Will applying for Universal Credit affect my mortgage application?

CJDWilkinson

On the Experian website, it says that "Claiming Universal Credit will not appear on your credit report, but it could still affect your ability to get a mortgage. When a bank or building society is assessing your mortgage application, they will look at your income to see if you can afford to repay the mortgage. If you are receiving Universal Credit it is likely because you have a low income, which means you may fail the mortgage lenders affordability tests.

That doesn't mean your Universal Credit is stopping you getting a mortgage, it is the financial circumstances that mean you are claiming universal credit that could affect your mortgage application."

I want to know if claiming Universal Credit is going to affect my ability to apply for a mortgage, and/or if it is better considered with the circumstances of the current climate. I would assume that what I'm reading on Experian has been written pre-covid19, and does not yet have information on how that will affect property buyers this year and next. 

I suppose the outright question here is this; if you claim financial benefits such as universal credit, will this affect your mortgage eligibility?

Thanks.

[Deleted User]

Claiming UC will not impact your credit report, having a lack of income which is why you are claiming UC will affect your eligibility for a mortgage. It is not the UC that will impact your ability to get a mortgage, it is the lack of income. 

Jeremy535897

Your quote says that it is the fact that you are eligible to claim universal credit, rather than the fact that you actually claim universal credit, that is the problem. If I were a lender, and I was prepared to lend you money even though you were eligible for universal credit, surely I'd be happier that you claimed it than if you didn't, as failing to claim it would mean you had less money to pay me, and that you were not financially aware enough to claim? But who knows with these systems.

MovingForwards

Each lender has its own requirements and is listed under the criteria section.
They don't like it if housing benefit is claimed or claimed within a certain period on the run up to applying for a mortgage.

Best up reading through a few lenders criteria to get a feel for what they accept / don't accept, not just in relation to benefits.

Semple

Look at it from a lenders point of view. If you're having to claim UC, then it either means your income is low, or you're out of work etc. Neither of those things look favourable when applying for the biggest loan in your life. 

sharpe106

When lending you the money the bank will not really care where the money comes from, just that it is stable. They lend on what they think you can afford to repay so as claiming UC what you can afford to repay will be a lot less so would be willing to lend you less than if you working.

calcotti

You need to bear in mind that if you are claiming UC and it includes help with rent the UC would go down as soon as you stopped renting. What would you be using to pay the mortgage with?

mobilejo

I assume that you are now claiming because your income has dropped - that will have the biggest impact on your affordability. Is that drop temporary (e.g. while on furlough) or permanent?

I'm not sure if the lenders' attitudes will be different for UC claims as a result of Covid-19. They model their risk profiles on real world possibilities and as of now, Covid-19 second waves and an impending recession are real world possibilities. 

That means that their concerns about benefits claimants in 'normal' times will still apply to people claiming due to Covid-19, as this is a set of circumstances that is likely to impact people's financial situations for a long time to come. It could be the new 'normal' for a while.

Grumpy_chap

The OP seems to have answered their own question that claiming UC will not affect a mortgage application but having an income low enough to qualify for UC will affect affordability and, therefore, mortgage application.

I think, if your current circumstances are that you need UC, then that has to be done to meet current needs.  At least, when you do come to apply for a mortgage, you will have whatever you received as UC more in the bank than if you didn't receive the UC.