Completing a fact find and be mortgage ready!

First time buyer or home mover?  Either way know the process and be mortgage ready!

On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance. At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you.  Advisers are required to provide you with an Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation.

A good adviser will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’  This is necessary before any ‘advice or recommendation’ can be provided.  Be patient as this process can be lengthy.  It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements. Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score.  We’ve had a few customers contact us for a mortgage recently who have been totally unaware that they have had a number of credit searches carried out having recently searched for competitive renewal quotes on their home or car insurance via comparison sites.  This, in a small amount of time can have a marked affect on your credit score, and as such, affect your ability to obtain finance, so read the small print and be aware! 

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to a full application. Payment for survey is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.

The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements.  Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completing your mortgage process!

Be prepared in advance of applying for a mortgage.

When applying for finance, if you don’t appear on the electoral roll or don’t have any credit, some lenders may consider that you don’t exist, financially!  This has been a hurdle in the finance world for some time, more so now with the evolution of technology.  It seems that lenders only need to find the smallest of excuses to not agree a mortgage request.  Historically, lenders were often more amenable if an applicant could not be located on a credit search. Today, if you have no regular credit commitments or do not appear on the electoral roll at your current address, be prepared for a possible knock-back or at least the request for further proof of residency, etc.

The market has been pretty quiet this week, with only a few lenders making headlines and reducing rates. I suspect the market is still coming to terms with an unexpectedly buoyant August and preparing their offerings for a good run to the end of the year.  Rates generally are decreasing, and this makes it a good opportunity to review what’s available to you.

We are experiencing a large number of ‘complex prime’ enquiries lately. One example is for a property which is currently converted in to two properties, but where there is only one registered title.  Another example was of a full conversion of a barn into a dwelling.  One further - for tax purposes – where the customers were seeking to purchase a number of investment properties in a Limited Company name with their company structure designed purely to hold properties.  These are live examples which certainly have a lender home. They just need a bit of extra thought and the location of lenders who don’t fit the normal credit scoring mentality.

Finally, getting a mortgage through lenders in the current climates can still be challenging. One day it’s easy to get a case through, the next, it’s a nightmare!  So whatever you do, try to not give lenders any excuses to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments where possible and, especially, not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision whether to lend to you, or not!

Lenders reject 33% of customers using comparison sites

It’s always a little surprising when customers contact us for a mortgage who have been totally unaware that they have had a number of credit searches carried out following recent searches for competitive renewal quotes on their home or car insurance via Comparison Websites.   I’m sure it will be stated somewhere in the small print, but the customers have researched a number of ‘comparison’ sites and ended up with a similar number of credit searches on their profile.  This, in a small amount of time can have a marked effect on your credit score, and as such, affect your ability to obtain finance, so always read the small print.

And according to Experian this week, lenders are rejecting 33% of customers using comparison sites as they do not meet their full lending criteria. Some 11,000 people were included in the analysis which examined eligibility inquiries made on price comparison websites and digital broker channels.  Its analysis also found that just 3.5% of people searching for a mortgage were eligible for every deal on the market.

With this in mind, a vast number of people still don’t think they can get a mortgage.  With so much negativity in the media, it is not surprising that many people think they have no options. But this couldn’t be further from the truth. There are more lenders and products available now than there has been for some time. Therefore, more options and choice for customers that may not have been eligible for a mortgage in previous times. This often does not include high street lenders though. These lenders could include a small building society located in a small village anywhere in the UK. Having access to a whole of market mortgage broker is the only way you’ll gain access to such a possibility.

The bottom line is that a mortgage is the biggest debt you’re likely to ever take on, so you need to do your homework and always seek professional advice.

Be aware of who is credit searching you, and when.

We have had a few customers contact us for a mortgage who have been totally unaware that they have had a number of credit searches carried out following recent searches for competitive renewal quotes on their home or car insurance via Comparison Websites.   I’m sure it will be stated somewhere in the small print, but the customers have researched a number of comparison sites and ended up with a similar number of credit searches on their profile.  This, in a small amount of time can have a marked effect on your credit score, and as such, affect your ability to obtain finance, so always read the small print and be aware!  

