7. The Application Process
This chapter considers some of the issues raised in relation to the application process and the administration of the First Home Fund.
Views on the application fee
An application fee of £550 is charged and collected by Link as the administering agent for the First Home Fund.
In the main, the £550 was considered to be reasonable; this was sometimes connected to fees being payable for other financial products, with some buyers reporting that they had anticipated that a range of fees (such as solicitors and mortgage set up fees) would be payable and that the application fee for the First Home Fund felt in line with these. Whilst sometimes noting that they would, of course, have preferred if no fee had been charged, it was neither seen as unreasonable nor as having been a significant consideration in their decision to make an application to the First Home Fund. Other views included that:
- Relative to some other fees, and particularly to solicitors' fees, the amount seems reasonable.
- When balanced against no interest being chargeable on the equity stake at any point, it could be said to represent good value for money.
Not everyone agreed, with a small number of buyers thinking that no fee should be payable for accessing a Government scheme, or that the level of the fee is simply too high. There were also queries as to why a fee is charged and what it is designed to cover; it was suggested that this is not explained to applicants and that greater clarity would be desirable.
Although a minority perspective, there were reports from an IFA and a developer that when added to other upfront purchase costs, the £550 fee might occasionally create the tipping point that prevents a buyer from making an application.
The timing of the payment of the fee, along with it being upfront, were also raised by others. In terms of the timing of payment, some buyers reported that they had understood that a fee would be payable but not necessarily when. This had left some needing to access the funds at what they felt to be short notice and there were associated suggestions that information about the fee, including when it is to be paid, could be given greater prominence and applicants could be given advanced notice that the fee would need to be paid within a set number of days (for example within 10 working days).
In terms of the fee being upfront, there was a query as why the amount of the fee could not be added to the Scottish Government's equity stake, such that, for example, if £25,000 was provided, the equity stake would be set at £25,550. Alternatively, it was suggested that the fee could be subtracted from the amount contributed to the purchase – for example, that if the full £25,000 was being used, the amount put towards the purchase price would be a maximum of £24,450.
Timing of application relative to purchase
An application to the First Home Fund is made once a first-time buyer has found a property they wish to purchase and has had an offer on that property accepted.
As noted above, for many buyers the process of researching their home buying options had been a relatively lengthy one, including seeking advice about the borrowing options available to them, and by extension the budget they had to spend. Buyers sometimes explained that they understood this to be the recommended and responsible approach. There were also comments about first-time purchasing feeling like a monumental and potentially frightening process, and to wanting to be as well prepared as possible. This included being sure that they could afford and would be able to finance a purchase before putting in an offer.
In this context, some buyers would have preferred to be able to apply to the First Home Fund at an earlier stage and to be reassured that, once accepted, the Scottish Government's equity stake had at least been secured 'in principle'.
"I don't know why you can only apply after you've had an offer accepted. There must be a reason for it but I would rather you could apply and a get decision in principle...that would give you a sense of certainty when you're putting an offer in. When we put an offer in, it was in the back of our heads that this might not happen if we don't get that money." (Buyer)
IFAs also reported that some buyers can struggle with the idea of making an offer based on an assumption that they will be able to access the First Home Fund as planned. However, they did note that given the relatively limited application criteria, they are usually able to reassure buyers that their application will be successful.
Ease of the application process
Although the First Home Fund itself was almost universally considered to be simple and straightforward, views on the application process were more mixed.
A mortgage advisor had completed their First Home Fund application for many of the Buyers. For these Buyers, any issues had tended to be about the amount of information that needed to be provided - albeit this was often described as part of a wider challenge with purchasing a property and not as being specific to the First Home Fund. Similarly, some Buyers and others described problems that were connected to a timely service from a solicitor, but again they did not generally see these as First Home Fund-specific issues.
A small number of Buyers had submitted their own First Home Fund application. They tended to describe the process as being time consuming but otherwise relatively straightforward. There were occasional reports of delays when making contact with Link in relation to queries, or when looking for a progress update. Buyers tended to connect these difficulties with staffing pressures stemming from COVID-19.
Although also recognising the pressures that COVID-19 has placed on those continuing to deliver services, some IFAs did report that prior to lockdown they had sometimes experienced difficulties in making contact with Link or in getting clear and consistent responses to queries raised. One supposition was that the First Home Fund was more popular than anticipated from the outset and that this created resourcing pressures that could not be immediately or readily resolved, especially with the added complications stemming from lockdown and the need for home working.
In terms of a lack of consistency there were reports of some issues with affordability assessments. This was both in terms of consistency of approach and messaging across the Link team but also in terms of a difference in overall approach between Link and IFAs and lenders. In essence, the affordability assessment calculator used by Link was described by some as an overly blunt tool that sometimes rules people out despite them passing the affordability assessment for a mortgage. Although all those raising this issue had been able to resolve any issues on a case-by-case basis, it was nonetheless described as a potentially time consuming and frustrating part of the application process.
Finally, there were a small number of other queries about how the application process worked for the 2019/20 round of funding, and by extension the plans for 2020/21. These included:
- Whether those who made an application to the First Home Fund for a new build, but whose application did not proceed because the First Home Fund closed before the completion date, will be able to or need to reapply in 2021.
- More generally, whether Link will be in a position to deal with a surge of applications from April 2021 and whether there are any plans in place to avoid the First Home Fund needing to close, or to close at short notice.