Adverse Credit? Clients shouldn’t be shamed into thinking they need not apply for a mortgage
A recent study by Aldermore Bank* showed that first time buyers are more likely to be rejected for a mortgage than they were a year ago. Unfortunately, more than two in five said that they had been rejected more than once. This compares with fewer than one in five before the pandemic.
In the survey, the top reason for mortgage applications being rejected was due to having a poor credit history (41%) and over a quarter of prospective first-time buyers said that they were worried about their credit history with over a third currently seeking to improve their credit score.
In our experience, an often repeated mistake is for first-time buyers with any kind of complexity and/or poor credit to seek to obtain a mortgage via their bank first and this will more often than not result in a rejected application. This can lead to despair, desperation and sometimes shame and embarrassment, but specialist finance brokers and distributors especially are experienced in helping such customers.
This is demonstrated by our recent partnership with the well regarded online mortgage broker, Mojo Mortgages who are referring their complex customers to impact, as we have vast experience in helping such customers obtain mortgages with a range of options not available directly to customers and many other broker firms.
The relationship we have with some of the specialist lenders ensures that some will allocate an onsite underwriter to our offices (during normal times) who will purely look at impact’s cases. This ensures certainty of decision and underwrite and in return the lender receives volume, quality business and increased completion conversions.
With some of the high street lenders looking to encourage clients to go direct and cut out the original broker, especially when it comes to PTs, now more than ever it is a good time to be looking at the specialist arena for another business income opportunity. As furlough draws to an end and many customers find themselves struggling on a monthly basis, this area is sure to be in demand over the coming months.
The Aldermore survey also highlighted this. More significant credit issues are becoming more prevalent with nearly a quarter (23%) having an account handled by collection agencies, one in nine (14%) having taken out a payday loan, 12% having a County Court Judgement (CCJs) and 9% having a bankruptcy in their past. These findings are being echoed in our day-to-day dealings with brokers and their customers and it’s clear that the pandemic has impacted the finances of many, but that need not mean that they cannot obtain a mortgage.
Lenders have an appetite to lend and we’ve seen that recently with many different product launches in to the specialist arena. This includes Help to Buy, Shared Ownership, Limited Company Buy to lets, 95% LTV Lending, Bridging, HMOs, all types of adverse, all manner of property types and so much more.
In addition, with the onslaught of technology, knowing that you have access to over twenty specialist lenders in one place, without the need to rekey data in to twenty different systems is time saving in the current climates. Systems should have the ability to seamlessly link in with market leading sourcing and criteria systems, such as iress and Knowledge Bank, and automatically store and update evidence of research as well as any produced KFIs/ESIS. With documents able to be ‘dragged and dropped’ into the system and automated updates via SMS and emails, any specialist packager partner you deal with should make the processing journey as simple and as slick as possible. Most importantly, adding value to your relationship with your clients.
The more thorough and better prepared brokers are from the onset – in terms of asking the right questions to generate relevant and detailed responses from any complex or adverse customer – the less time is spent firefighting issues further down the line, and less stress will be placed on the client, throughout this process.
By enlightening customers to the many options available, no matter what their circumstances, we can all help to remove the supposed stigma and shame of having poor credit and help make customers’ home ownership dreams a reality.