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

Broker! - as has already been said. Don’t spend time trying to second guess yourself why you were offered X amount instead of Y.
Run to brokers, who, at the click of a button, can scan the market and suggest workable options. The why question is unhelpful at the moment, as you might never know the real reason. It could be simply that the bank has recently tightened its lending criteria for whatever internal reasons. It might not be unaffordability on your part.

Oh for the days when the bank manager saw you in person, knew how you ran your account and decided on the basis of his assessment of risk how much he would lend. The staff you spoke to probably don’t know more than that your eligibility was decided by a computer (that’s the improved service we now have, and have to be grateful for)

Simpols, one salary lots of dependants.
Schoolboy/girl error - never apply directky. Use a broker, they sort all this out. I tried to buy current house by applying directly and had same issues, went to a broker got an AIP within half hour with generic answers without pfaffing for hours with detailed finances

Definitely use a broker. It's their job to do all the research for you and come back to you with realistic and suitable options for your circumstances. They'll also be aware of what lenders are more/less risk averse.

I work for a bank and it's most likely that there's one salary coming in and 3 dependants.

It's because you're on one salary. You'd probably find if you were both working, and your combined wages were the same as his salary now then you'd be okay.

A household living on one salary is a much bigger risk so they'll lend quite a bit less.

Unless you are urgently trying to buy right now I would take the time to understand what you can do to improve your position for your next application. You may need to spend less if they are looking through your accounts - ask your broker what the banks are considering as part of your core expenses and see if you can reduce them. Perhaps cancel streaming memberships, and reduce childcare. On the income side can you get a part-time job to improve serviceability? Definitely ask for a maximum-term mortgage as that makes servicability easier (and then pay it down at your preferred rate). Check your credit record. After the loan is settled you can leave the job and increase expenses back to the level you are comfortable.

Get a good broker and learn everything you can and don't apply for further loans unless you know the answer is 99% a yes as declines on your record will make it harder to get an approval.

People keep mentioning their “deposit” as though it assists with affordability. It doesnt but it gets you a lower interest rate if the loan to value is below say 60%.

Before the 2008 crash, all you had to do was have a 20% deposit and some banks ( ie Northern Rock ) would lend you ANY amount because “they” were covered by having 20% equity. With the crash that all changed. The risk is now assessed not from the banks perspective so much as the borrowers. They will not let you borrow what you cannot afford like they did before the crash. Hence very low multipliers with numerous dependants

I loved the 20% borrow what you wanted days. It allowed me to buy my forever home on my own at 35 and then buy houses to let.

As previous posters have said. Definitely use a broker. Our broker was able to get us a significantly larger mortgage than us going directly.
it didn’t come without its complications though! The bank whose mortgage we got in the end originally told the broker we could only afford something around half the price of what we got in the end.
Turns out they’d made a mistake with our income (as in just ignored several life’s of paperwork). We’d never have gotten to the bottom of that without a broker!
Good luck!

Regards income insurance, my non finiancially qualified opinion is : dont think about, it do it and do it now. Once symptoms etc arrive its too late and the younger you buy it the cheaper it is. Obvs you may have excellent sickness/accident cover with Dh job but you can build that in to a plan making it even cheaper.

🤣🤣🤣 yeah that's the best way to decide whether to lend someone tens of thousands of pounds - look them in the eye and see if you like the cut of their jib. The very definition of "responsible lending".

In the good ol' days of bank manager discrimination decisions, they wouldn't have agreed more than 3 times sole salary without referring to underwriters anyway, so OP would be in same position...

Does your husband have any secret debt that you are unaware of or any another bank account that he uses for gambling? That alone will block a mortgage

As other have said use a broker. We were told that many use different calculations for court when you have dependants especially those under school age.
When we were moving the Brooker told us Natwest had one of the more favourable affordability calculations for dependants but no idea where they are on one income households as we have 2 incomes. A broker will be able to advise though. You don't have to go with them. Once we knew our options we went direct and ot was pretty straight forward online

Exactly. My advice, to add, is never ever rely solely on workplace insurance. Someone I knew was diagnosed in his probationary period at a new job and hadn't yet sorted his own critical illness cover. If you start a job with cover at 30, then leave at 37 and need the insurance it'll be enormously more expensive.

Just echoing on using a broker. However please don’t do as a couple of people have said and get options then go direct - especially if they do not charge for their services. Many brokers are self employed, give free advice and if you just go direct, they will get no payment for the work they put in for you, which is a bit out of order

Absolutely zero guilt from me. But then again, none of our brokers went the extra mile, whether self-employed or from a company. Maybe because it was so obvious that we were a lost cause.
Had someone given me a unique deal and great service they'd have deserved my business.

Why were you a lost cause? Did they find you anything in the end?

They all came up with the same two lenders. I knew that they hadn't done much legwork because I hadn't given a lot of details and they got back to me very quickly, no request for further information, just telling me that those were my only two choices.

While my other friends with different positions (self-employed etc) got requests for more information, lots of explanation as to which lenders might consider and why, etc.

I didn't see why any one of those brokers deserved my business. As it turned out the lender's own broker was excellent and pushed us through despite technical challenges, so it was the right choice after all.

We managed to get a mortgage, I am a SAHM with two children and one on the way and my husband is self employed. We had to find a broker who was experienced with self employed people but it went through no problem. Like you we had a huge deposit which helped. Just need to find the right broker. Hope you get it sorted x

This is called income staging and is a type of mortgage fraud. Any good underwriter will be able to sniff it out in a second.

Every lender is different .. they all have their own acceptable risk profiles and therefore their own lending criteria. Mortgage advisor would be your best option. Or money supermarket.

Even if she keeps the job?

No, not if the intention is to keep the job. The pp who posted this suggestion said this wasn't the case in her friends examples.

Lenders vary a lot in what they see as a risk and what they are prepared to offer.

Our circumstances when taking out a mortgage were very different. Two incomes, no children etc.

However, although it was over 15 years ago and at the point interest rates were starting to rise ( they went up before our first payment and about 5 times in the first year), and we also had a good deposit from the sale of my previous house.
The banks/building societies we went to all offered different amounts. One offered 2.5 x joint income, another 3x and the third 3.5 times.

The lowest one wasn't enough for what we needed. The others were but we ended up with the one that offered the most because the deal was better. We didn't actually take the full amount they offered.

Banks are notoriously conservative. Use a broker.