Mortgage newbie - credit and background checks

jabbathehut

I've got a deposit on a house (around £80,000, part of a bequest I unexpectedly and tragically received quite recently). I've just applied for a mortgage for the rest (around £150,000). This is a buy-to-let situation to provide me with extra income.

Basically I'm a little worried about credit and background checks. I applied a couple of times for an unsecured loan (and was thankfully turned down) a few months ago. It was a stupid thing to do - I never expected to be in a situation where I'd have a mortgage application going through in the near future. I'm afraid once they've checked out my credit report and seen not one but two credit checks in the past they'll turn me down flat, leaving me in a bit of a lurch.

Along with this intermittedly I supplemented my income about a year ago with some payday loans (all repaid on time) - I was out of work at the time and in studies - again a stupid thing to do, but I'm sure something they'll spot.

My one ray of hope is that perhaps they'll be more fixated on the expected rental value of the property and overlook my faux pas in the past - could this happen or am I totally scuppered?

I'd add my debts amount to less than £3000 currently, no other mortgage, a couple of credit cards and a small overdraft, and that I'm in FT work and expecting to work these off in the next 6 months.

CBR600F_2

Bring me Solo and the Wookiee. They will all suffer for this outrage.

Thrugelmir

If you've £80k. Why haven't you tidied up your financial affairs?

Or is the bequest only to be used for a certain purpose?

Dave_Ham

A buy to let mortgage is a harder credit score than a residential, so you may have issues I think...

I think you may struggle with a credit score on this, but only have limited information provided to go off...

Good luck

The_J

A few things:

1) It's not a good sign that you were turned down for a loan, presumably a mortgage is 10x the magnitude of this loan?
2) 2 credit checks will be no problem.
3) Payday loans - no problem. Debts also fine as long as all payments have been made on time.
4) They will not be fixated on the rent.
5) Are you a FTB? It's harder to FTBs to purchase a BTL as their first mortgage.
6) Are you sure you want to become a landlord? Is it something you've thought about for a while and properly research the best areas for rent and investment (being able to sell the property in the future?). Your post reads like you got 80k out of the blue but immediately knew what you were going to do with it - it's a little odd.

ACG

If you currently have no mortgage there are not many lenders that will offer you a buy to let mortgage.
You should speak to a mortgage advisor.

Finding a lender that doesnt credit score and will allow a non home owner is probably going to be quite difficult.

Why do you need to spend £230k on a buy to let property? Would you not be better getting a few cheaper properties to rent out?

Im guessing your in the south of england? Up North, you could buy probably 2-3 properties for your £80k each bringing in about £400-500 per month.
Put £20k down on 4 properties and you could own 4 houses with an £80k loan bringing you £1600-2000 per month (less the mortgage).

I would suggest you speak to a mortgage advisor, you may well struggle and there is no point wasting valuable searches on your credit report to find out you have chosen the wrong lenders.

jabbathehut

hi guys thanks for replying - guess I didnt clear up a few things.

@thrugelmir you're absolutely right there are strings attached

@The J actually the loan was for about £1500. I'd just got a job at that stage and was actually looking to tide myself over without worrying about payday stuff - also needed new equipment. I am FTB, why is it harder than a regular mortgage when I have 35% of cost in deposit?

@ACG I had a very long telephone convo with a lady from HSBC the other day - explained my current situation (omitting my scurrilous unsecured past), today I received the application pack? Surely she should have flagged me down as a no-no earlier? She ran some kind of preliminary check through a computer while I was on the phone with her came out ok. House is down south, rental value could be quite high and I'm not looking for a property empire just a standby in case I get made redundant again.

The_J

It's harder because they are worried you are buying it to live in but only doing that to get around income multiples. For this reason, they will often base the amount of borrowing on your salary, not the rental income.

ACG

I didnt realise HSBC did buy to let mortgages.

HSBC for residential mortgages are very fussy, have a read through these forums to see peoples frustration with them.

Also, the lady you spoke to could just be an order taker, i doubt very much she is a mortgage advisor in the true sense of the word.

jabbathehut

@ The J My income isnt huge. Under £25k atm.

@ ACG Yeah I got bumped to a Premier Account unexpectedly. They do BTL for some reason