Mortgage Application Confusion

DracoNoir

Hi all,

Hope someone can shed some light!

As a FTB, I'm pretty sure I am missing something simple or just being completely naive, but this just doesn't make sense to me:

I am married, with a 2 year old and applying for my first mortgage. I am self employed, with a fairly low income but WTC and CB help with this in a small way. We decided that as my wife has not worked since LO's birth I would apply for a single mortgage as calculators showed we could borrow just a little more.

Called Santander on recommendation from a friend and went through affordability checks with an adviser over the phone. Sent copies of SA302's for past 3 years, proof of WTC and CB and bank statements to show regular payments of bills. I was honest about the whole single mortgage thing and was told it was fine and normal-ish. Result came back that subject to credit check, we could borrow upto 70k with a 5% deposit and that it was "time to go shopping", albeit without a DIP as the credit check only lasts 30 days and we still have more than that to run on our current tenancy. We were told to find a house, place an offer and when accepted, to call back to carry out the check..

So, we put an offer in on a house for 75k which was accepted and went back to the lender, saying we would like to borrow 69k as we had 6k to put down but it was declined when the credit check was done. I then signed up for a credit file checking service (silly not to do beforehand really) and couldn't see anything that would be a problem (ok so I'm no pro, but...) - credit score of 785, 1k on a credit card with a limit of 1,750, no CCJ's or anything like that. I called the adviser back and told him this and he said he would speak with the underwriter. When he called me back it was to say that we were declined at the credit check stage because we didn't have enough deposit and that they wanted 11k for an LTV of 85%. Budgeting for all the extras, there's no way we can come up with another 5k. On top of that, after only 2 days since the offer was accepted, the agent has told me that the property is now back on the market as we have not shown proof of deposit and DIP...

I do understand that what they say before the DIP is only a guide and not a guarantee of lending, but then, they should have been able to say that we would need a bigger deposit from the outset and if not, why bother with it all? What I'm getting at is that I feel a little led up the path, having adverts all over the place that their 5% mortgages are perfect for FTB's like me, having been told that we passed affordability at those values and placed an offer within those parameters, only to be told we need more cash in the first place due to my credit file.

I was under the impression that the credit check was more to make sure you didn't have thousands in concealed debt or something, not simply to decide that I need more upfront cash. The adviser simply said that the credit check was an amalgam of several things, taking into account my self-employment, income and expenditure as well as the LTV I was asking for - surely that is a mortgage application in a nutshell and not just a credit check?

I feel they should have been able to tell me this before I took 4 days off work to view houses, wasting my time, my wife's time, disrupting my little one's naps (any parents will KNOW what that does!), not to mention estate agents time and vendor's time?

I now have a broker trying to find me a mortgage but that'll cost me a bit extra and, of course I now have a footprint on my credit file from this failed application, plus the possibility of losing the house we want...

Am I naive here over the mortgage process or have they done something a bit out of order?

ACG

When applying for a mortgage you have to pass:
Affordability - this was checked and passed.
Criteria - this was checked and passed.
Credit score - this did not pass.

The score is basically a combination of what is on your application form along with what is on your credit report. You were lending towards the top of what they would lend, you are reliant on tax credits and you are borrowing 95% LTV - they are not a great mix from a lenders point of view and so your score was not as high as it needed to be.

Having a product ideal for first time buyers does not mean every first time buyer is entitled to it, even if you fit criteria.

It is what it is, there is no point dwelling on it as hundreds of people are declined every day. You have a professional on the job so hopefully they will make a better choice than your mate. Its not uncommon that I meet people who have been declined and then we get it through and sometimes at better rates than they had originally applied for directly.

Trust your broker, only pay their fees based on results (ie on mortgage offer or completion).

The_Oaks_Mortgages

DracoNoir wrote: »

Hi all,

Hope someone can shed some light!

As a FTB, I'm pretty sure I am missing something simple or just being completely naive, but this just doesn't make sense to me:

I am married, with a 2 year old and applying for my first mortgage. I am self employed, with a fairly low income but WTC and CB help with this in a small way. We decided that as my wife has not worked since LO's birth I would apply for a single mortgage as calculators showed we could borrow just a little more.

