Mortgage Application with defaults- Whats the Criteria

Debtsolver33

Hello, I’m hoping to get some insight from a mortgage broker regarding my current credit situation and my chances of getting a mortgage.

I currently have 2 defaults (registered less than a year ago, totaling £15k) and 5 other debts (totaling £17k) that are currently on a payment plan/DMP. My plan is to offer a full and final settlement for the 2 defaults, and pay off (or mostly pay off) the remaining 5 debts on the payment plan.

I have a few specific questions about how lenders will view my file once this is done:

DMP vs. Defaults: I’ve read online that having 2 defaults plus 5 debts on a payment plan is viewed by lenders as exactly the same as having 7 defaults. Is this true?

Paying off defaulted accounts on full and final settlements v Paid in full, I would only take this option if i get 50% or more discount.

Likelihood of Approval: Assuming I successfully settle the defaults and clear the DMP, is it realistic to get accepted for a mortgage?

Expected Terms: If I can get accepted, what kind of terms should I expect? Specifically, what percentage deposit is usually required for this level of adverse credit, and how much of an interest rate premium will I likely be charged?

Underwriting Factors: From a broker's perspective, what do lenders care about most—the age of the defaults, the total number of defaults, or the monetary value of them?

Any statistics or professional insights on securing a mortgage under these conditions would be greatly appreciated. Thank you!

ACG

It is very difficult to answer all of your questions as there are 80+ mortgage lenders, so you can imagine how many different answers there will be.

But I will try…

1. Not really. Many lenders will ask if you have been in a DMP, so not only will you have the defaults. You will also have declared a DMP. Some lenders may not ask, but they are probably going to see 2 lots of adverse (the ones that defaulted when the DMP started and the more recent ones).
2. The second part doesnt appear to be a question, but I will answer what I think you were intending to ask… If they show as settled (even as partial) that will help but in reality it probably wont make a huge difference one way or the other, other than for the fact you will not have them down as a commitment going forward. Which should help affordabiltiy.
3. Chances of acceptance, I think you are going to be looking at an adverse lender. High street there is too much to contend with. Building societies like to see 2 years clear and so I think you are going to be looking at a 15-25% deposit and rates of maybe 6%… Not entirely sure but ball park. I imagine there will be lenders so long as you have the deposit and are comfortable with the rates.
4. As above.
5. Age is probably the biggest factor. The saying "time is the greatest healer" is true with mortgages.

Not sure in relation to the last part. You wont be able to do this without a broker so you probably need to get in touch with one and the can go through everything with you in more detail based on your circumstances and give you a better idea of deposit/rates/processes/fees etc.