With this in mind, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result. Try and ensure there are no missed or late payments as these will also decrease your credit score.  In short, your credit search / score is the basis on which most lenders will initially decide whether to lend to you or not.  If you’ve not checked your credit file before, it is well worth a review. Experian, Equifax and Noddle tend to be the main providers used in our market with some offering free initial trials.

Finally, we are seeing a lot of first time buyers turn to the bank of Grandma and Grandad as the bank of Mum and Dad appears to be running a little dry!  There are various ways in which the older generation are helping the first timers.  Some are gifting deposits to help those get on the property ladder.  With most products, the larger the deposit, the lower the interest rate.  Others have agreed to the placement of a collateral charge on the parents or grandparent’s property. This gives a lender more security and maybe a better credit risk rational to the deal, than originally might have been the case.  In some cases, the parents have joined in to provide additional income support and bolster the overall application.  Whichever way required, always explore the options and have a conversation with a professional as there may just be an alternative way to do the deal.

With Open Banking now available, don't give the lenders a reason not to lend.

There’s been a lot of talk recently about new technology, especially regarding the new ‘open banking’ opportunities and how your private transactions will come under scrutiny by lenders decision making computers, after you’ve given permission of course!

The idea is that the lender can review your incomes, outgoings and all other financial items just from delving in to your account, via open banking.  Big brother indeed.  The aim is to speed up the financial transaction and allow institutions to access your data at the touch of a button, as well as providing more competition and innovation to financial services.

The downside is that whatever is in your bank statements, lenders must take it into account when deciding whether to lend to you, or not.  There’s no hiding and now no apparent limit on time to be reviewed.  Currently lenders tend to look at just the last 3 months bank statements, but with open banking data at their fingertips, this could be unlimited moving forward.

With this in mind and so many recent rate and criteria changes, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.  Don’t give them any excuses not to lend to you!  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result.  Try and ensure there’s no missed or late payments as these will also decrease your credit score.  In short, your credit search/score are the basis on which most lenders will initially decide whether to lend to you or not.  The best rates will almost definitely go to those with the best credit scores.  

Finally, so you’ve done all the hard work and gone through the whole mortgage process with the lender providing you with a mortgage offer and you can now sit back and relax.  Wrong!  Although the ‘binding’ mortgage offer has been issued, until you have completed on your new mortgage, the lender can still decline to proceed with their offering.  If you take out any finance, have lots of credit searches done or miss any payments after the mortgage offer has been issued and before completion, it could be that the lender will re-credit score you before completion, especially with the now easily available open banking access, and uncover something that might not be to their liking or mortgage conditions.  Always seek professional advice.

The mortgage process is pretty straight forward, whatever your scenario.

Arranging a mortgage can take time.  But actually, the process, regardless of whether you are a first time buyer, home mover or simply re-mortgaging, will be roughly the same.  On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance. At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you.  Advisers are required to provide you with an Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation.

A good advisor will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’  This is necessary before any ‘advice or recommendation’ can be provided.  Be patient as this process can be lengthy.  It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements. Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score.

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to a full application. Payment for survey is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.

The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements.  Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completing your mortgage process.And finally this week, if you want to find out more about Buy to Let mortgages, the Property Investor and Homebuyer show is taking place at the ExCel exhibition centre in London on 20^th/21^st April.  Well worth a visit and AToM will also be exhibiting.

Lenders will look at your bank statements.

When applying for a mortgage, there’s no shying away from the fact that lenders look at bank statements!  Whether it be paper based or via the new ‘open banking’ technology, your private transactions will come under scrutiny.

I’ve mentioned it many times over the years in my columns and highlighted that whatever is in your last three months bank statements, lenders have to take it into account when deciding whether to lend to you, or not.

Sadly, in the last two weeks alone, we have had to turn away 18 cases, yes 18 cases, due to the customers bank statements (even though we can do All Types of Mortgages!).

So, why would this happen?  It could be that the client forgot to disclose they had a payday loan (short term funding until payday arrives).  These types of loans work for some people, but most of the lenders treat them as an adverse entry.  Despite what the ‘bar room adviser’ says, they don’t help towards your credit score!

Or it could be that the client forgot they exceeded their overdraft limit last month.  Just a little bit, only for one day, but it’s registered.  And that can mean disaster for the mortgage enquiry as it’s perceived you can’t manage your monthly finances.

