6  Assessing Applicants Financial Capacity

6.1 General

6.1.1 RSLs must direct all households that are interested in accessing NBHB to the HomeBuy Agent for their locality, with whom the applicant must register (except for specialist RSLs offering properties under the HOLD programme).

The HomeBuy Agents’ role includes:

• Determining the applicant’s eligibility for the product (see sub section 1.4)
• Advising applicants of the opportunities and options available to them across the range of HomeBuy products.
• Processing applications from interested households including carrying out a preliminary financial and eligibility assessment
• Headline marketing all schemes that will be/are available in that locality
• Providing lists of potential purchasers to RSLs and developers of Grant funded schemes.

6.1.2 Developing RSLs are responsible for the sales and specific, local marketing of their own schemes. However they are required to work with the HomeBuy Agent who will hold up-to-date lists of potential purchasers, which will be provided to developing RSLs. The HomeBuy Agent may also be able to provide suitable purchasers for re-sales. The Homebuy Agent will headline Market all schemes in the locality on their web site.

6.2 Assessing Applicants Financial Capacity

6.2.1 RSLs must encourage purchasers to buy the maximum share they can afford AND sustain.

The Homes and Communities Agency requires RSLs to use the Affordability best practice guide and Affordability calculator or a methodology of comparable standard to determine applicants’ ability to afford and sustain home ownership using the HomeBuy Suite of products, (including the First Time Buyers Initiative), but excluding the OMHB product for which a separate calculator has been published.  This can be adapted to suit individual circumstance, whilst ensuring that long term sustainable home ownership remains the primary objective.  Capital sums held by applicants will be taken into account when assessing long term sustainability.  This does not include lump sums paid to medically discharged ex-members of the armed forces (please see 1.4.2a)
 
For more information please see the Affordability calculator and guidance. Follow the asterisk.  

 

The FSA's rules require lenders to take into account a borrower's ability to repay a loan and the sustainability of the particular loan being considered.

Further guidance is available to lenders and mortgage intermediaries when assessing a borrower's ability to repay a loan, and can be found by accessing the FSA's website http://www.fsa.gov.uk. 

6.2.1a For social tenants and Key Workers accessing NBHB and OMHB, £60,000 should be the maximum income threshold.
 
Where a RHA specifies an income threshold, it applies to their priority groups only.

6.2.2 Applicants in receipt of Benefits, such as Housing benefit are not precluded from applying for LCHO products, subject to affordability and sustainability assessments.  

6.2.2a The Agency would expect that assessment of applicants income would not wholly rely on self-certification.

6.2.3 In the case of joint tenants where only one tenant qualifies for the programme, the purchase can proceed in the name of the qualifying tenant provided both tenants surrender the joint tenancy and vacate the tenanted property on completion of the sale.  In these circumstances the HomeBuy Agent should satisfy itself that the non-qualifying tenant is either intending to live with the qualifying tenant or has identified alternative private living accommodation suitable for their housing needs.

6.2.4  An applicant who is an RSL or  Local Authority tenant must not be in rent arrears or in breach of their current tenancy agreement at the time of the application.  Where a tenant is or has been in arrears for a short period due to a sudden change in circumstances or an administrative delay or error in recording the rent paid in the RSL or Local Authority’s rent accounts, the HomeBuy Agent may use their discretion to allow the case to proceed where it is satisfied the rent is being paid and the applicant has sufficient income to support a mortgage loan.  In the case of private sector tenants, the HomeBuy Agent must be satisfied that the tenant has not had a history of rent arrears.

6.2.5  For an application from an RSL or  Local Authority tenant, the rented property must be able to be re-let to a Local Authority nominee.  However, if the HomeBuy Agent has instructed the applicant to proceed and the Local Authority subsequently fails to nominate someone from its waiting list, the application can proceed on the basis the HomeBuy Agent will nominate a household from its own waiting list for the social rented unit.

6.2.6  An RSL or Local Authority tenant whose property has to be vacated for repairs or demolition and who needs to be re-housed in alternative RSL or Local Authority accommodation may also be accepted onto the programme providing they meet the other eligibility criteria.

6.2.7  Tenants of mutual co-operatives are also eligible to participate if they meet all the other eligibility requirements.

6.3 Joint Purchases

6.3.1  An eligible applicant who wishes to buy a home with someone else can only proceed on the condition that all joint applicants become joint owners.  Although joint applicants need not all be an RSL or Local Authority tenant, key worker or other priority buyer, the person(s) must have their financial status assessed by the HomeBuy Agent.  
 
Anyone joining in the application who already owns or part owns a home, must sell it at the time of jointly buying through HomeBuy.  
 
The maximum number of people able to jointly buy a home is three or four depending on the Participating Lenders’ criteria.

6.3.2  A sole qualifying applicant wishing to purchase jointly may only proceed on the condition that they are to be a joint legal owner of the property. A deed of trust providing rights of occupation for a qualifying applicant is unacceptable as an alternative to becoming a joint legal owner.
 
6.3.3  An RSL or local authority tenant qualifying for the programme may have a partner who does not want to join in the application.  The application can proceed in the sole name of the qualifying applicant provided the HomeBuy Agent gains vacant possession of their current property AND there is no obligation to re-house the partner. 

 
6.4  Immigration Act Status

6.4.1  People accessing Grant funded NBHB schemes are required to demonstrate that they can afford and sustain home ownership in the longer term, see para 6.2.1 above.  

6.4.2 Those applicants who are subject to immigration control (i.e. who require leave to enter or remain in the United Kingdom under the Immigration Act 1971) are less likely to be able to satisfy this requirement unless they have indefinite leave to remain in the UK.

6.4.3  However, there is nothing which legally prevents individuals subject to immigration control but without indefinite leave to remain from accessing NBHB, provided that they fulfil the Association’s usual NBHB requirements. If such an applicant can demonstrate their ability to sustain their home ownership obligations, it is likely to be discriminatory to deny them access to the scheme.

6.4.4  RSLs may wish to take the view that if a reputable mortgage company is willing to provide finance for the purchase then the individual is considered good security and therefore should be allowed access to the NBHB scheme. 

6.4.5  RSLs must adopt a case by case policy and are responsible for the decision as to whether the individual in question qualifies for NBHB.