Advice for friends looking for mortgage. Please help.

buel10

Hi everyone,

I don't yet have a mortgage but two friends are thinking about buying a house.
I would very much like to help them and give them some sound advice as they are new to it all.
Please can anyone tell me if what i have told them so far is correct:

I explained that before they do anything it would be beneficial if they were to contact any or all of the credit reference agencies to obtain their credit files to check that there aren't any errors on there such as a phone company incorrectly stating that a direct debit was made weeks late or even something like them being mistakenly financially linked to someone else at their address (parents, brothers etc) when there should be no such link.

I also explained that getting your credit report is always a good idea, regardless of whether you are applying for a loan/mortgage.

I explained that any or both of these (or any similar) can, ultimately, have a bearing on not only whether their mortage application is approved but also, possibly, what interest rate they are offered.

I then mentioned that i had read that if someone goes to their own bank and allows said bank to run a credit check in order to process a mortgage application, then that in itself is a 'negative' on their credit files, thus making it slightly more difficult to obtain a mortgage at any other mortgage provider.

Rightly or wrongly, I also quoted Tony Hazell, ex-Money mail editor who once said 'Walking into a bank for financial advice is like walking in to a viper's nest' (I do like that quote)

They have yet to find out for sure the amount for which their chosen property is selling for ('rumours' have varied wildly in the local area). I suggested that this may be the first thing they should find out before getting any building survey quotes or the like.

Also, my friend has always hated being in any sort of debt (Which i was extremely impressed with) but this means that he has never had a credit card/loans or similar.
I explained that, as bad and annoying as it is, having a credit card and paying off any credit accrued regularly, shows 'proof' that he is good at paying back what he owes to any potential lender. Better, in fact (and unfortunately), than being wise enough with his money to never incurred debt in the first place.

Finally, i advised to potentially go to a mortgage broker first, before any bank, to at least get an idea of where to start and how much they could lend, without having to have a search on their file.

I would very much appreciate any help anyone could give on this. Im sure i may be talking absolute garbage but i am just trying to help a friend so please feel free to comment.

Thank you in advance.

buel10

Hi, can anyone help please?

ACG

You gave them a lot of information for someone who has no mortgage.

Forget what you have read/hear/understand. If they dont know then they should speak to a mortgage or financial advisor.

ANY company doing a credit check is negative to a certain extent - not just the persons bank. That extent differs from person to person - If its a one off credit check it wont have any real effect so dont worry about that. Its when you start getting to about 3 in any 6 month period.

Their bank may well be able to offer them the best deal on a Mortgage - its unlikely with everything that is out there but its not unheard of. The big problem is that they will get stung when it comes to "extras" such as insurance etc.

Get them to go to an Advisor and they should be ok.

buel10

Thank you for that, that is appreciated.

Can i just clarify that it is vitally important to at least check your credit history though, especially if you have never checked it before?

And regarding a Mortgage broker/advisor, would you agree with what Martin Lewis says, in that the two most important questions to ask are:
1, Are you 'whole of market'?
2, Do you charge a fee?

Yorkie1

I would say it is a good idea to check your credit history but I think 'vitally important' may be overstating it a little.

I never disagree with Martin.

buel10

Yorkie1 wrote: »

I would say it is a good idea to check your credit history but I think 'vitally important' may be overstating it a little.

I never disagree with Martin.

But surely you could have an unknown incorrect error or errors or even be incorrectly financially linked to someone with a terrible credit record, this would then make obtaining credit more unlikely (or if obtained, at a poorer percentage rate)?

opinions4u

Pay £2 to check a credit file by all means. 99% certain it will be accurate.

Other than that my only advice is:

1) Make sure they're on the voters roll.

2) Make sure all bills are paid in time.

3) Build up as big a deposit as possible.

4) Pay much more than the minimum payments on credit cards.

buel10

opinions4u wrote: »

Pay £2 to check a credit file by all means. 99% certain it will be accurate.

Other than that my only advice is:

1) Make sure they're on the voters roll.

2) Make sure all bills are paid in time.

3) Build up as big a deposit as possible.

4) Pay much more than the minimum payments on credit cards.

Brilliant advice!!
I had forgotten about the voters roll.
Thank you for that (I have clicked it)

Regards Credit Cards, yes, sorry, i didn't mean for them to pay just the minimum, i just meant that obtaining credit such as a credit card and then paying it back is good 'proof'. Unfortunately they do not currently have credit cards as yet (whoever would have thought that that in some way could be a 'bad' thing. Shame really)

Please may i ask, though, that if there is an incorrect error or errors (on your credit file) or even be incorrectly financially linked to someone with a terrible credit record, this would then make obtaining credit more unlikely (or if obtained, at a poorer percentage rate)?

Yorkie1

Yes, anything adverse on the credit reference check will potentially affect the obtaining of credit. I think incorrect financial linking is rare though.

Out of interest, do you think that your friends have got such adverse credit? You are focusing on this to such a high degree that you must have your reasons for persisting with it.

You should also be aware that the actual credit score from credit checks is completely irrelevant to lenders. They have their own internal scoring systems so simply having an experian score of 678 or 999 etc will not in itself dictate a lender's view (although, as previously stated, adverse entries can impact).

Thrugelmir

buel10 wrote: »

Regards Credit Cards, yes, sorry, i didn't mean for them to pay just the minimum, i just meant that obtaining credit such as a credit card and then paying it back is good 'proof'. Unfortunately they do not currently have credit cards as yet (whoever would have thought that that in some way could be a 'bad' thing. Shame really)

An alternative approach is to save regularly with the financial institution you intend applying for a mortgage with. As there's no easier way of demonstrating the ability to manage your money and personal finances in a responsible manner.

buel10

Yorkie1 wrote: »

Yes, anything adverse on the credit reference check will potentially affect the obtaining of credit. I think incorrect financial linking is rare though.

Out of interest, do you think that your friends have got such adverse credit? You are focusing on this to such a high degree that you must have your reasons for persisting with it.

Thanks for that.
No i do not have reason to believe that. The main reason i am focusing on that, for now, is that it seems to be the first issue to address. It seems pointless to me to jump to the other steps (getting a quote from a mortgage lender) without at least getting a copy of your credit report. It only takes £2 and a wait of a few days so is surely the logical first step.

My only other slight concern is that he may not have had any kind of credit in the last 6 years apart from a phone contract (is that 'credit' and does it show on a credit file?).

Yorkie1 wrote: »

You should also be aware that the actual credit score from credit checks is completely irrelevant to lenders. They have their own internal scoring systems so simply having an experian score of 678 or 999 etc will not in itself dictate a lender's view (although, as previously stated, adverse entries can impact).

I was kind of aware of that but thank you for reminding me. Very much appreciated.