What about transferring money from accounts resulting in a direct debit bouncing and being paid late?   Unfortunately, this is also looked upon negatively.

And there are numerous others, which include forgetting to disclose the student loan, or a 0% interest car loan, or even the monthly payment out to your pension.   Whether via bank statements, or via a credit search, the lender sees all debts and any monthly payments must be taken into account when it comes to affordability.

So, plan ahead.  Work out your budgets, what your monthly payments are and anything else that you need to disclose, before you go and see your local and independent mortgage adviser.  It’s time well spent and will stop any unnecessary delays, or possible declines, later on.

If the credit score computer says ‘no’, you will tend to find most high street lenders doors shut.

I haven't mentioned it for a while, but it certainly is causing a lot of customers an issue.  Credit scoring!  This is an assessment on all available financial information and calculates a 'score' for the lender.  It also includes a search on your overall credit history covering, in the main, all of your financial transactions over the last six years.

Most lenders credit score applications to try and assess your ability to repay any loans.  This will take in to account many factors including the amount of credit you have, whether you are on the electoral role, your recent payment profile on any existing credit and the number of recent credit searches you have on file.  Nearly all financial institutions will register a credit search against you.  So, if you have recently updated your car insurance, home insurance, taken out a mobile contract and just got a new credit/debit card, that’s probably four searches in a short amount of time! Be wary that some 'comparison sites' may have also searched you just whilst seeking a new insurance quote.

If the lenders computer says ‘no’, you will tend to find most high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis. 

I always suggest that you speak to an independent mortgage broker with access to whole of market mortgages.  Banks may only advise on their product range. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements, whether this be with a credit score or just a credit search.

Try to not give lenders any excuses to decline your application

Getting a mortgage application through a lender in the current climate can be challenging.  One day it appears relatively easy, yet the next, it’s a nightmare!  So whatever you do, try to not give lenders any excuses to decline your application or refuse to lend to you.  Try to pay bills on time, don’t miss payments of any type and especially not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision to lend to you.  Remember that many Insurance companies and mobile phone providers carry out credit searches on people before issuing their products.  Try not to incur too many searches in a short space of time as this can also be detrimental to your credit score.

 I haven’t reported on figures for a while, so I’ve highlighted a few stark reminders of the current state of the financials, estimated by creditaction, for November:

-          299 people are declared insolvent or bankrupt every day. This is equivalent to one person every 4 minutes 49 seconds.

-          93 properties are repossessed every day

-          1,432 people a day reported they had become redundant between June and August 2012.

-          1,170 Consumer County Court Judgements (CCJ’s) are issued every day (based on Q2 2012 trends). The average value of a Consumer CCJ in Q2 2012 was £3,217.

-          Citizens Advice Bureaux in England and Wales dealt with 8,465 new debt problems every working day during the year ending June 2012.

-           Average household debt in the UK (including mortgages) was £53,785 in September.

These are eye openers, but there are some that are really amazing:

-           the UK's total interest repayments on personal debt over a 12 month period would have been £60.3 billion.  This is equivalent to £165 million per day!  Just interest payments!

-          UK Banks and Building Societies wrote-off £5.3 billion of loans to individuals over the 4 quarters to Q2 2012.  In Q2 2012 itself they wrote-off £1.15 billion (of which £567 million was credit card debt) amounting to a daily write-off of £12.52m.

I know these are a grim read, but sometimes we need a gentle reminder of what’s what.  It also might help those who were looking to load up their credit cards on Christmas spending, and worry about it later, remember that these need to be repaid!!  Don’t become a statistic..

What if 'the computer says No'?

A flurry of activity in the mortgage market this week as a number of lenders reduce their rates.   Virgin Money, Natwest, Accord Mortgages and Platform are a few of the lenders who have cut various rates in their product offerings.  This follows decreases in both LIBOR and SWAP rates (in the main, measures against which banks lend each other money).  This is good for the end consumer and I’ve even heard whispers that this could lead indirectly to a Bank Base Rate cut shortly.  Who knows, as uncertainty seems to the only certainty in the financial sector!  Personally, I’m not sure a cut is a good thing right now, but with many companies struggling to survive and some big casualties (JJB the most recent noticeable), it will be welcomed by all those on sitting on a bank base rate tracker.

