Lender Criteria changes during Coronavirus – Can I Still Get a Mortgage?

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The answer quite simply is YES you can.  Whilst mortgage lenders are still very much open for business their ability to lend is hampered by the current Coronavirus situation and the obstacles to lending this creates, such as:

 

Staff shortages

With lockdown & social distancing restrictions in place all lenders are facing the problem of managing applications.  Whilst lenders are still actively open for business such restrictions negatively impact a lender’s ability to underwrite and process an application promptly, therefore lenders service standards have been impacted.

 

Property Valuations

Not being able to complete physical property valuations due to social distancing is a massive issue for any mortgage transaction because, if the lender can’t physically inspect the intended security, the case is unable to proceed. This is why the mortgage lender market suddenly stopped a few weeks ago because lenders couldn’t carry out physical property valuations under social distancing guidelines.

Most lenders have now introduced desktop valuation or drive-by valuation systems to counteract this but unfortunately not every property will qualify. Lenders have had to impose property and maximum loan restrictions to allow their desktop valuation or drive-by systems to work.  Should the property not qualify for a desktop or drive-by valuation, and a physical valuation is required, the case is effectively placed on indefinite hold until it is practical and safe to carry such valuations out. We have a handful of clients that are trapped in this situation.

Mortgage applicants also need to be mindful as a direct consequence of Coronavirus, desktop, or drive-by valuations are likely to return lower property valuations in the present climate and such valuations can’t be challenged.

 

Offer Validity

Most mortgage offers are only valid for three months, although a few lenders do offer six-month mortgage offers.  The issues with the current lockdown restrictions and house transactions placed on hold, with no guidance on when such restrictions will be lifted, mortgage offers could, and are, expiring.  Thankfully lenders have taken a common-sense approach and are automatically granting offer extensions however, checks could be applied and circumstances could be different from when the initial application went in.

 

Income issues

Following the Government’s lockdown announcement and the obvious restrictions, this has placed on people’s ability to work, Lenders have had to review their underwriting income criteria and introduce a serious of temporary changes. The lending policy has to take account of the fact mortgage applicants may find themselves in a temporary reduced income position.  This obviously could also affect mortgage applications already offered or processing in the pipeline.

To balance changes to an applicant’s income position at the time of application, or during the processing of an application, lenders have introduced underwriting flexibility. This is to help those applicants that find themselves in the position of either: redundancy; imposed self-isolation; furloughed; or self-employed with no opportunity to work. Broadly speaking for employed furloughed workers seeking a mortgage a lender would underwrite the mortgage application on the basis of their furlough income.

In cases where the employer is making up the difference to 100%, i.e. 20% top-up, lenders will generally expect a letter to clarify this, and confirmation of this will continue. For self-employed cases, lenders would look for more reassurance of current and future income potential whilst taking a view on the occupation type and the applicant’s ability to earn an income whilst lockdown restrictions are in force.

For those cases currently in processing, lenders would expect clients to confirm to them if they had subsequently been furloughed, had a reduction in income, or been made redundant, whilst their application was being underwritten.  Any new material case change would mean the lender reviewing the case in line with the new confirmed income details. This could potentially create the case to be at risk of a reduced loan, being declined, or the option to place the case on hold until the applicants’ position returns.

Most lenders, in the current climate, are unlikely to consider additional income sources such as bonuses, commission, or overtime.

Riviera Mortgages can help you navigate the present mortgage minefield and guide you with tailored expert advice. For more information, please call us on 01803 500190 or contact us here.