Risk of credit checks?

mkoprulu

Hi Fellow Moneysavers,

I've seen a mortgage advisor today and insisted on having no credit checks done, so as an estimation, he told me i could be eligible to borrow up to 155000.

With the deposit i have (20k), i am probably able to get a 175000 house. Obviously, this won't be confirmed without a credit check.

On the other hand, if i find a property for more than this amount (i.e. 200k) though, i may choose to go self certified.

In this case, if i get a credit check done, which reveals my borrowing potential to be around 155000 or so, would this create any issues if i decide to go through self-cert route to borrow more than that amount?

In other words, would the lender come back saying:

"Hold on a minute, you had a credit check done for a mortgage, which showed that you had a borrowing power of 155000, how come are you suggesting you can afford a 180000 mortgage?"


Any ideas?

dips_3

A self certificate mortgage is designed for those with non standard income such as the self employed - not as a means to nflate your borrowing potential.

If a mortgage advisor has advised you that you could afford £155K are you really sure you could afford a mortgage of £180K?

_Andy_

An underwriter will be asking themselves, why does this person need to go self-cert? As stated by dips, it is NOT there for you to make up the amount you earn.
You may find you can borrow more than the estimate by approaching a lender who asseses income in terms of affordability rather than pure income multiples.
There are also some lenders who will do a 'soft' credit search, i.e. one that won't leave a footprint on your credit file.

herbiesjp

Please remember that many lenders are part of the Hunter system - this system has been in place for a while now.

Basically what this system can do is compare information put on various application forms, So you if you apply to 3 different lenders and put down different income figures on each application, it can lead to lenders asking more and more questions.

I am guessing that you have proof of your income etc. If so, a self cert should not be an option for you.

A good adviser should be able to find a lender willing to agree the higher amounts, assuming they are not crazy amounts i.e 10 times income

HTH

AndrewSmith

Self cert does not change the amount you earn, nor does it change the income multiple applied.

It also does not mean that the lnder will never check income source or amount, it just means that they do not as a rule. They resrve the right to check whatever they want.

An ex collegue of mine from the late 90's is currently serving a 10 year prison sentence along with his client for falsely stating the clients income on a self cert mortgage application form. It is mortgage fraud and, yes, they do prosecute if they find out.

rossbenn

I think you will find the affordability rules are there to protect you from over commiting financialy. If you cant afford the property, dont buy.

Cara79

mkoprulu wrote:

On the other hand, if i find a property for more than this amount (i.e. 200k) though, i may choose to go self certified.

In this case, if i get a credit check done, which reveals my borrowing potential to be around 155000 or so, would this create any issues if i decide to go through self-cert route to borrow more than that amount?

Any ideas?

I'm amazed by this statement. I do not think you understand what self certifying is.

As said in the posts above, you cannot inflate your income. If you are able to prove your income, then you can't "choose" to go self-cert.

I would take the advice of your broker, in that it looks like your max would be £155k. How do you think you could afford £180k?

What is your income?

cara

AndrewSmith

herbiesjp wrote:

Please remember that many lenders are part of the Hunter system - this system has been in place for a while now.

Basically what this system can do is compare information put on various application forms, So you if you apply to 3 different lenders and put down different income figures on each application, it can lead to lenders asking more and more questions.

I am guessing that you have proof of your income etc. If so, a self cert should not be an option for you.

A good adviser should be able to find a lender willing to agree the higher amounts, assuming they are not crazy amounts i.e 10 times income

HTH

It was exactly the Hunter system that was the downfall of my ex collegue. He submitted a full status application at x amount then a self cert with different income at y amount through a different lender.

Bang, caught red handed.

If you carefully read the declaration prior to signing it you will see that it states the information may be used for the prevention of fraud etc etc.

herbiesjp

AndrewSmith wrote:

It was exactly the Hunter system that was the downfall of my ex collegue. He submitted a full status application at x amount then a self cert with different income at y amount through a different lender.

Bang, caught red handed.

If you carefully read the declaration prior to signing it you will see that it states the information may be used for the prevention of fraud etc etc.

I know it's mad isn't it.

Why risk it? Really not worth it in the slightest.

The sad thing is that most times you are quite able to get the higher amounts agreed 100% legally without the need for dodgy practises.

It's all about the experience of your broker,and how they are able to best put your case to a lender. Lending criteria is there for a reason - to protect both parties. If the mortgage amount cannot be agreed, maybe it is because one should take a step back and assess whether it is the right thing to do in terms of affordability etc.

This is not directed to the OP, but a general observation.

HTH

jamesd

mkoprulu, best just to say how much you make, what debts you have and what regular monthly payments you have to make (for car, child support or whatever), if any, and give some idea of any negative credit reference information that might be found. Then the brokers here can say what you might be eligible to borrow.

It's worth remembering that the lower the mortgage you have, the faster you'll be able to build up equity in the property, if you make the same monthly payments. It's a big advantage of not pushing to the limit.

mkoprulu

Thanks for all the replies. The mortgage advisor just called me back today, and said he did some more research, and found a lender that would lend me up to 180000!!! That's really a lot more than i thought. It's around 6 times my basic salary, and will be more than enough for me without the need to go self-cert.

As for questions about whether i could afford the mortgage or not, of course i wouldn't go into a situation that i couldn't afford, would i? That would beat the purpose of the mortgage being an investment.

Me and my wife are used to living in tight budgets, with loads of debt built up and nothing to spare. Therefore, i knkow exactly how much i can afford.

Now that we sold a property overseas and paid off all our debts, we have around £550 a month saved from paying towards debt as an extra spending power.

Considering our rent to be £675/month, i've got around £1100-£1200/month to spend for mortgage repayments.

I know that easily pays for a 200000 mortgage repayments... The only problem for me was whether the lenders would accept to lend me 180k, which is around 6 times my salary, or would i need to do self cert.

After today's offer from the advisor, it is obvious that they actually can offer, therefore no need for going self-cert.

But even if i did self-cert, my aim was NOT to commit any fraud. I know that i can afford the repayments. I don't want to be offered lousy amounts, just because the lender has a calculator in front of them which offers only 4 times my salary, without calculating how much exactly i can afford.