We try to post examples of applications that we have managed to place that are outside the normal for us and this Bad Credit Mortgage Success Story is a good one.
As Adverse/Bad credit specialists, we regularly come across cases where people have 1-5 defaults, bankruptcies from 3 years or more prior, and occasionally we see up to 10 defaults/CCJs but this is a very good example of where you can help yourselves to help us get you the best rate possible.
I think in 8 years of being a Mortgage Broker, this is probably my favourite example of where we have been able to get a Mortgage offered…
In June this year we received an enquiry from a couple who had both entered an IVA, both of which had failed and 2 Bankruptcies which had both been satisfied for 3 years (and a couple of days). I have just gone back over our original email exchange and the funny thing is, we got this one wrong – but in a good way. Initially I went back to the customer and said we would need a 20% deposit and rates would be up to around 6.5%.
The customer replied to say he had a 15% deposit and could not stretch to 20%. At that point I suggested he send over his credit reports as we might be able to find a lender prepared to do it.
The lenders I had in mind were 50/50 at best and a lot would come down to what was still on their credit reports from the bankruptcy.
As it happened, there was not a lot on there and in the 3 years from discharge to now, there was no build up of credit, just a sole credit card, there were no late payments and they looked like the perfect applicants on their credit report if you took off the bankruptcies and IVAs.
What we did:
A lot of this example is more about what the applicants did. They did everything right. They kept their noses clean for 3 years, they saved up as much as possible which could be evidenced and they also got in touch with us 🙂
We did have to put some work in our end though. I talk about “packaging” a lot on this site and this is the phrase we use when we are putting together a case for an underwriter.
Our aim is to explain the past problems, but also push to the front the positives in a way that we ‘package’ the application together so that lenders and underwritters can quickly see the details they need.
In this case, there was a reason for the initial IVAs, there was a reason they both failed and there was a reason for both of the bankruptcies which could all be explained in terms of the circumstances behind them. Added to that, we could evidence the deposit had mostly been saved (a small top up gift from the parents was also needed), there had been no issues in the last 3 years and it was quite clear from the explanation and the credit reports that there was an “issue” 4-5 years prior but these applicants were actually a good risk.
The lender we spoke to agreed with us.
We submitted the application in full, within 11 working days we had a full mortgage offer issued… A fixed rate for 3 years at 2.79%!
This 3 year term will see their Bankruptcies and IVAs drop off their credit reports and give them a 3 year history of making mortgage payments, all of which combined should put them in good stead for getting a “normal” mortgage when this deal comes to end. Although I say normal, I am not sure the rate would have been significantly lower on the high street anyway.
The funny thing here is that going back to our original email exchange, we managed to get this through with a smaller deposit than expected and at an interest rate of less than half what we originally thought.
Having spoken to the customer after their offer was issued, I have also found out that they did speak to a couple of brokers before us, some said no chance, others said it could be done but then changed the goalposts – ie needing a bigger deposit. Whilst we did change the goalposts, we did it in a positive way, I am a strong believer being open about your options and chances of success and I would much rather give you a worst case scenario and then improve on it – Under promise and over deliver as they say.
In this case I did expect rates to be over 5%, and I did think that the deposit was probably a little shy. The reason I took the case on initially was because I wanted to give the applicants some direction and something concrete to aim for. I did not actually expect us to be able to place the case at the time.
That is the reason I think this is such a great example. It shows that even we are not always right. It can be worth making a few phone calls rather than just accepting the first answer. In this case, it was just knowing the small quirky lenders who can take a manual approach to underwriting – lenders that many brokers may never have even heard of, let alone used. This one case where I learnt something new and am genuinely really proud of and happy to have been able to help.
It just shows that making that one extra phone call can make the difference, so please do get in touch if you think you may be our next Bad Credit Mortgage Success Story.
Even if we can not help (or think we can not help) right now, we will still try to point you in the right direction and give you something to aim for that can help future applications.