Mortgage Refused - Gobsmacked!

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sadie

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Just a warning to trader-uppers like ourselves who thought we were sitting pretty and that the banks would be falling over themselves to give us money. So be advised to get that full Approval in Principle before going house hunting.

We are a single income, wife at home, husband earning modest 40k salary, 2 children currently renting.
No debts or loans, over 200k savings.
We have been refused a mortgage OUTRIGHT by one financial institution as we wouldn't even qualify for the minimum 75k!
Bascially they said it was 'responsible lending'. We would need a salary of 48k min to qualify for the 75k mortgage (just below 2 x salary). At the initial 'chat' stage we were told we'd probably get up to 180k no problem.

But listen to this, if we had NO children we would immediately qualify for 175k from the same bank!
Last year 2008 we were given full mortgage approval for 140k by another Bank.

What annoys me is a young couple, no kids, earning a combined income of only 40k can get 175k, when the Banks know full well, that in say 4 years time likelihood is that couple may have 2 children, and the same Bank themselves wouldn't lend them 75k at that stage - because they know they won’t be able to afford the repayments.
This is what really, really makes me so angry about the whole property boom - young couples who bought in the last 5 years with the intention of starting families have already been lured into a LIFETIME of debt. And still the banks are bringing out packages aimed at First Time Buyers.
First Time Buyers today, Family in Crisis tomorrow.
 
Jeez thats terrible, thought with your amount of savings you would be sitting pretty.
Have you tries AIB? I got mortgage approval two weeks ago from them.
FTB, loan approval for 275k on my own, earning 48k per year, 25k savings.
 
If you have savings of €200k why do you need to borrow a further €75K?

What's the nature of employment? How long have they been in your current job?
 
exaclyt. number one how do you save 200k?? and why would you want a mortgage then
 
Without knowing how much you are looking to borrow, it's difficult to give an accurate reason why you may have been refused. However my understanding is that the banks are stress testing more given that interest rates are currently at an all time historical low and I would imagine that they are concerned that you would not have the ability to repay the loan, given your modest income, were rates to climb again.

Are you sure there are no other issues, eg credit history?
 
We sold our first house a few years ago, due to job move and then inheritance etc gave us the bank of savings. We have two children so had hoped when 'trading-up' to be able to afford more than a 3-bed semi in an area we don't like, which is what 200k would buy us. And then that'd be our savings gone entirely.
We have no other issues relating to bad credit history.
 
It's nothing to do with the nature of employment, I wasn't asked, we didn't get that far. The figures just didn't add up in the internal calculators - so there was no point proceeding with the application because the mortgage person knew it would be declined because the salary amount plus the 2 children just did not add up.
 
I am a mortgage broker (former banker) and this is the kind of thing which we are experiencing daily. The banks may have taken out full page adverts to say that they are "open" for business however I think this was merely just to convince themselves.

I would hazard a guess that you tried AIB? They plus a few others really reduce your borrowing potential based on having kids- this in itself is a form of discrimination.

You should try PTSB as their calculation method does not take into account whether you have children or not so hence you should qualify for a much large amount (although they are quite diligent on other lending criteria at the moment too). Alternatively try a good quality broker preferably an authorised advisor rather than multi agency fo some assistance.

PTSB rates aren't as good at the moment as AIB, but needs must if you require a higher approval- just be careful that you can afford to service the loan from net salary (reduce net salary by 8-10% to account for all these taxes that could be on the way & run the figures again to be sure!)

Best of luck with it!
 
Not_near_it said:
Jeez thats terrible, thought with your amount of savings you would be sitting pretty.
Have you tries AIB? I got mortgage approval two weeks ago from them.
FTB, loan approval for 275k on my own, earning 48k per year, 25k savings.
Click to expand...

OK, this is wrong. They approved you on a mortgage that you are not going to be able to repay. This is what got us in trouble i the first pace and it is dishartening to see that AIB is now lending governament money at a loss...

Cheers,

nadnerB
 
Stick with it Sadie, that's a baffling decision.

A bank gave me way more than they should have in 2006, I regret it now of course, but they should never have let me really (not denying it was 100 per cent my own fault) and then people like yourself get turned down.

By the way, Not near it, your loan does seem a bit mad unless there's something you're leaving out there.
 
NorfBank said:
Some banks crucify you for having kids, some are more lenient.
Shop around.
Click to expand...

Do they all ask if you have kids? What are the possible implications of leaving that section on the form blank? Does the negative weighting they apply vary depending on the kids' ages?
 
nadnerB said:
OK, this is wrong. They approved you on a mortgage that you are not going to be able to repay. This is what got us in trouble i the first pace and it is dishartening to see that AIB is now lending governament money at a loss...

Cheers,

nadnerB
Click to expand...


Getting approval is one thing, but following it through is another. They want to be seen to be lending and so give approval to large amounts, but once you take it to the next step, they suddenly cant lend as much.
 
Senna said:
Getting approval is one thing, but following it through is another. They want to be seen to be lending and so give approval to large amounts, but once you take it to the next step, they suddenly cant lend as much.
Click to expand...

It depends what kind of approval he got. If it is Approval in principle is one thing and can be revoked by the bank but to me approval means the final one te one when the bank sends out the loan offer and once this has been sent the bank cannot change its mind unless the loan is not drawn down for 6 months.
Even if it was approval in principal it would be wrong, before giving approval in principle the banks must define the ability to repay of the customer and in the case above they certainly got it wrong.

Cheers
nadnerB
 
How much did you want to borrow, what would the repayments on this amount be, how much is your current rent? Do you have any other debt that you are currently repaying. Try a different branch of the same bank. It's always best to find out in advance how the box ticking works so you give the right answers.
 
eggerb said:
Do they all ask if you have kids? What are the possible implications of leaving that section on the form blank? Does the negative weighting they apply vary depending on the kids' ages?
Click to expand...

Please see my text earlier in this thread.

From brokering experience- PTSB is where to apply for the maximum approval if you have got dependent children. Their underwriting system & criteria doesn't reduce approval amounts because of kids- only problem is their rates aren't as good as some other lenders.

Effectively at the moment these are your choices (this is a broad generalisation)

First Time
 
eggerb said:
Do they all ask if you have kids? What are the possible implications of leaving that section on the form blank? Does the negative weighting they apply vary depending on the kids' ages?
Click to expand...

Please see my text earlier in this thread.

From brokering experience- PTSB is where to apply for the maximum approval if you have got dependent children. Their underwriting system & criteria doesn't reduce approval amounts because of kids- only problem is their rates aren't as good as some other lenders.

Effectively at the moment these are your choices (this is a broad generalisation)

First Time Buyers & Trade Up Mortgages try AIB & BOI (those without savings have a reduced chance).
FTB & Trade Up (if you have kids) try PTSB
Investment Property- try ICS or AIB (low level of approvals being issued- very difficult)
Commercial Loans- try your own bank first (approvals commercially as scarse as hens teeth- this market is dead)

Hope the above rules of thumb save people some time
 
Playing Devils Advocate here, but we all slated the banks for handing out mortgages far too easy in the past and bringing the country to its knees, now they are being slated for being responsible in their lending.

Can they win?
 
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