Huge AIP then tiny mortgage offer

DBear85

Hi all, new here and new to house buying. So here is it in a nutshell!

We were looking at properties at our max borrowing level as suggested by our financial advisor.

We then had an agreement in principle from a lender for somewhere near this amount.

After looking at lots of places, we brought our budget lower.

We decided we would much rather have a smaller house and have more money spare to live and enjoy life. Sensible right?

Anyway, 3 weeks after our AIP our mortgage offer is some 70,000 pounds less than the AIP. This means we can't even afford the 'cheap' house anymore.

We need to stump up another 10k savings, just like that, in order to go ahead.


What.The.Hell.

Would it harm our credit ratings to begin the mortgage application process again with a less **** lender?

Sorry for the long post everyone, and thanks in advance, really.

Alphamare

What I am understanding is you offered on a property which was less than your DIP. The valuation has come back as 10000 less than you offered. This is what the lender feels the property is worth. If I were you I would renegotiate the price rather than 'stumping up' extra cash as you would be overpaying for the property!

DBear85

Not quite but thanks very much for the reply!

With numbers:

agreement in principle 218 k
House price 175 k
Mortgage application for 157k

Basically we worked on our AIP as our budget, put in the offer which was accepted, then dropped by a huge amount in what the bank was willing to lend.

Probably common, but angry they gave us such a different initial value to go on. It's not even in the ballpark so unsure what to do.

not had our survey yet.

Mortgage_Mark_2

If you haven't had a survey, you can't have had a mortgage offer...?

It's easy to overlook but please do bear in mind - an Agreement in Principle is only a credit score. Just because you can obtain an AIP for a certain amount is in no way a guarantee of the fact that you'll actually meet the lending criteria of that lender.

Hypothetically - and obviously I know nothing more than you've posted so this is just for example - you could well meet the lender's criteria for a mortgage of £218k, and then when they've assessed your application their income assessment has meant that you aren't able to use the income figure that you put in the AIP, and hence the lower borrowing....?

Kynthia

You also need to factor in the LTV that the lender is willing to lend you. If it's 90% then no matter how high your AIP they will not lend more than 90% of the property value, even if that's a lot less.

Alphamare

Yes our actual mortgage offer is only for 90% of the property value with us putting in the other 10% so your 'offer?' (You can't have an offer without a valuation?) is for what ever percentage you are borrowing. 157 is what would be offered on a LTV of 90% on a property worth 175!

Maybe that's where you were confused?

agrinnall

It's difficult to understand what your complaint is; as Alphamare has pointed out you are being offered a mortgage of 90% of the value of the property, which is pretty much the maximum you will get from most lenders these days. Do you really expect them to still give you the £218K when your security is worth £43K less than that? That's not the way it works now the days of 125% mortgages are consigned to the dustbin of history.

princeofpounds

Yes, it does look like you are forgetting the importance of LTV here.

What sort of deposit were you planning to put down?

lee111s

Yep seems like you misunderstand.

Your AIP shows what you could potentially lend. when you submit your application the lender values the property, deducts your deposit and the number that is left is the amount they'll lend on that property.

If you were looking at houses for a lot more money why are you only putting down a 10% deposit?

kingstreet

Which lender?

Direct or via broker?

What did the lender discover different at full app than at DIP?

Childcare costs, school fees, maintenance payments?

There has to be some reason as to why you can borrow £218k one day and only £150k the next, assuming this isn't a max LTV issue.

agrinnall

kingstreet wrote: »

Which lender?

Direct or via broker?

What did the lender discover different at full app than at DIP?

Childcare costs, school fees, maintenance payments?

There has to be some reason as to why you can borrow £218k one day and only £150k the next, assuming this isn't a max LTV issue.

Yes, but the simple explanation is that it is a max LTV issue and the OP simply didn't understand what was being offered.