It’s one of the most frustrating aspects of being a broker. You have calculated your customer’s affordability on the lender’s calculator, checked the criteria, and sourced an appropriate rate – but the case falls down as a result of another, more hidden, element of lending policy.
Unfortunately, not all lenders take a completely transparent approach to published criteria and underwriting policy, and there are times when an application is unexpectedly rejected. So, what are the sort of things should you be aware of? Here are some of the hidden stumbling blocks that could kill your case.
Failing a credit score
Many lenders, particularly in the mainstream market, use credit scores to power their automated decisions. Whilst this is a quick way to assess the credit worthiness for many customers, there are a significant number for whom a credit score is not an appropriate measure of their ability to service a mortgage.
At Pepper Money, we do not credit score, which means that customers who might fail a credit score with another lender could still fit into our top tier products such as Pepper 48 or Pepper 60.
Multiple credit agencies
Some lenders use two different credit reference agencies, with a second agency used halfway through an application. It’s often the case that different credit reference agencies can hold different information on a customer and so this approach could lead to an application being rejected well into the process.
At Pepper Money, we only use one credit reference agency, Equifax to check your customer’s credit report, which means the goal posts won’t change midway through an application.
Too much or too little debt
Some lenders reject a case because they are worried that the customer has too much debt, even though their affordability fits the requirements. At the same time, there are also some lenders that decline a perfectly good case because the customer does have enough record of servicing debt on their credit file. At Pepper Money, we have no predetermined level of debt.
Working past state retirement age
People are working until they are older, but many lenders do not take this into account when assessing a case and won’t take working income past state retirement age. At Pepper Money, we can and do take working income to the age of 75.
LTV limits on debt consolidation
Debt consolidation is going to be a key theme of this year as the cost of living starts to bite for so many customers. However, some lenders will limit the LTV to which they allow debt consolidation. At Pepper Money, we allow debt consolidation up to maximum LTVs.
Interest-only
Interest-only can be a sensible choice for any customer and more lenders are offering interest-only as an option, but some will stipulate a minimum equity requirement for customers who only want to service the interest on a mortgage. At Pepper Money, we have no minimum equity retirement.
Paul Adams is sales director at Pepper Money