To ask why we were declined a mortgage agreement in principle

[ChickenChickenHen]

Slightly perplexed. We just applied for a mortgage agreement in principle with our bank. We need a loan of just under 3.5 times my partner's salary (I'm a SAHM). We thought this was fairly conservative. Just discovered that the most they can offer is only 2.25 times his salary! We checked with another bank and they offered slightly more but still only 3 times salary, so not enough.

We have a huge deposit (63% of property price), no debts, excellent credit scores (just soft checked), very secure income. We do have two kids but outgoings fairly low.

Now obviously I know about the disaster budget and the cost of living etc, but my understanding was that 4-4.5 times salary was still typical. Is that wrong? Is it just for people without dependents?

We asked the bank for an explanation but they just gave us a rote statement about affordability that didn't explain anything. Maybe this is normal and we will just have to wait for prices to fall, but any insights would be gratefully received

The risk would still be there though with just one salary and 4 people

Out of interest what is your partners salary? Could that have a bearing on it? That it's a lower than average income when you factor in the fact he is supporting a family of 4? So is it say less than £50k

(Or do single parents manage to get a mortgage of banks won't lend to a single income household!)

Single parents are feeding, clothing and housing themselves plus children, not themselves, another adult plus children.

@DailyEnergyCrisis I agree about Nationwide. We purposely chose them about 10 years ago as I was briefly a SAHM and they would lend us the most based on one salary
They've always offered us really competitive rates to stay with them and the product switch process is so easy so we've stayed put
They were a bit slow to get it to offer initially and quite old school
I work for another bank in mortgages and up until a few years ago we could benefit from a staff rate mortgage. Nationwide rates were lower!

Depending on the bank, they can be very conservative and the rate not great. I paid a broker fee (around £300 on completion of the mortgage) for a fantastic broker who was independent so can look at the whole market (although they have their preferences, they aren't tied in like a bank). I'm a lone parent and I didn't have any trouble getting a mortgage at a good rate. It also helps to talk with the broker about all the different types of options, what if you can pay back earlier, how long to fix, I also arranged insurance through them.

Agree that Nationwide previously were quite generous. They offered to lend us £500k 10 years ago when our joint salaries weee less than £100k. Luckily we didn't borrow the maximum.

That are right! They’re doing this to protect you. The ridiculous price of houses now is precisely because of the banks lending huge salary multipliers. Traditionally a mortgage would only be offered at 3x the principal or 2.5x joint.

it’s about time lenders were doing this

Just to update. DP went on the L&C site, entered our details and it came up with an AIP of over 3.8

So that is what we would need for the house we're interested in, although I'm not sure what the rate would be.

Having said that, this experience has caused me to reflect a bit and I'm considering reducing my house-buying budget, or maybe waiting a couple of months. I'm not a big fan of risk...

Whatever happens though, we'll definitely be using a broker when we buy!

It was Nationwide that rejected us!

I'm aware that they have a good reputation - that's part of what spooked me about the rejection

It's not fancy but a decent enough salary. Our household income is slightly above average with just the one earner.

Building societys tend to be better than banks - especially the big banks are quite stingy. My DH was a decent earner but was offered a paltry amount compared to when we approached with my part time wage added - so I think a second income does help, perhaps with the affordability checks too.

Just to add quickly, please don't listen to PP who said hopping from lender to lender will damage your credit, not true at all
I would say at least 90% of lenders do a soft check at AIP/DIP/MIP (called so many different things!) And a soft check does not impact your credit file whatsoever. You could run 20 different soft checks and it wouldn't make a difference, there are a small amount of lenders who do a full check at the AIP stage, but they make that really clear and those are the ones you don't want to start collecting

Don't worry I'll definitely have my name on it!

Yes exactly, this was my plan. And why I was surprised that we were considered such a risk, given that it's an option

Our affordability dropped more than I was expecting once we had a second child. Thankfully it didn't stop us getting the house we wanted but I couldn't quite get my head around why the second child would make us that much poorer than the first did!
It was a while ago now but I'm sure they went through a load of stuff like monthly payments if the interest rates rose to silly heights of 10% and we basically had to say we could still pay. I mean, it seemed silly then but not so much now.

Just to add - you don't need to use a single broker. How it works is that, even for the paid ones. You give them all your info, they find you a deal. THEN you decide whether to take it. If it's 'paid' then they only get their fee once you choose them (or the application is successful).

We had a tough time because of a work visa (despite having healthy salaries and deposit). We went to loads of brokers, the same 2 lenders for all of them so we just went direct to the one with lowest rates.

All financial institutions have their lending criteria, different ones have different risk appetites but you should be able to find something. It might not be the best rates though. We thought we'd be in a great position (especially as the mortgage was affordable on one salary0. but no joy. At least you only need one!

London and country have been super helpful this last week for us!

I'd recommend trying a broker. We couldn't borrow half as much as we needed from our bank but going through a broker we easily got a mortgage for what we needed.

With a broker they can check multiple different lenders and find the one who is happy to lend to you.

My broker was great we had complicated circumstances but he knew the little loopholes to get us what we wanted.

Then one week before completion he emailed me saying the rates had improved and I got an even cheaper rate, which I definitely wouldn't have done if I had been applying for the mortgage myself.

He made sure our application was accepted and fit our specific circumstances. They know how to fill out the forms and can also advise you on how much the banks are likely to lend to you.

Also the good ones know which banks lend higher multiple of income. They know which banks are keen to lend compared to the ones that are being more difficult with the approvals.

Well I'd planned to fix for a few years, to give us time to respond (e.g. finding a second income) if rates continued to rise. By this time both kids would be in school, partner likely paid a little more. Mortgage repayments would not exceed our current rent until rates got to around 7%. I thought it all sounded fairly sensible!

Online figure is always bigger. We had this before Covid: went online, got a figure and then mortgage advisor( the same bank) said: No, no way.

Are you specifying 3 dependents?

Oh dear! How much less? Yes he listed 3 dependents. Were there any reasons given as to why they offered less?

If you’re a dependant, you can’t be named on the mortgage. However, it is possible to be named on the deeds even if you cannot be on the mortgage, do not let your lender tell you otherwise.

Definitely use a broker. We used L&C who were good. I don’t know anyone who’s applied directly! And the multiples are less on one income.