It is a common concern of those looking to get on the property ladder. How will their financial situation affect their chances of mortgage providers accepting them for credit? We took a look at getting a mortgage with debt.
Many who worry about gaining a mortgage will have utilised some of the support packages offered by financial institutions in the past 12 months. A clear example of one would be the payment holidays offered on debt. This could be used for such things as mortgages or credit cards and loans. The bad news is that mortgage lenders can see payment holidays. They leave a mark on your report. So for some, it may be best to wait before applying for a mortgage. What is important to lenders is a significant deposit and the trust that you can make mortgage payments. If you had to take a payment holiday or two over the past 12 months, then it stands to reason you are not in a good position to have a hefty deposit at hand and the confidence to make full mortgage repayments.
People’s financial situation can change often and by huge degrees. You may have been struggling recently but have no moved on and have a bright financial future, and a secure one at that. However, what the future holds is not as important to potential lenders as what has just happened, sadly. You may know that you can make any payments in future, but a lender will focus on previous difficulties, so it will still be relevant to them accepting you. Again, it may be best to show some patience. Perhaps use your new financial stability to build up a bigger deposit. Lenders will look favourably on that.
This is a big plus. Potential lenders use your credit report to assess whether they should trust you to lend you funds. If your report no longer shows past problems with debt, then they are more likely to lend to you. Simple as that. What’s more, you are more likely to attract preferential interest rates too. However, do keep in mind that a mortgage is the biggest loan of all. Lenders may well want to see detailed financial records that could still trigger doubts with them. They will look beyond a credit report.
The truth is, if you are in a debt management plan you are unlikely to get a mortgage, and you should not really be trying to either. You should make sorting your debts your priority, and again show patience. If you lower debts, with time you put yourself in a much better position yo handle a mortgage. A similar situation exists for those that have taken out payday loans in the near past. This will not be looked upon favourably by creditors. Again best to wait it out. Bankruptcy and the likes of an IVA will savage your credit rating for six years, but after then things can improve rapidly.
We have already mentioned that a credit report is not the be all and end all when mortgage providers make their decisions. Nevertheless, it is a factor. So it is in your interest to be fully aware of what your report contains. There are numerous reasons for this. Firstly, there may be mistakes in the report, which you can eliminate. And just by looking over your report, you can focus on how to improve your rating. It gives an excellent overview of what you have done and perhaps how you can change in the future.