Jigsaw Homes Group sets out a number of policies that govern how shared ownership resale properties are handled, along with eligibility, affordability and credit checks.
The policy areas include:
Monthly Surplus Income Policy: Defines a minimum percentage surplus income applicants must have each month after all expenses, to ensure affordability. Standard requirement is 10% surplus. Exceptions allowed in rare situations with documented justification.
Adverse Credit Policy: Sets rules about credit history (CCJs, defaults, bankruptcies etc.), ensures that applicants whose credit is less than perfect are still assessed fairly, and that financing arrangements are sustainable.
Cash Buyer Policy: Addresses cases where an applicant wishes or needs to buy the share outright in cash instead of via mortgage. Requires financial assessment, credit checks, and ensures income/outgoings are realistic and sustainable.
First Come, First Served Policy: For shared ownership re-sales: once a seller has an offer, Jigsaw begins assessment with the first buyer whose details are submitted. If that buyer fails to proceed, they move to the next. There is no nomination period (i.e. they don’t wait for a preferred buyer), and properties may be marketed via independent estate agents.
Minimum Deposit Policy: Applicants must contribute at least 5% of the share value from their own funds and be able to provide proof of the source if requested.
Aim
This policy sets out the minimum amount of money in percentage terms that an applicant should have as a surplus at the end of each month. This is to be assessed following an assessment of all elements of income and expenditure.
This is to ensure that any purchase is affordable and that the ongoing costs are sustainable for any applicant(s).
Scope
This policy is to be read in conjunction with the Leasehold Management Policy, Adverse Credit Policy (Re-Sales), Minimum Deposit Policy (re-sales), First Come First Served Policy (Re-Sales) and current Capital Funding guidelines. Applicants will also need to meet standard shared ownership eligibility criteria, additional eligibility criteria and local connection requirements.
This policy applies to all shared ownership re-sales including those developed with grant funding or via S106 agreements. The policy will apply to standard shared ownership properties, Older Persons Shared Ownership or those in Designated Protected Areas. The policy will also cover cash purchases, where applicants are required to complete a financial assessment.
This policy highlights the minimum amount of monthly surplus income any applicant(s) must have to be approved for the purchase by Jigsaw Homes Group. The policy also seeks to give guidance on how this surplus is determined.
Policy Details
As a standard approach, Jigsaw Homes will only approve applicants who have met the minimum 10% surplus monthly income criteria. This is to be assessed by the advisor completing the applicant’s financial assessment.
Confirmation that any applicant(s) have met this requirement will be documented by the advisor on the Re-Sales affordability check sheet.
Jigsaw Homes have the right to refuse an application if the purchaser cannot meet the 10% monthly surplus income criteria.
In rare circumstances, the advisor may deem a purchase affordable even if the 10% monthly surplus income criteria has not been met. In this scenario, the advisor will need to document the reasons as to why they feel the purchase should be deemed affordable on the Re-Sales affordability check sheet. Jigsaw Homes will then review such instances on a case-by-case basis and make a decision based on the information provided.
Jigsaw Homes will not dictate which lenders buyers use. However, Jigsaw Homes will seek to ensure arrangements are affordable and sustainable – this will involve means testing.
There will inevitably be a variance in interest rates and deals buyers can obtain depending on their circumstances and deposit size. In some situations, applicants may only be able to obtain finance at a rate that is notably higher than average mortgage rates for shared ownership. This can be for multiple reasons, including employment situation or credit history. Whilst such applicants may be able to satisfy Affordability and Sustainability, the higher interest rate at commencement creates a vulnerability in terms of the potential greater impact of changes to base-rate in future that can create additional risk for Snugg Homes and the purchaser.
For this reason, particular attention will be given to any interest rate that is 2% above the average rate for the closest equivalent mortgage (considering loan to value, length of fixed rate term) of five mainstream shared ownership lenders (e.g. Leeds, Halifax, Nationwide, Santander, Barclays). The HA may decide to set a higher parameter in terms of remaining net income on the budget planner and take an overall view of the case to decide if it can proceed.
Our requirements
- No CCJ’s or Defaults that remain unsatisfied, of any age
- No CCJ’s or defaults within last 2yrs over £300 in total
- IVA’s or Bankruptcy discharged 3yrs ago acceptable, or registered over 6 years ago and satisfied, with no further issues
- Debt management plans paid off over 12 months ago acceptable
- No mortgage arrears in last 12 months
- Previous repossession over 3 years ago acceptable, provided no outstanding debt to lender and no other credit issue in last 3yrs. (requires letter from repo lender to confirm no outstanding debt).
- Jigsaw Homes will not dictate which lenders buyers use. However, Jigsaw Homes will seek to ensure arrangements are affordable and sustainable – this will involve means testing.
In the majority of cases, purchasers will be expected to obtain a mortgage. Exceptions can be made in some circumstances, such as age or religion. Requests for cash purchase will be assessed on a case by case basis.
Credit files will be required on all cash buyers, irrespective of the reason. Adverse policy to be followed at the time. This includes partners/spouses of applicants who must also meet the adverse policy.
The reason for needing to be a cash buyer cannot be because they are unable to obtain a mortgage due to adverse credit from a non-high interest rate lender.
If buying cash due to age, the assessment also needs to take into account future income changes if still currently working as this will be changing imminently – hence the need to be a cash buyer
Budget planner must be completed on all cash buyers. For anyone buying less than a 25% share there needs to be a minimum of 20% net income remaining over. The budget planner must be based on the household composition and include realistic figures for all expenditure, backed up by bank statements where necessary.
Income must be considered sustainable. In most circumstances, if a mortgage lender is not willing to accept the income, the income will not be used.
Outgoings must be realistic, ONS data for expenditure may be used in some instances.
Jigsaw Homes Group have adopted a first come, first served policy for the assessment of potential shared ownership purchasers during re-sales.
Jigsaw Homes Group waive the nomination period contained with the standard shared ownership lease and as such, shared owners are permitted to sell their properties on the open market via independent estate agents. This is subject to any purchaser(s) completing Jigsaw’s assessment and approval process and meeting any other eligibility criteria applicable to the shared ownership scheme or the property.
Once an existing shared owner accepts an offer they will forward the details on to us. We will then commence the assessment process with the buyer(s). As well as completing the assessment process, any purchaser(s) will be required to meet any other eligibility criteria applicable to the shared ownership scheme or the property.
Jigsaw Homes Group will commence the assessment process with the first buyer that details are provided for. If for any reason this buyer does not progress we will advise the sellers and await details of a new buyer.
Every applicant is expected to be able to provide at least 5% of the share value from their own resources. You will need to be able to provide evidence of the source of these funds where requested.
