First time buyer - seeking advice

Dondaddyd

My situation:

My partner and I was rejected for a 95% help to buy mortgage by Natwest, who I bank with, because I was using my overdraft. Each month I would use my overdraft, get paid clear it and then use it again.

Since being rejected on the 21st August (took 4 weeks to get a response) I have taken the following steps:

• Overdraft £600 (main current account) - cleared and removed from my main current account on 27 August 2012.
  
• Overdraft £1,200 (second current account) - cleared, I paid £2.5k into that account on 27 August
  
• Credit card £2900 balance. £3400 limit.

I have a default issued Sept 2010 for £1800. Paid off on 31st July 2011. So more than 3 years old.

Annoyingly I went £12 over the overdraft limit in August due to a late payment into my account. The charges were waived. A charge was waived from my credit card within the last three months and a charge was refunded for my other Natwest account (£1,200 overdraft one) when I reduced the limit by £600 (from £1800 to £1200) and a day later the interest charges took me over and I complained that the adviser should have told me of the amount I would need to reduce it to to avoid said charges.

Should I go back to Natwest and explain my new financial position. Should I go to another lender now? Or should I wait 3 months and reapply with Natwest/another lender?

I've been told my credit file was fine, my partners is good and we received a AIP for £100k over the asking price of the property.

Jitterbug123

Hi,

As you've already been rejected it is probably worth going to a broker to discuss this. They'll be able to help you and discuss your situation in greater detail.

Thanks

BarleyGB

Likely that you were rejected as your current circumstances don’t demonstrate affordability? continued use of overdraft, credit card nearly maxed out, default (lenders look back 6 years I think), this all implies that you run things close to the bone month on month.

MMR rules and the tighter lending rules for HTB mean lenders are very sensitive to this, they will be looking carefully at your bank statements to validate figures in the income & expenditure estimates you provided, also comparing to ONS data for your household structure e.g. 2 adults 0 children. They will also look at affordability with a ‘stressed rate’ e.g. what you maybe paying in 2 years or if the base rate changes.

A broker may be able to place your application? But it could be with a lender who charges a premium rate beyond HTB (whichis already a premium rate), unless you can demonstrate affordability, e.g.validate income and expenditure, account for extra spending, show a self saved deposit / demonstrate you’ve managed rental payments similar or above yourexpected mortgage commitment.

BarleyGB

Worth a 2nd opinion from a broker (find one that doesnt charge you a fee but recoups from lender on completion).

I would advise against (being placed by broker to) lenders who charge a premium rate, saddling yourself with a +1% premium doesnt make sense as 3-6 months belt tightening / maintaining financial stability (saving a little more) could strengthen your position.

If you havnt already, ask Natwest for their advice, what do they suggest you do to improve your chances of getting accepted?

AIP is purely theoretical maximum loan, and pre-underwriting (full assessment of circumstances)

Good luck.

Dondaddyd

Thanks for the response,

I went to Which Mortgage Advisers (took six weeks to get a response from them) and they couldn't find me anything but Aldermore who, at the time, were only willing lend me enough for a 95% mortgage on a £220,000 property. That property fell through and when I asked Which if they could me a mortgage for a £250,000 property they said they couldn't because of my default and Aldermore was the only lender and that was the maximum amount.

We are also with another broker who has got us AiPs with Santander and doesn't seem to think there is any problem.

I'm nervous and confused.

Dondaddyd

BarleyGB wrote: »

Worth a 2nd opinion from a broker (find one that doesnt charge you a fee but recoups from lender on completion).

I would advise against (being placed by broker to) lenders who charge a premium rate, saddling yourself with a +1% premium doesnt make sense as 3-6 months belt tightening / maintaining financial stability (saving a little more) could strengthen your position.

If you havnt already, ask Natwest for their advice, what do they suggest you do to improve your chances of getting accepted?

AIP is purely theoretical maximum loan, and pre-underwriting (full assessment of circumstances)

Good luck.

Thanks, I mean to put this into perspective. We save around £1200 a month, which is the monthly mortgage repayment fee.

I've cleared and removed one overdraft and will clear and remove the other if needed. I could and should pay more to the credit card (that could work against me).

I was informed by Natwest that £30 charge split between two accounts prevented me from getting the mortgage. I explained these and pointed out that they have been waived/refunded and then was told that simply using an overdraft would mean instant fail.

I will phone them and ask for advice, thanks.

BarleyGB

Your situation isnt bad in the scheme of things, just that lenders are jittery with all mortgage rule changes (MMR), prospect of interest rate rises, the fines and scandals that have come their way in the last few years, can you blame them?

There are just a few things that are tipping you over the edge, lenders are looking for a reason to lend rather than a reason not to lend. Charges, overdraft, default all go against you, and as I mentioned before HTB attracts strict lending criteria.

Youve seen several brokers with mixed success, can friends / family recommend one in your area? you also mention a few AIPs lenders could be seeing multiple credit searches and assuming youre being declined, making multiple applications?

Saving £1200 a month is really good, allowing time for clearing down debt, thecharges moving off your last 6 months account history and saving more could do wonders for your ability to get a loan.

I dont know individual lenders policy (though suspect Santander and others assess applications how I have implied), a broker is really your best bet, as is getting advice from Natwest.

Also whilst I stress the rejection would have been many of a number of factors (so dont pin your hopes on a change of decision), have you reitterated the situation about the bank charges, have they properly taken your explanation into account?

Dondaddyd

Thanks. Natwest said that with charges they would simply say "no", even before the credit search, though they did appear to be responsive to my explanation.

This is all very frustrating, clearly we can afford the mortgage - rent in London is often several £100 more expensive - and we have an offer accepted on a property and don't want to lose it (but I accept its of my own making). We are with a Mortgage Broker now, who appears positive - though he said "hope so" - when I asked him what he thought.

I keep getting mixed advice though, one phone call to Natwest said they use Experian. Their mortgage department, which sounded like a call centre in America, said Equifax.

I will persevere and follow the advice here. Worse case wait three months, remove my overdrafts, reduce the credit cards and be in a stronger position. We'll lose the house though :-(

Dondaddyd

AND one month of statements on, Santander accepted our mortgage application.