Called Santander on recommendation from a friend and went through affordability checks with an adviser over the phone. Sent copies of SA302's for past 3 years, proof of WTC and CB and bank statements to show regular payments of bills. I was honest about the whole single mortgage thing and was told it was fine and normal-ish. Result came back that subject to credit check, we could borrow upto 70k with a 5% deposit and that it was "time to go shopping", albeit without a DIP as the credit check only lasts 30 days and we still have more than that to run on our current tenancy. We were told to find a house, place an offer and when accepted, to call back to carry out the check..

So, we put an offer in on a house for 75k which was accepted and went back to the lender, saying we would like to borrow 69k as we had 6k to put down but it was declined when the credit check was done. I then signed up for a credit file checking service (silly not to do beforehand really) and couldn't see anything that would be a problem (ok so I'm no pro, but...) - credit score of 785, 1k on a credit card with a limit of 1,750, no CCJ's or anything like that. I called the adviser back and told him this and he said he would speak with the underwriter. When he called me back it was to say that we were declined at the credit check stage because we didn't have enough deposit and that they wanted 11k for an LTV of 85%. Budgeting for all the extras, there's no way we can come up with another 5k. On top of that, after only 2 days since the offer was accepted, the agent has told me that the property is now back on the market as we have not shown proof of deposit and DIP...

I do understand that what they say before the DIP is only a guide and not a guarantee of lending, but then, they should have been able to say that we would need a bigger deposit from the outset and if not, why bother with it all? What I'm getting at is that I feel a little led up the path, having adverts all over the place that their 5% mortgages are perfect for FTB's like me, having been told that we passed affordability at those values and placed an offer within those parameters, only to be told we need more cash in the first place due to my credit file.

I was under the impression that the credit check was more to make sure you didn't have thousands in concealed debt or something, not simply to decide that I need more upfront cash. The adviser simply said that the credit check was an amalgam of several things, taking into account my self-employment, income and expenditure as well as the LTV I was asking for - surely that is a mortgage application in a nutshell and not just a credit check?

I feel they should have been able to tell me this before I took 4 days off work to view houses, wasting my time, my wife's time, disrupting my little one's naps (any parents will KNOW what that does!), not to mention estate agents time and vendor's time?

I now have a broker trying to find me a mortgage but that'll cost me a bit extra and, of course I now have a footprint on my credit file from this failed application, plus the possibility of losing the house we want...

Am I naive here over the mortgage process or have they done something a bit out of order?

I feel your frustration.

The affordability check is just a guide and will always be subject to credit check.
The credit check which the lender will undertake, give them a points scoring system, where you will need to meet a certain number for them to lend on 85%,90% and 95% Loan to Value. I would guess being a first time buyer is working against you as you may not have built up a sufficient credit history.

Unfortunately, in hindsight, maybe you should have gone to a broker initially rather than a friends recommendation of a certain bank. The broker could have completed a credit check with a lender without it being a footprint on your credit report.

Do you have a whole of market broker working for you now? They should be able to help secure the mortgage with the right lender... Another lender may allow you to borrow more.

Good Luck

DracoNoir

Thanks for your responses. That makes a little more sense I suppose but then knowing that I was reliant on WTC and that I'm a FTB, surely the adviser should have known better than to get right to the credit check before saying 'tough luck, mate'?

I'm not annoyed over the fact it didn't go through really, just more annoyed that the process has wasted our time when someone who is supposed to do this for a living didn't say from the outset "look, you're probably not going to get 95%; I'd ADVISE you to aim for a bigger deposit before I credit check you"

Again, I didn't realise the credit check still affected the amount you could borrow, I thought that was what affordability and criteria checks were for. I figured that a credit check was simply to make sure that you weren't bankrupt etc.

Anyway our broker is popping round tonight to see what he can do so hopefully there will be good news at the end of it all!

JonMitchell

DracoNoir - I'm sharing with you my past experience. If a broker doesn't inform you about possible hurdles in getting a mortgage, I will have second thoughts using them. Been screwed by Countrywide brokers and legals when I was a FTB before. Recently I had wanted to use L&C (London & Country), supposedly one of the largest in UK though IMHO not the best, but dropped them after 2 calls as the chap was indifference.

Credit checks - I would advise, if you can in any means, pay off as much as possible that £1K on your credit card to bump your credit score higher. Clearing a credit card helps a lot and it ususally takes 6-8weeks for credit agencies to update that to be reflected on your new score.

