First Time Buyer S106 Advice

Pootsc123

Hi all,

Am new here and I'm one of those usual lurkers that browses for advice but my Wife & I are in a situation where we are looking for specific advice, any of which would be greatly appreciated.

We are both first time buyers and currently living with parents which I'm sure many can relate as being really difficult after renting together previously for 3 years - it has put a lot of strain on our relationship at times but we're in a good place currently!

We found a new build property, a 3 bed semi in a rural village which is subject to the section 106 restrictions, we got denied by the local council due to them deeming we do not need a 3 bed (were 29 & 25 years old.)

During the above interest we applied for an AIP with Leeds BS through Habito and we had been accepted and they began underwriting & valuation was completed - I paused the process of underwriting pending the councils decision just in case, Hard Searches had been made against our credit scores. My Wife also finances her car as PCP agreement has finished - hard search recorded.

The council recommended we take the 2 bed alternative on the same estate (15 new houses) and we had a viewing and financially in our current situation it made sense, we loved the property so we decided to proceed with Leeds BS (Through Habito) and swiftly got an AIP and underwriting took place quite quickly, once we received our official offer I instructed a local solicitors for conveyancing.

During this process everything had gone through until Leeds BS requested our solicitor to confirm we meet their acceptions list with regards to the section 106, they do not accept any exceptions outside of that lidt - our solicitor informs us they cannot inform Leeds that we meet their criteria - on our covenants it states that "Must be able to obtain a mortgage and have a deposit" but it does not state this on critieria list given by Leeds BS and they will provide no more comment so now looks like we've been advised the wrong mortgage although we are dumfounded at the reasons why.

I should now mention that the estate agents had listed our propeties as shared equity - they are in fact affordable housing sold at a discount, there is no shared equity in the house we would own 100% on a freehold - have we been advised for the wrong mortgage based on this? This I am not sure and plays a more impactful role on what happens next.

Habito look into another lender and say Halifax will lend under the criteria of the 106 we have - they asked more questions this time around to ensure but say we need to go direct as not available online. We went to our appointment yesterday.

In house mortgage advisor who is very helpful and kind but suggests what I already thought, that the fact I have 2 hard searches against my file and Wife has 3 it may go against us at the AIP stage and this turns out as correct. We pass on affordability more than comfortably but fail on credit score, advisor says she will appeal as she can see reasonings behind it all - we provide as much evidence as possible.

Today she calls and underwriters are not prepared to accept the appeal at this time.

To say we are gutted is an understatement, we've had a tough year but were so looking forward to being in our own home by end of Jan, now we will likely lose this home, face a large bill from the solicitors and feel like we've lost all hope in regards to obtaining a mortgage because our credit files have been affected by this whole saga and I don't feel it's necessarily down to us.

We have some debts but affordability on this home is clearly well within our means, the house is 150k we have savings to pay deposit, fees and moving costs etc, I am on 30k and my Wife is on 21k a year, we have some debts but checking into our own affordability we would have over £1400 remaining each month after all bills & living costs to pay off debts/save - my credit score is 990 on experian, my wifes is 500+ on equifax both apparently excellent and I literally have no idea where to go from here.

Sorry for the long post - we don't really have anyone to ask for advice, or don't at least know where to go for it so anything would be really appreciated, thank you.

kingstreet

Pootsc123 wrote: »

"Must be able to obtain a mortgage and have a deposit"

Do you have a deposit, or not?

If so, what percentage and from what source?

Pootsc123

Hi kingstreet

Yes we do have a deposit, 5%.

To clarify, the lenders would not accept the wording. We as buyers now meet all criteria - the concern is from a resale point of view I believe although we've not had much in terms of clarity from solicitors etc

Thanks

kingstreet

AFAIK there are only three/four lenders accepting S106 discounted open market valuation sales on newbuilds and in most cases they require a deposit of 10% or more.

Leeds does accept a 5% deposit. Halifax will only accept 5% if the builder and broker is on its special newbuild list.

However as you appear able to get the mortgage with Leeds and have a deposit, please explain how you don't meet the acceptance criteria as I now don't understand what from this;-

"Must be able to obtain a mortgage and have a deposit"

you don't meet?

As an example, our last DOMV case was a 60% purchase with a 95% mortgage with Leeds and that was accepted, so are you sure you have selected the correct reason this was not proceedable?

kingstreet

Does your solicitor understand how a DOMV purchase works? How did you come to find them?

One of our recent cases the inexperienced solicitor our client appointed was adamant this was shared equity and we had to get the builder's solicitor to write to them to confirm the process.

Pootsc123

Hi kingstreet,

Below I have pasted the solicitors only correspondence on this, my own view is that it doesn't make sense - we ourselves pass the criteria but Leeds BS will not accept the extra criteria inserted into the covenant even though common sense (on how I read it) says the extra restrictions would be what the basis of why a section 106 exists and if a human being looked at it from Leeds pov would they also see this? See below;

"Leeds BS have a specific guidance sheet for schemes of this type which is attached for your reference, section 3 is applicable.

You will see that there is a list of Acceptable Restrictions in clause 2, which include salary restrictions, restricted purchase prices, local living restrictions or a combination of the above. The difficulty we have is that there are other restrictions in the section 106 Agreement which do not fall within this set of Acceptable Restrictions, such as purchasers being unable to afford to buy a home suitable for their housing needs on the open market, able to demonstrate a good credit history, able to secure a mortgage and having a sufficient deposit to purchase etc. There is a note at the bottom of page 5 which states that the BS will not accept any other restrictions that fall outside of the Acceptable Restrictions listed.

The guidance does state that we have to provide the BS with the specific wording of the restriction and seek confirmation that the property has been valued accordingly. We have done this, and provided the BS with a full copy of the Section 106 Agreement asking for confirmation that the scheme is acceptable to them.

The response from the BS has been that they require us to specifically confirm that the Section 106 agreement fully meets their criteria, and will not offer any further guidance or commentary. We are not able to do this unfortunately, because of the extra restrictions which are not listed as ‘Acceptable.’"

Leeds form is found on google if you search: Leeds building society requirements in respect of shared ownership schemes/shared equity - a pdf sheet, info under section 2.1

Should I be contacting Leeds directly?

Pootsc123

Kingstreet, a work colleague recommended them - I did no research into them really.

Pootsc123

Also just to add, we looked into other county councils versions of a section 106 and the wording above is always included on the requirement sheet so I don't see how this is out of the norm? "purchasers being unable to afford to buy a home suitable for their housing needs on the open market, able to demonstrate a good credit history, able to secure a mortgage and having a sufficient deposit to purchase etc."

kingstreet

Have the builder speak to their solicitors about this. Chances are they will be much more experienced in this as they will have dealt with all the lenders on the site, hopefully including Leeds.

Using an experienced newbuild broker would also have been helpful in resolving this as we have specific newbuild contacts within lender HOs and can often resolve issues more quickly.

Who does your builder recommend?

Pootsc123

Thanks for this kingstreet.

I have not spoken with the builders at all, we have no experience at all in any of this and just chose a solicitor based on a recommendation as didn't know where to look or go really.

I will speak with them on Thursday, is this something you recommend we pursue, is a resolution possible based on what you can see?

Thanks for all of your help thusfar

kingstreet

If this is happening to you, it's happening to others on the development. The builder will want to find a solution.