At what point do you have a credit check?

bob_dob

Hi, im very unknowledgable about the mortgage process so id like a few pointers please.

If a couple go to a broker and he advises them then can borrow x amount from lender x, and then the couple place a bid for the house, at what point does a credit search by the provider come into it? Is the broker's quote of x amount on the assumption that the credit check is good?

kingstreet

A check is done if and when you apply for an agreement in principle either direct to a lender or via a broker. Other than that, the check will be done at the point you make a full application.

bob_dob

Thanks.
Well a friend of mine has been given a quote for a mortgage and an interest rate so would that insinuate that the search has already been done?

kingstreet

No. You can have a discussion with a broker or lender concerning mortgage deals and an idea of likely rates/costs can be given with nothing else being done.

As we're all duty bound to disclose a check being done and the implications of too many searches in a short space of time, you'd know if it had happened.

Senior_Paper_Monitor

Not necessarily - he may (from your description) just have an illustration which is produced without credit check, but hopefully based on his fianncial details/background so there is a reasonable chance he will qualify for it.

Alternatively, he may have gone through a 'decision in principal' which will normally involve a credit check (but at what level varies by lender).

There will also probably be a credit check at the point of full application and/or immediately prior to offer or completion.

bob_dob

Thank you again, that is so interesting and useful.
Well my friend has now put in a bid for a house using the approximate details of any potential mortgage given my the broker.
Unfortunately he hasn't had any other quotes from any other lenders but says he will get them next week.
Should he have done this first?
Once you place a bid, what happens next?

kingstreet

There is no hard and fast rule. Some get a mortgage agreed in principle before they start to look, others apply when an offer is accepted.

Once an offer is accepted, the purchaser needs to appoint a solicitor and provide those details to the selling agent.

Next job is then a mortgage. They should be looking to apply within a week of having an offer accepted, if not sooner.

bob_dob

Thanks for that.
That only leaves me with two questions.
1, Surely when people choose the option of placing the bid first they then run the risk of either letting the seller down by being turned down for credit or having to think twice because the rate they have been offered is so high?
2, on a mortgage of, say, £105,000 on a 30 year term, what would be the difference in total amount paid in the first two years if the rate was 4% (if their credit history was ok OR had a decent deposit) and 6% (if it was poor OR had a low deposit)?

Conrad

Bob, your'e over thinking things. For a start you wont get a mortgage with poor credit, well unless you had a 40% deposit and are prepared to pay a high rate.

In the end there aren't that many lenders anyway, so start with the cheapest and see how it goes, none of us could second guess what will happen.
I'd usually suggest your look to trying your Bank first if there is an element of doubt about credit worthyness.

You could think and research until the cows come home but it's all beside the point if your credit rating is too low.

Good luck.

BTW some small Building Societies do not credit score which is sometimes helpful if someone has had a SMALL credit blip, but they wont lend more than about 3 x joint income.

ESKIMO

They will usually say something along the lines of; 'Terms and Conditions apply, successful application is subject to status/appropriate Credit Reference Checks' yada yada yada

To clarify, you can discuss your circumstances, interest rates, needs and wants and shop around WITHOUT having to disclose all of your 'particulars' - so to speak. The potential prospective mortgage lender/broker will basically conduct a 'Fact Find' to 'tailor' a product that best suits your individual requirements and needs.

Do shop around though, and remember that a broker/IFA is more likely to have a larger and broader spectrum and understanding of the marketplace than any individual bank/BS - as credit (as far as where credit is due) to 'Appointed Representatives', 'advice' - loosely speaking (more appropriately; 'recommendation and suggestion') can only be based on limited knowledge of a bank/BS's own products/services.