfriend and I are currently trying to move out of rented accommodation and purchase our first property. We initially went through a broker, got an AIP from Nationwide for £450k, and started house hunting.

The first property we had an offer accepted on was below budget, and given we'd be borrowing < £400k, we applied directly through First Direct as they had marginally better rates than our broker could offer. Everything went fine with the mortgage application and we received a mortgage offer. However following a disagreement on price with the seller after the survey, we walked away from the property. All First Direct ever wanted in relation to the deposit was verbal confirmation we had it; they didn't ask for statements or any proof.

The second property we had an offer accepted on was such that we needed to borrow more than £400k. First Direct won't lend more than £400k to first time buyers (regardless of income, something that seems utterly ludicrous, but that isn't the purpose of this post), so we went back to Nationwide and applied for a mortgage... and the number of hoops we are now being asked to jump through in relation to the deposit is crazy. They want letters from people who gifted money years ago, and are querying every movement in and out of the savings accounts the deposit is held in (it's across approximately four different accounts). It is getting to the point we are now worried they are just looking for a reason to reject the application, and we will then lose a property we love.

Can anyone explain to me why Nationwide are so interested in the deposit? It seems bizarre, especially when compared to First Direct. Intuitively, the sale will never complete and the solicitor will never draw the mortgage down unless cleared funds are with the solicitor ahead of time. I do not see where the risk for Nationwide lies and why they are being so difficult?

Which experience is more normal; First Direct or Nationwide?

dotdash79

Mine was the first direct experience, wasn't asked to prove anything.

Dave_Ham

Hi there,

It is not necessarily the norm for Nationwide to check in this level of detail, but could be based upon value amongst other things.

Typically a deposit is scrutinised more on certain cases than others, although we never really get completely transparent reasons why this is.

Nationwide can sometimes get very detailed on the deposit source and likely that is the case here. Better to get this done now and sanctioned, rather than at the Solicitors stage though as they are likely to do the same..

Good luck

hamster2013

it is important for a lender to evaluate your affordability.
they would need to ensure that your deposit is not a 'loan' from a friend of a family member - and that you actually own that money.
furthermore, they would need to ensure in relation to money laundering regulation where the funds are coming from - and if they are not some form of money laundering.
finally, they have to look through your spendings in the past X months to be able to draw a trend and make a decision on the risk they will be taking by lending to you.
£400+k is a large amount of money - and depending on the LTV, it could be a big risk for any lender.
I do not think they are making you jump any hoops, but maybe they have seen something unusual in your applicaiton which made them want to clear the full check list before lending to you.

you can obviously take a different lender if you feel this will take too long - why not walk into your current banks branch and ask them? If you have banked with them long enough and the monies are held with them, they will not be as picky as the funds are cleared from their point of view.

Goldiegirl

I imagine at the price level you are buying at, even if you are having a high LTV mortgage, the deposit will still be a substantial sum of money.

You don't say how old you are, but maybe they think you are quite young to have that sort of cash lying around so they want to investigate in more detail than normal how you got these funds.

Thrugelmir

tednol wrote: »

I do not see where the risk for Nationwide lies and why they are being so difficult?

If the money came from "other people". Then a claim can be made to recover the funds in the event of insolvency for example. Nothing NW can do in such circumstances.

tednol

Goldiegirl wrote: »

I imagine at the price level you are buying at, even if you are having a high LTV mortgage, the deposit will still be a substantial sum of money.

You don't say how old you are, but maybe they think you are quite young to have that sort of cash lying around so they want to investigate in more detail than normal how you got these funds.

We are in our late twenties, borrowing at about 87% LTV. So yes the deposit is quite a large chunk of money.

Fingers crossed it's just a formality. We have nothing to hide. The broker keeps saying that in terms of affordability etc the lender is happy (borrowing c. 4 times combined income), and they just want to dot the i's and cross the t's in relation to the deposit.

tednol

As an aside Nationwide instructed the valuation last week, and the valuation took place today. It feels a bit strange for them to have done that without making a final lending decision.

Thrugelmir

tednol wrote: »

As an aside Nationwide instructed the valuation last week, and the valuation took place today. It feels a bit strange for them to have done that without making a final lending decision.

Valuation is part of the process. Source of deposit is not an issue in the majority of applications.

Lexiedhb

Nationwide did this to us too. Eventually they were just not happy enough with the fact that the deposit was to be gifted, and turned us down.

Thankfully there are lenders out there who want to HELP get people onto the property ladder. It turned out to be a blessing in disguise as we went with Halifax and they are paying our stamp duty to. :T

tednol

Lexiedhb wrote: »

Nationwide did this to us too. Eventually they were just not happy enough with the fact that the deposit was to be gifted, and turned us down.

Thankfully there are lenders out there who want to HELP get people onto the property ladder. It turned out to be a blessing in disguise as we went with Halifax and they are paying our stamp duty to. :T

Mortgage valuation has come back in line with our offer. Just pulling together the last lot of supporting documentation for the deposit that Nationwide have requested (gift letters and some historical bank statements relating to accounts of ours which have since closed). Given we have nothing to hide and will then have provided everything they asked for, we have everything crossed that they don't pull the rug out from under us at the last minute as they seem to have done for you Lexiedhb! Although a bank offering to pay our stamp duty would be rather helpful...

For completeness, I'll come back and post where we get to with Nationwide when it all shakes down as it might be useful to future readers.