I mention credit scoring/searching quite a bit, but it really is so important in the current financial world when deciding to lend to you, or not!  Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile on any existing credit.   The number of recent credit searches you have on file will also have an impact.  Nearly all financial institutions will register a search against you.  So, if you have recently updated your car insurance, home insurance, taken out a mobile contract and just got a new credit/debit card, that’s probably four searches in a short amount of time!

If the computer says ‘no’, you will tend to find most high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis.  AToM has access to a number of these lenders so don’t despair if the high street lender’s computer says no, give us a call to see if we can assist.

House prices up 2.2%! Positive news!

The Halifax House Price Index suggests that house prices increased 2.2% in March. They report
that the average house price now sits at £163,803. A spokesperson commented that the end of the Stamp Duty holiday period for First Time Buyers at the end of March probably helped
to increase sales and support prices.

A mortgage is the biggest debt you’re ever likely to take on, so do your homework and shop around, as you would for you weekly shopping! We are always surprised that someone will announce to the world that they saved £30 off the price of, say, a fridge or cooker, yet fail to apply the same research into their mortgage! If you have plans to apply for a mortgage in the
not too distant future, then keep an eye on your credit. Don’t miss or make late payments to any
provider. All financial institutions will base their decision initially on your credit history. If you have missed or late payments, or numerous credit searches (from multiple finance/mobile/car/home insurance applications), this could be detrimental to your ability to obtain finance at competitive rates. Even whilst shopping around for a new mortgage, be wary that many ‘institutions’ are likely to carry out a credit search on you. Make sure you stipulate at the outset of any mortgage conversation that you do not authorise any credit searches, until you agree you are happy to proceed with a specific product or lender. If you have not reviewed your credit search before, get it for free (30day trial period) from Credit Expert (see www.atomltd.co.uk for a link). It’s well worth a review and a good insight on how attractive you may, or may not, look to a lender.

Finally, we’ve been bombarded with visitors over the last few days as hoards of children embark on the Great Easter Bunny Hunt, organised by the Rotary Club of Horsham. It’s wonderful to see so many people taking part and obviously its superb fun for the children as they are spoilt with
chocolate, if they find the bunny’s name and carrot! We’ve also enjoyed some great enquiries from those parents who have been dragged, I mean accompanied, the children on their tour of the 24 participating shops! This event has certainly been worthwhile for all involved and created a great community spirit (ends Sunday 15th April).

What is Credit Scoring?

Credit scoring is creating havoc for mortgage applications to high street lenders. Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile. If the computer says ‘no’, you will tend to find all high street lenders doors shut to you. Even your bank, with whom you’ve been a loyal customer to for many years, reports back that you have a low credit score, the computer says “no” and they will not offer you a mortgage.

But you have no credit problems: you have a good income: no debts and you are looking to buy a property or maybe remortgage. This is a dramatically increasing scenario. The world of credit scoring (tick box mentality) has taken over and there’s no arguing with the lender once their technology has made the decisions.
All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc . Every financial institution from mobile phone companies to insurance companies will carry out a credit search before offering you their services. This can also be a negative though, as the more credit searches you have, the lower your credit score maybe.

Fear not! There is light at the end of the tunnel. AToM recognised that good clients were being rejected by lenders for no apparent reason and has built up exclusive relationships with a number of lenders who will assess an application manually and seek to offer assistance to such customers. This is our alternative to ‘the computer says no’ and have found an avenue for the right deals working with lenders that not only manually underwrite cases, but who have an appetite to lend. We call this Complex Prime and it does not just include those turned away by their bank for low credit scores. It could be a case scenario that needs a bit of lateral ‘out of the box’ thinking by an underwriter keen to say ‘yes’. This could include cross collateral security for clients who are asset rich: a sympathetic view for those who have trouble in proving ‘real’ income: customers who need guarantors or maybe just need someone to sit down, review the whole picture and advise on the best route to take.

I have always suggested that you speak to an independent mortgage broker with access to whole of market mortgages. Banks may only advise on their product range. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements, whether this be with a credit score or just a credit search.