Why can't banks be upfront with their mortgages?

Mac_Sami

I'm hoping someone can explain this for me...

I have been trying to apply for mortgages for weeks now, but I am being offered less than I want for a mortgage. To give you some quick figures, I earn £16k (soon to be increased in 2 weeks time, which should help my problem), am buying a 40% shared ownership at £65k. I am putting down £10k as a deposit, and £55k as a mortgage. I have no outstanding debts, and an excellent credit rating. I am 22.

When I initially have spoken to Halifax and HSBC, they have all said they can offer me the necessary amount. However, when it comes down to their affordability, they cannot offer me the full mortgage. This is despite me providing honest and accurate figures upfront of my monthly outgoings, and rental costs of the shared ownership property. The banks tap all the figures into their system and come out with the first answer i.e. yes, and then when I apply for the mortgage, their system (somehow) comes out with the second answer i.e. no.

Why is this? The banks cannot seem to give me a straight answer, with the Halifax saying that they are inundated with applications and so cannot look into my case further.

I appreciate we are in hard times for borrowing money from banks, and I don't think I am a special case just because of my good credit history. All I ask is that the banks don't mess me around and have the balls to tell me upfront whether they can seriously offer me a £55,000 mortgage, or something less.

Credit where credit is due, Nationwide have done this upfront, saying they could only offer me £53,000. No problem - I actually have enough funds to cover the extra £2,000 deposit. But again - why can't the other banks be upfront like this? It has cost me lots of time, and I am now in a position where I am fast running out of options and patience, and walking away from everything seems the right idea.

sammyjammy

It sounds as if you're being accepted in principle but failing the credit check for some reason, they probably wouldn't tell you why even if they took the time to look. Have you had a copy of any credit report from Experian or Equifax or Call Credit? They only cost £2 each, I'm not suggesting that your not telling the truth about your good credit but until you check lord knows what is on them, there could be fraudulent transactions or anything.

Sam

MORPH3US

As above, something sounds not quite right with the banks....

I must say I am a little surprised that you can get that much mortgage on £16k wage in this financial climate....

HelpWhereIcan

sammyjammy wrote: »

It sounds as if you're being accepted in principle but failing the credit check for some reason

Nearly there but not quite.

The Halifax's Affordability calculator, for example, will give you differing amounts depending on your credit score.

They have 3 levels of pass - a, b & c - with a being the highest.

Someone with an 'A' pass (very unlikely to be a first time buyer) will get more than someone with exactly the same income etc who gets a 'b' or a 'c' pass.

The person estimating your borrowing power will not know what type of pass you are until the application or agreement in principle are done, but it would be an unwise 'adviser' who assumed anything more than a 'C' for a first time buyer on £16000.

You do not say what the monthly rental for the rest of the property will be (do not forget this needs to be deducted as a commitment), but assuming £150 as an example, the Halifax would do approximately the following for someone on 16000 based on a 25 year mortgage:

Pass C - 49420
Pass B - 53220
Pass A - 57020

One thing to consider (if you have not done so already) is that the term you put the mortgage over affects the amount available. If the mortgage were to be over 40 years, the figures above would change to:

Pass C - 56205
Pass B - 60530
Pass A - 64885

The figures above are just to try and show you roughly how they work and are based on what you have posted. Without knowing the rental you will have to pay I have no way of knowing if they apply to you.

sammy has it correct though and it may be that there is something on your file that is bringing your score down to below even those figures.

Hope this helps

Mac_Sami

Thanks, this makes more sense. I cannot see anything adverse on my credit file, and I have checked myself a few months ago. Halifax went as far as to say the issue could be because there is an outstanding amount of £280 on a credit card, despite the fact I have always, without issue, paid off my credit cards immediately. Ironically, the £280 collerated with their valuation fee, which they took from my credit card... go figure.

Nationwide did the credit check upfront, which is why I'm guessing their figure is accurate. Why the others could not do this upfront I do not know. As I said, I have some flexibility to increase my deposit.

The figures you talk about are about right - my rent is slightly higher, and Halifax offered me £45k - so I'm assuming I'm on a Pass C.

dunstonh

When I initially have spoken to Halifax and HSBC, they have all said they can offer me the necessary amount. However, when it comes down to their affordability, they cannot offer me the full mortgage. This is despite me providing honest and accurate figures upfront of my monthly outgoings, and rental costs of the shared ownership property. The banks tap all the figures into their system and come out with the first answer i.e. yes, and then when I apply for the mortgage, their system (somehow) comes out with the second answer i.e. no.

You may not have noticed but lenders are tightening their lending criteria by the week (sometimes the day or even hour). So, when you made your initial enquiry then there may not have been a problem. However, things having moved on and you no longer fit the criteria.

All I ask is that the banks don't mess me around and have the balls to tell me upfront whether they can seriously offer me a £55,000 mortgage, or something less.

They are not messing you around. A decision in principle is a basic check that says "if this application was processed today and everything you have told us checks out then we can see no reason why we would not lend you the money". Problem is that they application isnt in that day and can be weeks or months later when credit has dried up.

Mac_Sami

dunstonh wrote: »

You may not have noticed but lenders are tightening their lending criteria by the week (sometimes the day or even hour). So, when you made your initial enquiry then there may not have been a problem. However, things having moved on and you no longer fit the criteria.



They are not messing you around. A decision in principle is a basic check that says "if this application was processed today and everything you have told us checks out then we can see no reason why we would not lend you the money". Problem is that they application isnt in that day and can be weeks or months later when credit has dried up.

Sorry, I should have perhaps illustrated my example further.

HSBC were prepared to offer me a whopping £83,000. There is no reason why they would not lend me the money (unless the credit check is causing an issue, which I'm certain it's not - just about to check my file). I cannot see how a change in markets in less than a week would result in a dramatic drop of £30,000. So, in short, they are messing me around. Nationwide had the balls to tell me upfront what they could offer (and still stand by that decision today, after speaking to them) - so why can't the others do the same?

MORPH3US

Mac_Sami wrote: »

HSBC were prepared to offer me a whopping £83,000.

On a £16k salary :eek::eek:

When my GF and I were applying, we were both earning £20k each...

Natwest would only offer us £80,000 as a 95% mortgage.

This was 2 years ago when they were throwing money around for fun!

Mac_Sami

MORPH3US wrote: »

On a £16k salary :eek::eek:

When my GF and I were applying, we were both earning £20k each...

Natwest would only offer us £80,000 as a 95% mortgage.

This was 2 years ago when they were throwing money around for fun!

Absolutely - I appreciate the figure they gave was a silly amount, and no way would I want to take out that sort of money, I simply wouldn't be able to afford repaying it!

Mac_Sami

So I've just checked my credit history, and have a score of 884/1000 with Experian.

There is nothing adverse on there, save three searches performed by the three banks I've gone to for mortgages. They are in a short space of time, which could be part of the problem?

I also notice I am not on the electoral register - at the moment I am transferring it due to moving a few months ago. Would lenders get jittery about this? I did explain to all three that I would not appear on there due to having just sent off the paperwork to update the electoral roll.

sammyjammy

There you go then, not being on the electoral role will probably mean no-one will lend you money, you'd be lucky to get a mobile phone contract without it!

As an aside the score you've paid for on your credit reprot means nothing, every lender has theri own credit scoring system personal to them, get the electoral role sorted and maybe leave it for a few months as you've got those three searches on your record, they will certainly ring alarm bells if you keep getting searches done.

Sam