Buying a property? Lending is very strict

Yes, it is true, that the property market is hot right now and it really is the right time to buy a property.

Truthfully, any time is a great time to purchase, if the deal is right.

However, at least 85% of the first-time buyers' applications are being rejected, and the lending criteria is very strict at the moment.

You will most likely notice properties being sold, and then a month later, going back onto the market. This is happening due to the lending criteria changing and underwriters' scrutinising risk.

Getting an AIP (Decision in Principle) doesn't mean anything anymore. The underwriters' will take you through a very painful journey, so be prepared.

Recently, I have been liaising with some Bank Lenders to know what things they are looking out for when lending. Below are some key facts they look at:

1. If you have been on furlough, then you won't get a mortgage, as it's a massive risk. So many people have/are being made redundant, and the underwriters are completely aware of it.

2. Regarding furlough, if you were receiving a 100% salary and not 80%, then you may still have a chance, but ultimately, it is the underwriters' decision based on other factors, and the lenders will ask for an employers letter, to confirm your employment is secure.

3. Don't have an outstanding credit card balance, as it is not a great starting point.

4. Any loan is a potential risk.

5. Having outstanding finance or a lease vehicle, will be subtracted from your annual salary and then leveraged between 4-4.5, depending on the lender. For example, your salary is ￡30,000 a year, and your car finance works out to be ￡350 per month - ￡4,200 will be subtracted from your salary. Other expenses will be too, depending on the lending criteria.

In this example, the lending amount will be based on 25,800 x 4.5 = ￡116K available to lend.

Note: Loans and credit cards will be subtracted too.

6. Don't have any CCJs

7. If you are self-employed, then your previous 2-3 years' average income will be taken into account and tax summary.

8. Be prepared to show 6 months of bank statements.

9. If you are receiving tax credits, then have your latest tax credits overview to hand

I have also noticed, that the 2 years fixed interest mortgage products are not available with a lot of lenders. The products greater than 2 years have a slightly higher interest rate, meaning you may end up paying a higher monthly repayment. The question is, will you be able to afford it?

That is all the information that I am aware of at this moment in time. I truly hope that this information helps anyone looking to purchase a property in these days, because a great deal is always worth snapping up at any time.

Best of luck!

Cam