Refused a mortgage

suzie380

Can anyone give any advice?

My daughter is wanting to purchase her first property and has seen a flat for £50,000. She works full time, although doesn't earn a great deal, therefore as a gift, I have given her £10,000 for a deposit.

The mortgage broker worked out simple figures, and advised that my daughter could apply for a mortgage up to £52,000. Given that I have gifted her a £10,000 deposit, she only needs a £40,000 mortgage. However, the broker has tried two banks, Santander and Halifax, who have both refused.

The broker stated that it appears that my daughter has more financial commitments that her car loan, which we stated was wrong. We were asked to send of for an Experian report, which we did this, and it showed two positives, no negatives, a fair rating and the only financial commitment being the car loan.

The broker is puzzled, the banks are refusing and we now don't know what to do. Can anyone advise if there is any thing more we can do, or anyone else to contact??

Warm regards

Sue

Senior_Paper_Monitor

Go to the other credit agencies and check them - checkmyfile.com will give detail of CallCredit (Noddle) and Equifax on a free 30 day trial which is easy to cancel - they also have an excellent helpdesk.

Look carefully at financial associates and linked addresses on the reports. Make no further applications until you get to the bottom of this. Consider smaller and/or local lender who will manually underwrite and discuss the case, rather than just feed into computer scoring.

ACG

I cant really add anything to the above, im surprised the 2nd application was submitted without checking why the first was declined but thats down to the broker.

Your options are going to limited as the value of the property is below a lot of lenders minimums.

But getting all 3 credit reports will be useful to try and work out why the applications are being declined. Either way you need to get to the bottom of it before making more applications - it may just be credit score - in which case a lender who doesnt score would be the better option... albeit it with higher rates.

suzie380

Thank you for your replies.

We have just completed the free trial for the Equinox, and that has come back fine. There are no linked associates as with the Experian report and no negative issues. The only financial commitment is the car loan.

Both reports show a linked address, from when my daughter private rented during 2011. However, there was nothing outstanding left at this address, everything financially (bills etc) was settled, she was refunded her bond in full and everything is fine.

During the application stage from Equifax,they asked a few multiple choice questions, for example how much overdraft do you have (there were four figures to choose from and one saying none of the above), who did you open your bank account with (there were four banks to choose from and one saying none of the above).

HOWEVER - One of the questions did throw us though, and it was who did you get your mortgage from in 2005. Similar to the other questions, there were four banks to choose from and one saying none of the above. We presumed this was a trick questions as my daughter was only 16 years old in 2005, and we ticked none of the above.

However, thinking about it, is there a possibility that the landlords mortgage, from the house she privately rented, has been linked to her name? And if so, wouldn't it have shown up on both the Experian and Equifax report as some financial commitment.

The plot thickens.

Sue

Senior_Paper_Monitor

Standard question - nothing to worry about there (nor the landlord's mortgage theory).

I assume the broker is being told 'there are other financial commitments' ? Or have I read something into your post that wasn't meant ? If he has just assumed that, they should go and get whatever clues they can from his/her BDM.

Have they declined (failed score) or refused at that level ? May be worth running amended DIPs (uses same credit search data so no harm being done) - although I seem to recall that Halifax (use them very rarely) actually offer a lower amount anyway if its affordability.

Is she on voter's roll ?

Does she have any other credit activity other than car loan - how recent is car loan ?

suzie380

My daughter is on the electoral role and has been since 2007. She got her car loan April 2012, over three years with Ford. This is her only loan, although she has a mobile phone contract with O2. Other than these two, that is it.

The broker has advised us that the bank will not give her any information other than they have declined my daughters application. Is this usual? Is there anyway the broker can find out?

To be honest, although the broker has said that the banks believe there is other financial commitment, I think the broker has presumed that?

I really believed that with a gift of a deposit from me, and a small mortgage, there would not be any issue....how wrong was I.

I think our next step will be to go direct to Halifax (who have turned her down) and see the mortgage advisor. My daughter has banked with them since a young child when I opened her an account and we both have a decent relationship with our local branch.

If we take in both credit reports, are they obliged to tell us why they have said no??

Warm regards

Pont

How has your daughter explained the £10,000 gift on her mortgage application? BS's like evidence of 'savings' rather than 'gifts'. Gifting money can sometimes suggest a third party financial interest in the property which most BS's will avoid like the plague.

Oli.s

Does she have other things on monthly payment, such as car insurance, mobile phone, sky credit card etc? Could it be these type of things being regarded as financial commitments.

Edit: just seen your latest post.

ACG

Going direct to halifax is going to make very little difference. They may even try to talk you into making a new application which will do more harm than good.

Personally i think you need to take her credit reports to a new broker. This broker doesnt seem very proactive. I would be on the phone to my account managers at the lenders trying to get an understanding of why.

It sounds like you need a smaller lender who the application can be talked through with and a person can make a decision rather than a computer.

suzie380

The broker is aware that the deposit is a gift from me, so I presume the banks have been advised of this. Do you think that is where we might have gone wrong? It was a toss up between gifting her a deposit, or acting as a guarantor. My husband and I chose a gift, as once she is on the property ladder, we would like to help our son do the same.

My daughter still lives at home, therefore has no bills in her name. However, she does pay car insurance.

If the banks would let us know why they have said no, then we could begin to address the issue. However, if they are not obliged to give us that information, then goodness knows what we will do next.

Warm regards

macman

But does your daughter actually have sufficient income to service the £40K loan? All you say is that 'she doesn't earn a great deal'. Which means not a lot.
Even with a 20% deposit, her income after outgoings vs the monthly repayment is the crucial figure.
If she is still living at home, is she fully aware of all the other expenses she will have in addition to her mortgage: gas, electricity, phone, broadband, water, insurance, council tax, home maintenance, etc? They won't be dramatically cheaper just because she is buying a cheap property.
Part of the problem may of course be her rather limited credit history. Lenders look for a record of money borrowed and then repayed on time. No credit card trail?