Refused my first application

jezzer_72

So,

I've had my first mortgage application refused by HSBC on the affordability stress test.

[figures at the time] Unknown to me before applying, they increase the mortgage by £110 and add £120 for lifestyle estimates in this stress test. This meant that even though i would have under £300 left after all bills (including current spending habits) i would be too high risk.

How anyone is meant to get on the ladder i don't know.

Anyway, here is the question... What now? Another provider? Broker? Go back to the estate agent? Anyone had this happen?

amnblog

HSBC are well known for being picky and you will probably get placed elsewhere.

If you don't want to run the risk of applying with another lender to get a 'no', engage a broker.

csgohan4

have you got copies of your credit file for yourself and your partner buying with you ? Specifically the credit history is more important than the score


Are you aware every application puts a footprint on your credit file and having too many in a short period can have a negative effect


A good first port of call if not already done is the MSE house buying mortgage guide:
http://www.moneysavingexpert.com/mortgages/mortgage-guide?_ga=1.40164576.317436192.1427359633


As AMN has mentioned, engage a broker


There have been regulations put in place to ensure borrowers can withstand interest rate increases and rightly so in order to reduce the amount of defaulters and repossessions. Have a look at the mortgage market review on google.


You need to do some more research and have a play around with the mortgage calculators that are freely available from most lenders to ascertain what you can afford.

ACG

Its worrying that the application was submitted in the first. Affordability is one of those things that can be checked beforehand with most, if not all lenders.

I have no idea how HSBCs affordability stacks up compared to others. However one lender declining does not mean they all will.

jezzer_72

Hi csgohan4, Just me buying. I've got a free credit score and file from Noodle. I'm good with finances anyway so the only things i have on my credit file are all settled and closed or are upto date monthly payments on my car which is my only other big outgoing. My only other one is a train pass at £33 a month, mobile at £19.12 and telephone/broadband at £25. I have searches for car insurance at the start of the year but i paid this annually anyway (this should also reduce in cost as i'll be in a better postcode and have a driveway).

Pension comes out of my pay packet as does student loan.

I have no outstanding debt other than my car. 1 credit card with a 0 balance (used for internet shopping), i closed a credit card last week which came to the end of the 0% period and usual household things such as , tv licence (cancelled sky in May), electric, gas, water, council tax and food.

However, my credit score isn't massively high (noodle says between faire and good with a rating above 600) and i don't know why as there are no obvious issues in the credit file... Maybe because i never miss a payment as i heard this is backward intuitive but can hinder you. I anticipate i will have a mark from HSBC now. I've also read the mortgage guide.

I know about the market review but all of my outgoing are virtually to the bone anyway as i've been preparing for this and fit a homeowner profile. At the end of the month i have approx £300 left (after outgoings and savings) and £300 cushion in my account i've built over the years so i'm never in overdraft. There is no doubt i might struggle if interest rates increased to 5 or 7% though but we are currently at 3% max on fixed rates with a 0.25% reduction in base rate and it is unlikely to move for a number of years (note i am not financially qualified its just an observer's view) although i know the bank will look at the whole term. I would also hope i get a pay increase of some sort in the first 2 years of a fixed rate.

I did the calculators (many of them) and saw HSBC before to get an agreement in principle. They initially said i could more money than i've had an offer accepted for.

Hi ACG, he said he was going to do the application and left the room for 5mins. I've seen them two times before i did the application to get an agreement in principle and so that i had accurate figures for what it might cost me, so i knew the maximum cost on what i could borrow and once when i put an offer in so i knew the monthly payments... they then booked me in for an application meeting based on that. The offer accepted reduced monthly payments by over £150 compared to the max i could borrow... To my mind, it means my lifestyle would remain pretty much the same, i just wouldn't have so much money going into my savings (as explained above, i saved the same as a mortgage of £600 for 6 months to prepare me).

Just a bit stuck now as i know i can afford it (all be it cutting down on going out, making lunches at home every day rather than a few days a week, Aldi instead of asda lol), i have a decent deposit. The house isn't massively expensive and bar any unexpected exchange costs i'll have a small rainy day pot of savings of a couple of grand for emergencies. HSBC would be £10 cheaper than the next provider... the interest rate and of course the monthly payment starts to increase though and the worse my affordability gets.

I can't do anything about my car as it's a contract for 3 years and i'm a yr and 6 months in but at the end of 1 year and 4 months i can find a cheaper car, hand it back or pay the balloon payment. I also get milage with work but can't take this on board for mortgage applications. This is usually used to pay for car insurance and i've saved half this years premium for it from the milage.

Thanks for your replies though.

minimike2

ACG wrote: »

Its worrying that the application was submitted in the first. Affordability is one of those things that can be checked beforehand with most, if not all lenders.

I have no idea how HSBCs affordability stacks up compared to others. However one lender declining does not mean they all will.

The problem with HSBC is their pre-application affordability check is totally flawed. They have a DIP with a personal banker before seeing the MA. That DIP uses a totally different set of figures to that which the MA uses in order to calculate affordability. These often then also change when the underwriter looks at it. It's a total shambles of a system. I heard a story of customer who had a DIP for £160k, sold their house and went into rented, then went in to make their application and were told they could borrow £0.

Terrible terrible application process.

goodwithsaving

May i ask, are you comfortable with having less than £300 left? Reason being if you have to call on a plumber or electrician, or have an unexpected bill that £300 won't be enough.
Also (just my opinion so ignore if you disagree), you shouldn't have to be altering supermarket habits or lunch habits to afford a mortgage. Life is for living and it leaves very little wiggle room should you come to re-mortgage and find that rates have increased.

Try a more flexible lender but don't forget, the limits are there to protect you.

wen-tom

we were refused by HSBC. We knew in advance that they were particularly picky and both me and my other half have excellent credit scores (996 & 998 with experian!) we have over £1500 left at the end of every month and they still refused us.
We had a broker on standby and so far so good with Halifax..

jezzer_72

Hi minimike2, this seems to be what has happened in my case. I've lost 60k from what they told me in May and 45k since last week in how much i can purchase for.

Hi goodwithsavings, I have less than £300 now so provided the roof doesn't fall off i should be ok. Besides, i hope to maintain 2k in a savings account for emergencies. With shopping and spending habits, unless i cut back here i'll never afford anywhere and renting anything near the standard of dwelling i intend to buy will cost me £700 in rent. Renting, in our current housing market is a poor way to spend money imo. If you rented and had secure tenancies etc then it would be different. My current budget would maintain my lifestyle anyway i think as i included £30 for food and £16 for lunch. So lifestyle isn't really an issue, just means i can't eat out as much each week.

I would also say that when you have one income, as with many of my friends who have purchased properties, changing habits is a common thing to buy a house and you make that sacrifice. Many of my friends who i've spoken to have either nothing or less than £100 at the end of the month. If i can get to £300 as currently, i think im am doing well.

Hi wen-tom, looks like a broker is the way to go.

goodwithsaving

That's okay, I understand. I've gone from dual income to single income and while I'm not going to have to change my lifestyle, I won't be able to make 'flippant' extravagant purchases as freely (something I can only do because day to day I am careful, without really intending to be careful (I just spend a lot)).
Good luck whatever you sort.

jezzer_72

Thanks for the reply.