Also I believe your broker done a credit score as a Santander intermediaries, a credit score check will take away points on your existing score (Santander intermediaries uses hard footprint), from 785 to 773, its around 12 points subtraction per credit check. Best if you can shop around for high street banks that do soft credit check that only leave a "quotation". I done that over the past 2months and was concerned that soft credit checks will be seen by other lenders, but it turn out it doesn't nor impact your credit score.

But bottom line is, before committing to any brokers, ask all the questions you can think of - ie that is if they do not bother telling you. Most brokers are GREAT but a nightmare if you meet up with a crap one, like that one I chat to recently from L&C.

Hope this help and all the best to your mortgage application.

ACG

I woudl suggest if the option is less debt or a bigger deposit, to go with a bigger deposit, especially if there is no issue affordability wise.

The advisor should really have told you that a high score is needed just to set your expectations if nothing else. But you have applied in branch, dont get me wrong I am not slating their advisors but generally speaking estate agent based brokers and in branch advisors are relatively new. It is where most advisors start and so they are rarely going to be the best and have years and years of experience.

The credit check does not affect the amount you can borrow, it just affects the loan to value (ie the maximum percentage) as the high the LTV, the higher the risk.

If the purchase price was higher, the the point where 85% was what you had asked for I reckon you would have got it. Its just the risk rating that is caping it.

nath81

I would never put in an offer without a DIP, as you have found out estate agents require a copy of your DIP, and proof of deposit as soon as your offer has been accepted. Even with a DIP in place there is no guarantee that the full application will go through.

ACG

I think it depends if you have a broker or not. I am reluctant to give out DIPs until an offer has been accepted. However, that being said I do look over peoples credit reports and have their information from a factfind to go through.

If I did you a DIP today but your offer is not accepted until tomorrow, the lender of choice may have changed due to rate or criteria changes.

Some DIPs show how much you can lend, do you really want to give that to an agent who works for the vendor when negotiating a purchase price?

They also expire, what happens if you do not find something in the timeframe? Another credt check is required.

DracoNoir

JonMitchell, thanks for sharing your experiences, I wish I'd just gone with a broker from the start. My credit score was actually 785 after the check was done as it was only after it failed that the adviser said to check it myself and I saw the check he had done. Does that mean that my score would have been 797 beforehand and that I was 3 measly points away from the next band?! Lol!

ACG, that's exactly my point! I'm not so upset about the decision - dems de breaks. What I'm annoyed about is that the adviser didn't twig that this might happen after giving him all of my details and circumstances. He isn't exactly green to the job!

Nath, I was told to get an offer accepted before applying for the DIP, further enforcing my belief that LTV and affordability were ok...

amnblog

JonMitchell wrote: »

DracoNoir - I'm sharing with you my past experience. If a broker doesn't inform you about possible hurdles in getting a mortgage, I will have second thoughts using them. Been screwed by Countrywide brokers and legals when I was a FTB before. Recently I had wanted to use L&C (London & Country), supposedly one of the largest in UK though IMHO not the best, but dropped them after 2 calls as the chap was indifference.

Credit checks - I would advise, if you can in any means, pay off as much as possible that £1K on your credit card to bump your credit score higher. Clearing a credit card helps a lot and it ususally takes 6-8weeks for credit agencies to update that to be reflected on your new score.

Also I believe your broker done a credit score as a Santander intermediaries, a credit score check will take away points on your existing score (Santander intermediaries uses hard footprint), from 785 to 773, its around 12 points subtraction per credit check. Best if you can shop around for high street banks that do soft credit check that only leave a "quotation". I done that over the past 2months and was concerned that soft credit checks will be seen by other lenders, but it turn out it doesn't nor impact your credit score.

But bottom line is, before committing to any brokers, ask all the questions you can think of - ie that is if they do not bother telling you. Most brokers are GREAT but a nightmare if you meet up with a crap one, like that one I chat to recently from L&C.

Hope this help and all the best to your mortgage application.

Our poster did not use a Broker. He went direct to one of the Lenders with the tightest scoring on a deal with the tightest score.

Hence the problem.

Fortunately he has consulted a Professional now.

amnblog

DracoNoir wrote: »

Does that mean that my score would have been 797 beforehand and that I was 3 measly points away from the next band?!

No it does not.

The 'score' given out by the credit reference agency is irrelevant to the whole mortgage application process.