Applying for mortgage with defaults on record

jayjay1111

I am currently trying to rebuild my credit rating after a rough patch a few years ago as I have decent deposit money for a mortgage in a help to buy ISA. I have two defaults on credit cards from last year one for 6k and one for 3.5k. I have another for £200 which will be paid off in a few months. Will it be difficult to get a mortgage if these can be paid off fully before I apply and get my credit rating excellent? Anyone have any experiences or advice?

bamgbost

Las t year being 2019?

I believe if u can get them all paid off and settled and show a period of good repayments then... there may be an option or 2 at above high street rates. The brokers can defo comment better.

jayjay1111

bamgbost said:

Las t year being 2019?

I believe if u can get them all paid off and settled and show a period of good repayments then... there may be an option or 2 at above high street rates. The brokers can defo comment better.

Thats what i heard was wondering if anyone can vouch for this?

[Deleted User]

The obvious question is, if you so recently defaulted (twice) and 3 times in total - how will you maintain a mortgage? You could put it through as a one-off  (everyone's circumstances are different, afterall) but Underwriters will certainly question it, unless you wait a while and it's historic.

Not a broker, but from what I know of lending criteria, it really depends when exactly you are looking at.

"now"/soon - Two very large, recent defaults, I'd be very surprised if high street lenders took it. Adverse lenders would, so that's a start, but at high rates.

3 years after the latest default was registered - High street could be a chance (subject to scoring), probably need to be settled before application,

Building Societies etc. might be more a bit willing to lend before 3 years are up, but it'd have to be low LTV (below 75/80% ish) as those that use Mortgage Indemnity Insurance for high LTVs are unlikely to get it with adverse that recent (and probably 'standard' only - i.e. not shared ownership/HTB etc.)..

If the 3rd £200 one is Telephone/Utilities/Mail Order, you might get lucky and it'll be discounted from calculations at some lenders.

Not_for_real

I had unbeknown default for ~£9 from a phone company which was enough to halt my mortgage application and I’ve got years of good credit. Been able to take out credit cards and finance agreements 

Thrugelmir

Focus on clearing the defaults as soon as possible. Until you do there'll remain a blot on your record. Takes time to heal. No quick answers.
Little point having money in savings rather than settling the debts. Reflects poorly on you as a potential borrower. 

jayjay1111

Somerset_La_La_La said:

The obvious question is, if you so recently defaulted (twice) and 3 times in total - how will you maintain a mortgage? You could put it through as a one-off  (everyone's circumstances are different, afterall) but Underwriters will certainly question it, unless you wait a while and it's historic.

Not a broker, but from what I know of lending criteria, it really depends when exactly you are looking at.

"now"/soon - Two very large, recent defaults, I'd be very surprised if high street lenders took it. Adverse lenders would, so that's a start, but at high rates.

3 years after the latest default was registered - High street could be a chance (subject to scoring), probably need to be settled before application,

Building Societies etc. might be more a bit willing to lend before 3 years are up, but it'd have to be low LTV (below 75/80% ish) as those that use Mortgage Indemnity Insurance for high LTVs are unlikely to get it with adverse that recent (and probably 'standard' only - i.e. not shared ownership/HTB etc.)..

If the 3rd £200 one is Telephone/Utilities/Mail Order, you might get lucky and it'll be discounted from calculations at some lenders.

It was during a period of reduced income which I have set up income protection insurance to prevent this happening in future. The question is if the defaults are paid off like they soon will be how will this affect me?

[Deleted User]

jayjay1111 said:

Somerset_La_La_La said:

The obvious question is, if you so recently defaulted (twice) and 3 times in total - how will you maintain a mortgage? You could put it through as a one-off  (everyone's circumstances are different, afterall) but Underwriters will certainly question it, unless you wait a while and it's historic.

Not a broker, but from what I know of lending criteria, it really depends when exactly you are looking at.

"now"/soon - Two very large, recent defaults, I'd be very surprised if high street lenders took it. Adverse lenders would, so that's a start, but at high rates.

3 years after the latest default was registered - High street could be a chance (subject to scoring), probably need to be settled before application,

Building Societies etc. might be more a bit willing to lend before 3 years are up, but it'd have to be low LTV (below 75/80% ish) as those that use Mortgage Indemnity Insurance for high LTVs are unlikely to get it with adverse that recent (and probably 'standard' only - i.e. not shared ownership/HTB etc.)..

If the 3rd £200 one is Telephone/Utilities/Mail Order, you might get lucky and it'll be discounted from calculations at some lenders.

It was during a period of reduced income which I have set up income protection insurance to prevent this happening in future. The question is if the defaults are paid off like they soon will be how will this affect me?

How soon will depend on what rate you're willing to pay.

If you're happy with more expensive rates to get moving ASAP (e.g. 4% or 5%) then as soon as the defaults are paid is a possibility (potentially even if they aren't) - you'll need to get your credit files in front of a broker. For instance, the broker could well advise that a higher deposit (but leaving some defaults outstanding) is better than a much lower deposit but settled defaults. You'd need to speak to someone with experience of adverse credit (e.g. I think ACG on here).

If you want high street rates, e.g. 2-3% at high LTVs or sub-2% for lower LTVs, then I'd say you're waiting 3 years minimum from the latest default date (settlement date may also come into it, depending on lender) - but if do you want normal rates, they'd have to be settled.