Mortgage application tips or advice

Ronnie_Pickering

Hi All,
We are in the process of trying to buy a new build after a failed application circa 18 months ago with Precise. We engaged a broker who applied with Precise for us given that my wife was a non EU citizen (Aus) and i hadn't lived in the UK for several years so did not have much of an address and credit history to go by at that time.

My wife raised concerns early on that she had found out that Precise didn't accept her visa as she only had leave to remain and not indefinite LTR.

We chased our broker for info and found it difficult to pin her down so decided to call the lender ourselves a week later who told us after paying the valuation and engaging the solicitors that it was rejected. They would not accept a single application either from myself as we were married although i could prove the income.

We are trying again and enquired with MAB who fobbed us off because my last year's SA302 dropped to £11K from £32K the previous year due to a non paying customer in that accounting year which wiped the profit. They told us we were un-mortgageable even though my wife started working full time recently (17.5K) with a contract of employment and no probationary period to serve.

I spoke with a high street lender myself to clarify whether if I resigned as director, transferred my shares to my wife and went on the books PAYE would they look at this. The lender said that as long as I was no longer a shareholder and had also got a contract of employment with 3 months payslips then they would accept this as working in a family business. I told MAB who told me to get it in writing because they didn't believe me and made me feel like I was breaking the law.

I needed piece of mind therefore I called the bank back and asked the same set of very specific questions again and got the same answer as the first time I called them.

To obtain the three months payslips would take us into around early May to put an application in however, I have looked into Halifax's criteria since and they seem much more accomodating with lending criteria, for example; less then 3 months payslips required, accept LTR visa, accept part gifted deposit.

We both have clean credit and a history of repaying large amounts. £15K Lloyds loan, paid double every month and settled early. No credit card debt, £5.4K available balance with Santander, hers is zero balance with Cap One. No missed payments on anything, two settled HP car loans and one outstanding in my name which is partly why I started this thread as it's £985 pcm with VWFS with only one year paid so far of a five year HP agreement.

I earn £49K and included the car repayment when we completed an AIP with Halifax last week. It didn't seem to affect the amount we need to borrow for the house as we are going down the help to buy route. However, would you advise I get rid of the car now prior to a full application as I am at break even if i sell it to webuyanycar or keep the car and hope the underwriter uses this a some form of proof that we can afford a mortgage of £800 if my car is £985 and rent is £750?

Would they perceive it to be a negative thing disposing of it prior to application or prefer we had no debts at all?

Sorry it's a bit long winded but I don't want history repeating and have no confidence in a broker as they only seem to want easy straightforward cases.

crystalpinks

Just to clarify, you start trying for a mortgage 18months ago, then 12months ago took out car finance for £985 pcm ?
What car is £985 pcm just out of curiosity ?

ACG

A mortgage lender has twice told you if you give your shares to your wife and go on the books as a paid employee they would accept you?

I would be classing that as fraud and would not touch it with a barge pole. Who is the lender? I would be interested as maybe I am over thinking it.


I hope you got your money back from broker one for the val and any legal fees. If they have messed up applying to a lender who would never accept you based on published criteria, you should not be out of pocket.

amnblog

ACG wrote: »

A mortgage lender has twice told you if you give your shares to your wife and go on the books as a paid employee they would accept you?

I would be classing that as fraud and would not touch it with a barge pole. Who is the lender? I would be interested as maybe I am over thinking it.

I am with ACG on this. I would not touch a case where the applicant was altering his business status to try and meet lenders criteria.

Why?

In the first place, this is a good way for the Broker to get struck off the Lenders panel for attempted fraud.

In the second place, borrowers should never be making changes to their business or taxation affairs for the sole reason of obtaining a mortgage. This is good way to end up with a tax bill, a business problem, and no mortgage.

This brings me to my third point.

If you phoned many lenders direct today and asked them if being Paye on a firm owned by your spouse is acceptable, they would tell you that it is. Further you would need to be in the role for a minimal period, perhaps three months.

What they wont volunteer is that they wont just consider the pay slips on a family linked business, they will want to see the accounts to make sure the business can afford the Paye - a grey area here which sounds like it will be a no.

A little knowledge is a dangerous thing.

Coming onto the car finance which seems substantial given the income. Is this paid by the business? Will it affect the Help to Buy affordability calculation? Further questions which need an answer.

