Too many mortgage applications can ruin your plans

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Too many mortgage applications can ruin your plans Mortgage Guardian

Too many mortgage applications can ruin your plans

Too many mortgage applications can ruin your plans – Too many applications submitted to mortgage lenders within a short period of time can be harmful to your financial health to the point where mortgage lenders could start rejecting your applications. This includes the “decision in principle” facility which is also often called an “agreement in principle” as well as a “mortgage in principle”.

Too many mortgage applications can ruin your plans Mortgage GuardianA decision in principle is where the mortgage adviser can submit a shortened application to a lender on your behalf so that you can get an idea whether you would be accepted for a mortgage and also how much the lender will lend to you. The lender does not perform in depth checks as this will be done when a full application is made, but a credit search is carried out and the lender scores the application using the data supplied.

If you pass, the lender is saying that in principle they will lend you the money to buy the property.

So, how can it happen that lenders suddenly start rejecting your mortgage application? The most common scenario is when you seek advice from several different mortgage advisers and have a decision in principle done with each adviser. When the mortgage application is finally submitted the lender refuses which then becomes a surprise. Although there are exceptions, a footprint is left on your credit file each time a credit search is done by the lender. Even though you may be acting legitimately, each new lender can see how many previous applications have been made and they can become suspicious that you are applying for more credit than you can afford. Lenders also look for patterns to prevent fraud.

If your mortgage adviser is doing their job properly they will ask whether you have had an agreement in principle done already and if so they will advise that not too many are done.

Last week we witnessed a scenario where a new client wanted to make an offer on a property but the previous two mortgage advisers failed to secure a mortgage for them.

The client was self-employed but with only 2 years’ worth of accounts. The previous mortgage advisers were making a mistake by submitting mortgage applications to lenders who required a minimum of three years’ worth of accounts. This was a big mistake as they were submitting applications to lenders who would refuse based on criteria. Not only was this a waste of time for everybody but unnecessarily exposed the clients to additional credit scoring which left a footprint each time.

We researched the market and found a selection of lenders who would lend the full amount to the client based on just 2 years’ worth of accounts. Although it seems simple, it was a little more complicated than we are letting on but our main worry was the amount of mortgage applications that were made previously. More applications indicate more credit searches and more footprints left on the credit file for lenders to see. So, we had to be extra careful and triple check criteria before submitting. Fortunately, the mortgage was accepted and the client could make a successful offer on the property.

It could so easily have gone the other way for the client which would have spelled disaster.

Too many mortgage applications can ruin your plans

Making too many mortgage applications or agreeing to more AIP’s (agreement in principles) can be detrimental. Consumers heavily rely on their “whole of market” mortgage adviser to guide them through the mortgage process from start to finish and help them buy their new home avoiding the pitfalls at the same time. It is one of the main selling points of using a “whole of market” mortgage broker. The broker works in the industry every day and this experience benefits clients especially when client circumstances are a little unusual or tricky. However, this is not necessarily the case as experience differs across the industry and inexperienced advisers can sometimes do their customers a disservice.

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