Halifax Mortgage 'decision in principle' credit check

Mortgage_Mark_2

Just to give a bit of general advice given that our firm is a contractor specialist; firstly Halifax are one of the most flexible when it comes to basing mortgage lending on your contract, however I have had many, many clients in the past who have had their application turned down after going direct, even though the lender's criteria will accept contractors. The simple fact is that their direct/branch network don't deal with contractors very much and therefore they can make some understandable mistakes when presenting the case to the underwriters.


As a rule, Halifax will lend to day one contractors; your length of time contracting will not on it's own mean that Halifax won't lend to you. As for their income assessment, they take day rate x 5 (or 4 or you work a 4 day week) x 48 (payable weeks in the year). Generally day rate times 20 is about right - it's what you'd expect to see from bank statements crediting in the company account or personal account - but just bear in mind that the £xxx x5x48 is the calculation that their underwriters will use.


Big, big piece of advice is to keep the gaps in contract down to a minimum, Halifax will not budge on anything over 5/6 weeks in the last year (two years if less than six months left on contract).


Kingstreet is absolutely right in saying that clients sometimes get a little aggrieved that we need so much stuff, but as a contractor, every case is potentially different so it really is needed, and I can echo the thoughts of him(apologies if you're female kingstreet!), in that this preparation means that you really can take advantage of Halifax's service standards being VERY good at present, and to give you an example I recently had a case that was submitted on the Thursday, and we received a mortgage offer the following Tuesday.


For a contractor mortgage, preparation really is key; and I'd STRONGLY advise contacting a specialist as even from lender to lender your situation will vary - as an example, other lenders will only take into account 46 weeks' worth of income.


The final point is that Halifax have a minimum income for contractors outside of the IT industry, of £75k based on the calculation above. Please note that this is an essential point for each contractor - even if you're married to someone earning £150k a year, as a contractor, to take your contract income into account, you will need to earn at least £75k if you're not in IT (if you are there is no minimum with them).


One final point, as a contractor it's especially important to bear in mind that a DIP doesn't mean that you actually meet the lender's criteria. It merely confirms that you have met their credit score; so please don't assume that because you've passed a DIP with Halifax that the intricacies of your application will be ok, and go ahead and exchange contracts etc - this is something that we hear very often.


Sorry for the ramble but with contracting it really is worth a bit of extra research.


All the best


Mark

Mortgage_Mark_2

Ltd_Company_advice wrote: »

Hi,

I thought I would reply to this post as I'm currently going through a mortgage application with Halifax at the moment and I am an IT Contractor.

I got my AIP a week or 2 ago. We are looking at a new build and they make you get this before they will allow you to put down a deposit.

Which is great but the people doing these AIP's will ask you what you earn, so if you are a contractor your day rate etc.

They will put in various bits of information about you, previous addresses any known adverse credit etc and then they will let you know whether they will lend you the money. Great.

Until you have to go through the full mortgage application. They will want 3 years of completed accounts and they will calculate your average salary for the latest 3 years and that will be your salary and what you can borrow on.

So if you earnt 30k first year, 40k 2nd year and 50k 3rd year they would base your earning on 40k.

So forget about using what you earn per day as a contractor as what you can borrow on. They will use the total income, minus Directors remuneration, minus expenses. Then you get the figure you can borrow on.

Mine was only submitted yesterday so I am waiting at the moment.

I have adverse credit from 3-5 years ago. All paid off now but have to see how much of a problem it is. The broker said it should be ok as I got through the DIP but that they might query it but because it is all paid off it might be ok.

I'm always the pessimist and I don't think I will get the mortgage offer anyway. :-(

Hi,


Just to clarify this a little - Halifax will not only base lending on your limited company accounts over the past three years - that is their self employed criteria which will be applied if you don't meet their contractor criteria (min salary, gaps in contract etc).


If they're basing lending on your contract value, it's unlikely in some situations that they will ever actually ask for company accounts.


All the best with your application, if you encounter any problems then it would be well worth your while speaking with a specialist to see if they can help.


Mark

mc1981

Thanks so much for all your help everyone! Ltd Company Advice I hope all goes well for you!


Thanks so much for this Mark. I am in the process of using a specialist mortgage broker for IT contractors and as I say have my decision in principle was just really concerned because I had only been contracting for 4 months they would say no. I would be devastated if I lost this house because of the length of time I had been contracting!! It's good to know they do lend to day one contractors, I'll just need to hope they say yes when it goes to full application! Is there anyway I can find out prior to it going to application whether it will be a yes or not?

Mortgage_Mark_2

mc1981 wrote: »

Thanks so much for all your help everyone! Ltd Company Advice I hope all goes well for you!


Thanks so much for this Mark. I am in the process of using a specialist mortgage broker for IT contractors and as I say have my decision in principle was just really concerned because I had only been contracting for 4 months they would say no. I would be devastated if I lost this house because of the length of time I had been contracting!! It's good to know they do lend to day one contractors, I'll just need to hope they say yes when it goes to full application! Is there anyway I can find out prior to it going to application whether it will be a yes or not?

Hi,


Your broker will have a contact there that they can speak to, although really they probably wouldn't have put an application forward if they thought there was any possibility that it wouldn't fit with their criteria.


Provided that you've had no gaps as mentioned above in the past couple of years, there's nothing that jumps out at me as a reason for concern (although of course I don't know the full details! )


Best wishes


Mark

mc1981

Thanks again, I had been in full time permanent employment up until 4 months ago when I started my first contract, which is why I'm slightly worried! Although I have no gaps, and I do earn over the £75k based on my day rate, I have only been contracting for 4 months! My broker is speaking to someone he knows at Halifax so as you say I'm hoping he would have said upfront if he thought it would be a straight no! Finger crossed everyone!!

Mortgage_Mark_2

Give me a quick run down of the gaps and I'll let you know if I think it's excessive (for their criteria)?


Essentially, any more than 5 weeks in each of the past two years should be ok - was there much of a changeover period between being permie and contractor?


EDIT: I've read your post properly now and seen the 'no gaps' line! Sorry!!

mc1981

Hi Mark, thanks for this! Yes I've had no gaps but only became self employed IT contractor at the beginning of November 2013, I am in contract currently and will be until 1st July when I move onto a rolling 3 months after that, although my signed contract is until end of June - I don't get to sign my 3 month rolling until 4 weeks before my contract expires

Mortgage_Mark_2

Hi,

That sounds ok to me - the main things that would jump out would be less than one month remaining on your contract, along with the income and continuity issues mentioned above.

Hopefully you can relax a little more about it, it sounds as if it's well within Halifax's contractor criteria.

mc1981

Mark you are an angel!!! Thank you!! I'll let you know how it goes!!

gmtrack

hello everyone, can some please tell me what credit agency halifax(HBOS) uses for full application search, I have got Decision in Principle from halifax and credit search went fine without flagging any issues. I got membership for both experian and equifax and there is no late payments or adverse history, however when i checked noddle today i found few defaults on my file they were linked to many other addresses where I never lived, but these defaults on call credit file were not flagged in getting DIP, they must be there when halifax did their initial soft search as i checked noddle just out of interest after three days of getting dip from halifax, can some kindly let me know whether this is will affect full application credit search after issuing DIP.