Our original poster has been let down by the Broker on a basic point of residency and Lender criteria which suggests that their experience is minimal. It appears that the MAB explanations were also not clear. That does not mean that progressing through another Broker it not the right route, it is.

Ronnie_Pickering

Thanks for the reply. We already had a Q5 and upgraded to a Q7 after the first decline with Precise.

MAB also made me feel that this was not an acceptable thing to do which is why we spoke directly with the bank and then a few days later to a different person and were very specific in what we asked. We told them the exact situation and the women on the phone checked, put me on hold five minutes then came back and said it's acceptable.

The bank advised that they would look at the case as working in a family business but I must not be a shareholder or director and have an employment contract along with pay slips.

The bank is one of the high street lenders to which I won't name just yet as I am going to clarify for a third time tomorrow and also mentioned that somebody has advised this is potentially fraudulent to get there reaction and make them look deeper into it, however, I cannot understand why they have told me this information twice if it's not there own policy. I did not put words into their mouths, I was very open and clear with them from the outset.

kingstreet

I agree with the others.

This;-

I spoke with a high street lender myself to clarify whether if I resigned as director, transferred my shares to my wife and went on the books PAYE would they look at this. The lender said that as long as I was no longer a shareholder and had also got a contract of employment with 3 months payslips then they would accept this as working in a family business. I told MAB who told me to get it in writing because they didn't believe me and made me feel like I was breaking the law.

is something I have told people in the past is certainly questionable and would go along with the "no case is worth my 34 year career" speech.

As amn asked, have you actually completed the HTB Affordability calculator yet? You might find the rest is moot once you do.

https://www.gov.uk/government/publications/help-to-buy-equity-loan-calculator-and-guidance

amnblog

I appreciate that you would consider a conversation direct with the Bank as the last word Ronnie, but both ACG and Kingstreet will agree with me that it is not that simple, despite what the staff are telling you.

Lenders have a couple of problems with calls direct in to the Call Centre.

The Borrowers does not know what question to ask.

The Call Centre staff dont know and ask colleague who they think might, then take the response at face value.

An experienced Broker.

Knows how to ask the question.
Knows if the person they speak to knows what they are talking about.
Knows how to clarify the response.
Knows how to ask about further implications.

Ronnie_Pickering

So for example -

Mr Smith owns a fish and chip shop

Mr Smith sells to a family member

Mr Smith stays in the business to show Mrs Smith how to run the business and fry fish

Mr Smith receives a salary as an employee for this

Mr Smith doesn't want to own a fish shop anymore and likes being an employee

Mr Smith wants to buy a house a few months later

Mr Smith declares all his business dealings to the lender along with his fish frying antics and love for deep fried mars bars

Mr lender looks at Mr Smith's case and declines

Mr Smith asks why

Mr lender says ' you used to own the local chippy '

Mr Smith says ' yes I know, I told you this '

Mr lender says - you will never get a mortgage whilst associated with ' Bob's bits - the local chippy '

Mr Smith goes away with tail between his legs and doesn't like fish and chips anymore.

amnblog

Mr Smith does not get paid for his chips.

The Lender says you need to be paid for your chips if you want to buy a house.

Mrs Smith says to Mr Smith, you give the chip shop to me, and I will pay you to fry the chips.

Mr Smith says to the Lender, I am now paid to fry chips by Mrs Smith.

The Lender says fine.

The application goes in. Mr Brains in underwriting says Companies House say Mr Smith owned the chip shop last year. We had better check that Mrs Smith is being paid for the chips so that she can afford to pay Mr Smith to fry them.

Ronnie_Pickering

Mr Smith explained to his broker that last year half of the estate took their fish supper's on a tab, they decided not to pay so Mr Smith took them to court and got his money back the following tax year which his accounts reflect this.

Mr Smith hasn't let anyone take their fish supper's on account since, and the monthly accounts are healthy.

This happens every day in business for a number of reasons. Anybody self employed knows this, it's a fact of life.

So as long as the lender / underwriter satisfies themselves that the business is stable, it's taxes are paid and has good cashflow then he should really care that Mrs Smith pays Mr Smith then is what you are saying?

amnblog

Mr Lender has told Mr Regulator and Mr Auditor that when an applicant has a business where profits have dropped they will only consider the lower figure.

Mr Lender agrees with Mr Smith that his business has had a blip and taken steps not to repeat it, but unfortunately Mr Lender has to keep his word to Mr Regulator and Mr Auditor.