Page 3: The status of the borrower
The Britannia needs to establish the status of the potential borrower. The most basic requirements are that the applicant:
- is over 18 years old at the date of completion
- has a regular income from an acceptable category of employment
Where the loan required exceeds 75% of the valuation or purchase price (whichever is the lower), known as the Loan To Value (LTV), the following categories of employment will not be acceptable to Britannia:
- seasonally based employment, e.g. fruit picking or seaside casual work
- commission only sales people, e.g. a computer sales person whose earnings are based entirely on the number of sales he / she makes
- any employment where over 50% of payment is commission.
Also, where an applicant has recently started their career, (e.g. first job, or returning to work following a career break) they must work a minimum of 6 months before their income can be taken into account. The Stevens certainly meet all the requirements outlined above. They are in their early 20's and have had regular employment for the last three years. Neither rely on commission or seasonal work.
Once the applicant has satisfied the above criteria, Britannia needs to establish the applicant’s status and decide how much the applicant can borrow. Building Societies use the term ‘status’ as a measure of whether the applicant can reasonably afford the monthly repayments on the loan they have applied for. To establish the status of applicants, it is important to look at both their income and any regular outgoings which must be taken into account. For example, a borrower may be trying to secure a second mortgage, or purchasing an expensive item (e.g. a car) on hire purchase.