Affordability declined

[PrincessConsuela12]

Hi all,

I'm hoping someone can help, just over 3 weeks ago we put in an offer for a new build, we had a soft credit check & everything was fine, a few days later we had a (4 hour call) with the MA and were pleased with the option we were given, at the end of the call I asked what would happen if our mortgage application was declined & told that it absolutely wouldn't & we'd hear from them in a couple of weeks with an offer.
Since then we've had a few calls asking us to send further information (I am currently on maternity leave & have had to send older payslips, credit reports & a letter from HR confirming my start date).
Today I got a call to say the lender cannot loan us the sum we originally asked for & that someone had been trying to call us all weekend to go through the application with us again. This is not true, I haven't had a single missed call. We've also paid the broker quite a large sum of money to be a lifetime member as well as survey fees (which haven't taken place). We are waiting for a call from the MA which should be today but I'm very frustrated because we've had hard credit searches which is now on our file which could potentially look bad to other lenders & also cannot understand why the MA were so certain we were going to be approved. The lady who called today said our credit report looks fine & she couldn't understand why they won't lend the money to us.

Any advice on what our next steps should be?

Have you initially been declined and then gone onto get accepted elsewhere?

I suspect it's 4x joint salary that's the issue. Especially if you're at a stage in life where you are likely to have more maternity leave. Do interest payments start on your deposit scheme in 5 years? Without an increase in equity they may be concerned about that too.

I suspect it's 4x joint salary that's the issue. Especially if you're at a stage in life where you are likely to have more maternity leave. Do interest payments start on your deposit scheme in 5 years? Without an increase in equity they may be concerned about that too.

@DianaT1969 Yes they do. Our broker advised paying that part off as quickly as possible & then said a lot of people add the H2B loan to the mortgage after 5 years if it's not all paid.

I understand the lenders worry but our broker assured us this wouldn't be a problem. I thought going through a broker would make things easier as they knew the criteria & would place is with the lender who would be most likely to approve.

Lenders are being really wary at the minute due to the pandemic. We recently moved house and there wasn't nearly as many mortgage products on offer.
Are you in high risk for redundancy careers?
Hope it gets sorted for you soon. These things are so stressful.

When we got our mortgage the affordability check was can we pay it if interest rates increase, I can’t recall how high it was, but it was something like 7percent. So they checked all our fixed costs, car, commute, insurance, child care/school etc.

I suspect it’s the child care, any other fixed expenses, and four times the salary, which is causing them to say you can’t afford it when they apply the interest increase hypothetically.

Just to say we have used One77 mortgages for our last two purchases, including once when L&C just didn't seem too concerned about how quickly they got back to us. They are much smaller, basically respond to queries 24/7 and were set up by some of L&Cs finest. We completed our last purchase during lockdown in Nov and it wasn't the agents or solicitors who were most supportive during the purchase, but Crystal and the team from One77. OP DM me if you'd like her contact details. They were amazing for us this time as before.

@greenfrogs1 Luckily I don't think we are but you never know with everything going on.

Thank you @mrsanflowerpot. I will definitely be in touch if we don't get anywhere after this call.

@Bluntness100 You could well be right. The H2B scheme did check for affordability and the interest was around 7% like yours, it meant we had to increase our deposit by around £7000.

I've just received a call & apparently it's due to how my DH extra responsibilities are reported on his payslip. It looks like a bonus (it's not, he gets the same amount every month and not associated to any targets) but they still won't accept it so the MA is submitting our application to another lender 🤞🏽

Thank you all for your help.

Could your husband's employer write a letter to confirm this is the case?

I recall having an issue many moons ago with a mortgage application as my pension was salary sacrifice. HR wrote a letter saying this was the case, and my actual salary was £X, and the mortgage provider (possibly Nationwide) accepted it.

@NachoNachoMan I did ask that initially but she's sent the new application across to me now & it's actually a lower rate so we're going to resubmit with the new lender. The MA said it's going straight to valuation so I'm hoping it's a quicker process 🤞🏽

It is unethical to make promises. Until you actually have a mortgage offer it is only ever possible to give an indication.
The recommendation to just add the loan to your mortgage after 5 years is also not kosher. If it was that simple why not just take out a bigger mortgage now?
You have to bear in mind that the 20/40% is an equity loan so even if your house price goes up, you will still owe 20/40% of the value.
So really you need to pay off the loan and hope house prices don’t go up or you will owe more.

Hi @PrincessConsuela12 a couple of things. Sounds like your MA was shit and should never have told you you’d be old I suspect the decision not to lend is correct, and your MA got it all wrong.

Are you first time buyers and / or have you had a chance to build up much credit? First time buyers often get rejected.

You could have been rejected because you’re on mat leave (not sure how they’d know unless your MA told them, so technically your income is less).

What other repayments are you making right now?

@kittenpeak I'd say we're relatively young but I'm not sure if that's wishful thinking. We are FTB but both have excellent credit scores.

We're paying the usual insurances / household bills but nothing out of the ordinary.

First time buyers often get rejected.

I'd be interested to see some stats/evidence on that because I certainly don't think that's the case at all, certainly not "often".

@ForensicAccountant That's something we've taken into account. Our aim is to pay / save a large chunk each month which is currently very doable,

I think that's why I was so frustrated yesterday, we'd sent payslips at the beginning of the process & told them about the extra responsibilities, once again the MA didn't see it as a problem so I was very surprised when it came back declined.

I'm really hoping this next step is more successful. Our credit score has already gone down slightly because of all the hard searches that have been done.

@ForensicAccountant for lots of people, FTB especially, and especially at the moment with the reduction in low deposit mortgages, it's not always possible to get the bigger mortgage straightaway due to the amount of deposit they have, not just affordability. After 5 years you've increased your equity and for people on career paths they may have increased income too making remortgaging an option (though of course tbuyers should always been explained to what happens if they can't afford to remortgage the loan because not everyone will)

Also, very few with a HTB loan is going to wish for prices to stagnate, HTB buyers still make 80% of the profit of any price increase which in turn can help pay off the loan even if it is now 20% bigger. Yes it means you pay off more, but also means you've made more! You'd be paying huge chunks of interest if it was on the mortgage any way on a high LTV, this is just how the model is designed to be sustainable for the government, it can't be free money. Though of course the sooner it is paid off the better. A house price dip will only benefit those who are able to save for the loan in those 5 years, of which I can't imagine there are too many in that situation.