Alan Lakey is senior partner at Highclere Financial Services
“We are not advised whether Barry and Sally have funds for a deposit and the requisite fees. If not, and they are looking for a 100 per cent loan, they need to have an excellent credit rating as these loans do not usually accept adverse credit or low credit scores. A 5 per cent deposit will offer them a far greater choice as the majority of mortgage lenders will restrict 100 per cent lending to three times joint incomes – in this case £171,000.
Assuming that there are no loans or large credit card balances, their current joint income of £57,000 will allow a 100 per cent loan of £190,000 with some lenders. It is assumed that Barry is employed – if self-employed then a three-year net profit history will be required, which might involve averaging the last two years’ figures.
Sally would be advised not to change occupation before making the mortgage application as this will not only reduce the credit score but may reduce the list of potential lenders because of minimum employment period rules.
On a purchase price of £190,000 the fees are likely to total around £4,000, which does not include any higher lending fee that may be applicable. It is not unreasonable to expect them to have accumulated such a sum based on their incomes.
It is advisable to avoid a higher lending fee. My recommendation would be Northern Rock, which offers a number of 100 per cent options. My choice would be the fixed rate of 5.99 per cent for two or three years as I find it appropriate for most first-time buyers to cap their outgoings at an affordable figure.”
Nick Gardner is director at Chase De Vere
“Barry and Sally’s options depend to a large degree on their regular outgoings, the size of their deposit and their credit score. But broadly speaking, their joint income is plenty to be looking at properties in the £190,000 price range. There are plenty of lenders who will advance 4 times joint income or more.
Not all lenders are so generous though. Portman, while offering the lowest five-year fixed rate at 4.99 per cent, will only lend 2.85 times joint income, so wouldn’t be worth approaching.
But there are plenty more generous lenders with very competitive product rates which are well worth considering. For example, if they wanted to fix their rate they could look at Alliance & Leicester’s two-year fix at 4.64 per cent, available up to 95 per cent loan-to-value (LTV).
Alliance & Leicester lends based on affordability but four times joint income should not be a problem unless the couple are seriously hindered by any existing debts.
For five-year fixes, Yorkshire Building Society offers a rate of 5.09 per cent and will lend 3.5 times joint income up to 95 per cent LTV.
Finally, if the couple wanted to take a chance with a variable rate mortgage deal, Alliance & Leicester is also offering a 4.39 per cent two-year tracker product, pegged at 0.36 per cent below Base Rate for two years and with a very reasonable £499 fee, which is also available up to 95 per cent LTV.”
The response is from The Mortgage Broker Ltd residential lending team.
“Barry and Sally are in a great position as most lenders that offer 100 per cent mortgages would be willing to lend the clients the advance that they are looking for. Three lenders jump out as main contenders for this loan, including Northern Rock, Coventry Building Society and Accord Mortgages. Our preferred route would be Accord mortgages as it offers a great solution to Barry and Sally. Their income fits within the lender’s income multiples and therefore, subject to a positive credit score, they can get a 100 per cent mortgage with a fixed rate of 5.75 per cent currently being offered to September 2009.
Accord will also take Sally’s current occupation into account. Her future career change into the teaching profession will not affect the underwriting decision as the application will be based on her current job and her current income. However, if her career change took place during the application stage the lender would require the new information regarding income and employment details – it would then base its lending decision on the new information provided – subject to there being no material change in Sally’s income the underwriters at Accord would foresee no problem with their joint application based on the new job.
The deal has reasonable arrangement and valuation fees with a bonus of no higher lending charge.”
