Mortgage Madness!

Dpw15

Hi everyone!

Just a quick question.

I've applied for a mortgage with my partner for a property priced at £175,000 with Halifax

We have a 15% deposit and my partner has a good credit rating.

We've made it through to the DIP but on full application it was referred to an underwriter.

I have some over 12 month old payday loans showing on my credit file (a total of 14). I thought these would help me build my credit file, but they definitely don't.

Could this have been referred for the use of payday loans I had taken out?.

Also is there anyone reading this who has been approved a mortgage with payday loans on their credit file?.

Thanks All

ellie27

I thought all mortgage applications go to underwriters? Think thats the standard process.

Payday loans, who told you it would be good for your credit file? I would think certainly not, but I dont know about payday loans!

Malmo

We've made it through to the DIP but on full application it was referred to an underwriter.

Underwriters authorise / underwrite all full applications. What do you mean here exactly? A DIP does not mean that you have a mortgage approved. It just tells you the maximum amount you could borrow based on the information you provide and your credit profile / history. A full application must then follow, which needs to be assessed by the underwriter along with the property valuation.

I have some over 12 month old payday loans showing on my credit file (a total of 14). I thought these would help me build my credit file, but they definitely don't.

This "advice" is misleading. Who/what provided you with this information?

Malmo

Also is there anyone reading this who has been approved a mortgage with payday loans on their credit file?.

Yes, this is possible, but in those circumstances, it is advisable to engage & consult with an independent mortgage broker who would be best placed to match the customer with the right lender.

Dpw15

We've applied for the DIP (Decision In Principle) and have been approved with Halifax.

We have then done the full mortgage application via phone call and this is the point where it has been referred to the underwriter.

If all applications get sent to the underwriter then hopefully we should be fine.

I was just worried that the payday loans would stop me getting fully approved.

Wonga had a statement on their website which said as long as you pay off your loan in full then this should show as a positive result on your credit report. Hence why I thought it could help as I had no prior credit history.

We've gone past the point of using a mortgage Broker as our mortgage application is fully complete. We are just awaiting the underwriters decision.

Malmo

Wonga had a statement on their website which said as long as you pay off your loan in full then this should show as a positive result on your credit report. Hence why I thought it could help as I had no prior credit history.

This is Wonga's marketing tactic to sell their product. Hopefully this can be a lesson learnt for the future.

Credit-Crunched

Dpw15 wrote: »

We've applied for the DIP (Decision In Principle) and have been approved with Halifax.

We have then done the full mortgage application via phone call and this is the point where it has been referred to the underwriter.

If all applications get sent to the underwriter then hopefully we should be fine.

I was just worried that the payday loans would stop me getting fully approved.

Wonga had a statement on their website which said as long as you pay off your loan in full then this should show as a positive result on your credit report. Hence why I thought it could help as I had no prior credit history.

We've gone past the point of using a mortgage Broker as our mortgage application is fully complete. We are just awaiting the underwriters decision.

Wonga clearly use this as a marketing tool - It is not necessarily correct. I do not want to panic, but lots of main stream lenders do not look favourably upon pay day lenders.

It generally shows that the applicant, does not have sufficient provision to cater for their financial liabilities or has faced financial difficulty. Either way, the underwriters will look into this and see why a pay day lender was used.

They assess, not just your affordability now, but due to the MMR, your ability to repay going forward, increase in interest rates, etc

amnblog

Payday loans to improve credit score?


That may improve the irrelevant figure shown on your credit file by the Credit Reference Agency for marketing purposes. It does not assist mortgage Lenders.


I cannot see anything on the Wonga website about improving your credit rating - but they do say


'We encourage you to think carefully before committing to any form of credit.'


The underwriter referral may be due to these PDL's.


I wish you well but get plan B ready.

Dpw15

There's an article about them sending emails out saying it, but it wont let me paste the link as I'm a newbie.

They used to have the same message on their website but were since forced to take it down.

I've just seen an article also from Lloyds banking group saying that they see Payday loans as any other loans.

Again I can't paste the link.

But I'm definitely preparing for disappointment.


I'll update once I know.

Thanks people.

amnblog

Dpw15 wrote: »

I've just seen an article also from Lloyds banking group saying that they see Payday loans as any other loans.

Where was this?

Dpw15

Type into Google the following

''Llodys banking group accept payday loans''

Then it's the mortgagestrategy.co.uk (Third one down on list)

The Article Reads

What the major banks say

Yet of the major banks, few actually have a different policy towards the presence of a payday loan compared to other credit commitments such as a standard loan, overdraft or credit card.

Lloyds Banking Group, the Royal Bank of Scotland Group, Santander and HSBC all treat payday loans the same as any other type of loan.

Barclays has a slightly different approach, though its policy still does not mean a recent payday loan actually hinders a client’s chances of getting a home loan.

The only difference is it deducts the entire loan amount from an applicant’s net income when determining affordability, yet given they are often paid back within a few weeks this approach will often reflect reality anyway.

With a standard loan, lenders tend to only deduct the value of monthly payments from net income.

One of the major banks told Mortgage Strategy that if a borrower had a payday loan in the past but had paid it off, and the rest of their credit references and affordability were good, then they should be OK.

“It’s about overall finances and affordability, both now and going forward,” they added.

“And we would approach with more caution – but it’s about the state of their finances as a whole rather than the payday loan itself.”

Halifax Intermediaries head Ian Wilson says his bank has no problem per se with payday loans and says that when considering a mortgage application it does not differentiate between payday loans and other forms of credit such as personal loans.

“If people have any outstanding loans with more than three months left on them, including payday loans, when they apply for a mortgage, they will be considered in an affordability assessment and therefore factored into a decision to lend,” he says.

Brokers confirm that many major lenders do indeed accept some borrowers with a recent payday loan.

“I have seen deals go through with the likes of Halifax and Santander but that’s not to say that all applicants will get a positive result,” says Hollingworth.



Positive effect on credit scores?

The most high-profile payday lender, Wonga, said in late 2012 in an email to customers that a payday loan can actually “do wonders” for people’s credit ratings if paid off in full.

It later apologised for the email going to such lengths to accentuate the positive, yet the body that represents payday lenders, the Consumer Finance Association, maintains that short-term lending can help a consumer’s credit rating.

“The main credit reference agencies agree that short-term loans can have a positive effect on people’s credit score, as long as they repay that loan on time,” says CFA chief executive Russell Hamblin-Boone.

“Indeed, when used responsibly, payday loans may help to improve the credit profile of many consumers.

“If any mortgage lenders have declined applicants who have recently taken out payday loans, and we haven’t seen any evidence of this, even when they have been repaid, in full, on time, this is not a fair judgement on the individual.

“Many people who do not have a credit history use short-term loans to demonstrate their ability to manage their finances and increase their credit score. Using and paying back is not a sign of financial woe and borrowers should not automatically be penalised by mortgage companies. I have written to the Treasury to bring this matter to the Minister’s attention.”