Decision in Principle and Credit Checks

Newbie85

Hi everyone,

I'm a new poster- but have read through a lot of these forums obsessively and have learnt a lot so far!

I've been searching through some of the threads- but a lot of the questions are specific to people's circumstances and I just thought I'd ask a very general question...

We've just a decision in principle from the HSBC for a mortgage (we are FTBs with a 10% deposit). The amount they have provisionally agreed to lend us in the DIP is lower than the amount that the HSBC have previously quoted (it is exactly 3.5x our salary in the DIP- however the MA orginally said we could borrow more). The MA at the HSBC said we shouldn't worry about this and if we do find a property at a higher amount we should be confident to carry on with the mortgate application. However I am a little cautious- and I don't want to be one of these people whose mortgage ends up falling through...

The problem is, we are looking to buy in London- where property prices are ridiculous so I know we realistically won't find anything that is within the budget specified on the DIP. Has anyone else experienced the above situation- should I be cautious or carry on looking at properties at the original budget?

I'm also planning to get a credit report so I can see if there's anything potentially dodgy on there before we go through with the actual mortgage application (as I understand it- it is a much more thorough check than the DIP). I don't envisage any problems- I've never missed any payments and have been using credit cards for years, etc. Does anyone know where exactly I can get a decent credit report- a lot of people mention the £2 reports, where you don't have to sign up for monthly subscription..

Thanks in advance!

Burridge60

Newbie85 wrote: »

Hi everyone.......
Does anyone know where exactly I can get a decent credit report- a lot of people mention the £2 reports, where you don't have to sign up for monthly subscription..

Thanks in advance!

Hi

The three main credit agencies in the UK are:
Equifax plc
PO Box 1140
Bradford
BD1 5US
Tel: 0870 514 3700
Experian Limited
Consumer Help Service
PO Box 8000
Nottingham NG1 5GX
Tel: 0870 241 6212
Callcredit plc
PO Box 491
Leeds LS3 1WZ
Tel: 0870 060 1414

They will all try to sell you their supper dupper service. All you need is their Consumer Credit Act access to your credit file report. It is there but is sometimes hard to find it.

It wont get you a mortgage but it will show you what the lenders can see. All your credit commitments, their history and conduct and your addresses and if you were on the voters roll at any address. it Will also show who you are associated with in any financial transactions like a joint loan.

Some allow you to apply on line and pay with a debit or credit card in your own name to get your report.

Thrugelmir

Do you have any unsecured debt owing? Loans or credit cards.

What ratio of salary are you hoping to extend to? If you've only a 10% deposit this will cap the maximum value in any event.

Lenders are increasingly focused on affordability as opposed to credit rating alone. Some people have expensive equine hobbies for example.

Newbie85

No expensive equine habits for me!

I do have a credit card which I mainly use for work expenses- but regularly pay it off. If it helps, I can make sure there isn't any debt on there when we eventually make the full mortgage application (if we ever find a place).

We are hoping to get a property for £250,000- so a mortgage loan of £225,000 with a £25,000 deposit. The loan would be 4x our joint salary- which is more than the 3.5x normally quoted on websites. Do you think its possible we can achieve this- or are we potentially wasting our time? I have friends that said they were able to get a property at a higher loan than was originally specified on thier DIPs- just wanted to sense check if anyone has had this experience, or if its a rare occurance? The MA at the HSBC seemed to think it would be fine...

Thanks

Thrugelmir

Multiples of salary are only a guide. HSBC (and FD) have some of the tightest lending criteria in the market hence their good lending rates. Simply put they minimise their risk.

A DIP is only a guide. Not an offer. Improving your deposit will widen the possibilities.

RenovationMan

We went to a mortgage broker and he found us a mortgage at 5xSalary last year. He was able to check Whole of Market, rather than just in-house ones. Perhaps you could find a broker in your area and he will be able to give you an idea of the maximum mortgage you can obtain?

Newbie85

Thanks for everyone's posts so far :-)

We went to a mortgage broker when we first started to look at houses and he found us a deal at 6% which wasn't as competitive as the HSBC (we went direct and at the time it was 4.99- but its just increased to 5.5% due to recent speculation on base rates. The broker deal was for 4x our salary at £225,000 and so was the HSBC. It wasn't until we got our Decision in Principle that the HSBC then said the 'computer' worked out a loan of £196,000 which is the standard 3.5x salary. The MA at the HSBC said not to worry- but I don't like not knowing what's going to happen (welcome to the world of property buying and mortgages you cry!).

So now I'm wondering if we should go back to the broker or stick with the HSBC for now. I know you're supposed to keep the number of DIPs to a minimum as this can affect your credit rating.

Is it worth finding a property at £250,000 with the hope that HSBC will give us a mortgage? We don't want to lower our budget to £221,000- we won't find anything in London we'd actually want to live in.

Buying a house involves so much guess work!

Thrugelmir

Newbie85 wrote: »

Is it worth finding a property at £250,000 with the hope that HSBC will give us a mortgage? We don't want to lower our budget to £221,000- we won't find anything in London we'd actually want to live in.

I would rent as cheaply as possible and continue to save. Alternatively move further out and commute.