Help, first time buyer

Jmcc142

Hello, we have had an agreement in principle accepted on a property. The seller has agreed to an offer £7k less than home report value. How does this affect mortgage application?

user1977

The lender will treat the lower of the agreed price and the HR valuation as being the value. So if they will (say) only lend you 90% of the value, for you that means 90% of the price.

Jmcc142

user1977 said:

The lender will treat the lower of the agreed price and the HR valuation as being the value. So if they will (say) only lend you 90% of the value, for you that means 90% of the price.

Thank you for commenting, so lets say the seller has accepted the offer under home report value & the lender is willing to give us a 95% LTV. Will this be worked out against the agreed price with the vendor?

CSI_Yorkshire

I think yes - 95% of the agreed price if that is lower.

Divorcing_Dad

Jmcc142 said:

Hello, we have had an agreement in principle accepted on a property. The seller has agreed to an offer £7k less than home report value. How does this affect mortgage application?

Lol, good luck with that.

If your going with the mortgage survey, the surveyor simply looks at it (often without even going to the property).

The mortgage company will say "They've asked to borrow this, they've offered this". If the surveyor thinks that's fine, they'll generally put the value as whatever was offered.

Surveyors almost never put a value more than the offer. It's not in their interest. They'll only undervalue, not over.

As an example.....

John goes to look at a house which is advertised at £250k. He offers £225k and the seller accepts this.

He tells his mortgage company who ask a surveyor to value the property.

Surveyor looks at comparisons, the local area, previous sales and the market and decides it's well worth £250k.

But his report will say that it's worth £225k, because that's what has been offered and it covers his backside.

CSI_Yorkshire

Divorcing_Dad said:

Jmcc142 said:

Hello, we have had an agreement in principle accepted on a property. The seller has agreed to an offer £7k less than home report value. How does this affect mortgage application?

Lol, good luck with that.

If your going with the mortgage survey, the surveyor simply looks at it (often without even going to the property).

The mortgage company will say "They've asked to borrow this, they've offered this". If the surveyor thinks that's fine, they'll generally put the value as whatever was offered.

Surveyors almost never put a value more than the offer. It's not in their interest. They'll only undervalue, not over.

As an example.....

John goes to look at a house which is advertised at £250k. He offers £225k and the seller accepts this.

He tells his mortgage company who ask a surveyor to value the property.

Surveyor looks at comparisons, the local area, previous sales and the market and decides it's well worth £250k.

But his report will say that it's worth £225k, because that's what has been offered and it covers his backside.

I'm guessing this is Scotland, you're talking about England and Wales

Jmcc142

CSI_Yorkshire said:

Divorcing_Dad said:

Jmcc142 said:

Hello, we have had an agreement in principle accepted on a property. The seller has agreed to an offer £7k less than home report value. How does this affect mortgage application?

Lol, good luck with that.

If your going with the mortgage survey, the surveyor simply looks at it (often without even going to the property).

The mortgage company will say "They've asked to borrow this, they've offered this". If the surveyor thinks that's fine, they'll generally put the value as whatever was offered.

Surveyors almost never put a value more than the offer. It's not in their interest. They'll only undervalue, not over.

As an example.....

John goes to look at a house which is advertised at £250k. He offers £225k and the seller accepts this.

He tells his mortgage company who ask a surveyor to value the property.

Surveyor looks at comparisons, the local area, previous sales and the market and decides it's well worth £250k.

But his report will say that it's worth £225k, because that's what has been offered and it covers his backside.

I'm guessing this is Scotland, you're talking about England and Wales

Hello, yes this is in Scotland. The offer accepted is around 7k lower than home report value & our AIP is based on the offer that was accepted.

Divorcing_Dad

CSI_Yorkshire said:

I'm guessing this is Scotland, you're talking about England and Wales

Ah, fair point

user1977

Jmcc142 said:

user1977 said:

The lender will treat the lower of the agreed price and the HR valuation as being the value. So if they will (say) only lend you 90% of the value, for you that means 90% of the price.

Thank you for commenting, so lets say the seller has accepted the offer under home report value & the lender is willing to give us a 95% LTV. Will this be worked out against the agreed price with the vendor?

Yes, like I said, it's based on the lower of the price and the HR valuation. So in your case, the price.

Jmcc142

user1977 said:

Jmcc142 said:

user1977 said:

The lender will treat the lower of the agreed price and the HR valuation as being the value. So if they will (say) only lend you 90% of the value, for you that means 90% of the price.

Thank you for commenting, so lets say the seller has accepted the offer under home report value & the lender is willing to give us a 95% LTV. Will this be worked out against the agreed price with the vendor?

Yes, like I said, it's based on the lower of the price and the HR valuation. So in your case, the price.

So how does the HR valuation come into it ? If we only require a mortgage for the agreed price with vendor.

Caz3121

Jmcc142 said:

So how does the HR valuation come into it ? If we only require a mortgage for the agreed price with vendor.

the home report is like a cap on the valuation that the lender will use
eg for £200k home report value and 90% deal
buy for £180k, lender will lend 90% of the £180k (offer price)...you need £18k deposit
buy for £190k, lender will lend 90% of the £190k (offer price)...you need £19k deposit
buy for £200k, lender will lend 90% of the £200k (offer price = HR value)...you need £20k deposit
buy for £210k, lender will lend 90% of the £200k (HR value)...you need £30k deposit
buy for £220k, lender will lend 90% of the £200k (HR value)...you need £40k deposit
etc

in England where Home Reports are not used, the same principal would be applied with a mortgage valuation