the nightmare of mortgages for first-time buyers

[chirpychirpy]

A mate is self-employed with a fairly steady income of about £12K a year. He's also a first-time buyer but the well-known building society who he's trying to get a mortgage from has still not made an offer after several months. In that time they've asked a million questions, all of which appear to have been answered to their satisfaction. And they've repeatedly set dates they'll decide by, yet never actually come up with an offer. The mortgage broker claims to be powerless to do anything. Is this standard these days, due to the nervousness of lenders following the recession? And, most importantly, can anything be done to make the building society finally come up with an offer?

[buildersmate]

More likely the £12k pa income and the self-employed bit that is causing them nightmares.
That doesn't sound to me like a strong basis on which to be taking out a loan.

[chirpychirpy]

I forgot to add that he already owns a property worth over £125K

[CheekyChops]

I don't think that already owning a property will have any bearing on their decision. As Buildersmate says, £12K is not a lot of income when looking for a mortgage, most lenders will lend around 3 - 4 x salary so he would only be able to borrow £36K-£48K anyway. How much is he trying to borrow and how much is the property he is looking to purchase?

Has he tried other lenders instead of waiting for the one Building Society?

[hc4361]

Does he own the property mortgage free?

[chirpychirpy]

hc4361, the answer is yes

[buildersmate]

Well if he owns a property now, irrespect of how he came by it (inheritance?), he's not a first-time buyer.

[chirpychirpy]

fair point, buildersmate - better to say he's a first time mortgage applicant

[factor-fiction]

So do we know how much he's trying to borrow?

[chirpychirpy]

ideally he'd like at least 50K but, knowing that is unlikely, has explained he'd settle for whatever the lender is prepared to offer

[buildersmate]

It's 4x the annual salary then. I would seriously wonder how he thinks he can afford this as a bigger proprtion of a £12k salary than average gets swallowed up in everyday expenses.
It may appear fine in repayments with interest rates around 5% but the long-term average is around 7% - so over 40% hike in mortgage repayments when rates go back up.
Plus he's self-employed - so more at the mercy of market demand for whatever he provides in his business.
When viewed in those terms, it is perhaps understandable why companies are less than enthusiastic. No-one wants to be turfed back out of their property later.