Mortgage credit reports and checks

That depends on whether you’re applying together or not. If you’re looking for a joint mortgage then yes, both parties will be credit checked and any bad credit issues that come up will impact the application. It’s not the case that one partner with good credit cancels out another with bad credit - if anything it’s the other way around.

If you’re applying as a single applicant though, your partner won’t come into the equation - they won’t need a credit check just because you happen to be in a relationship with them. If you are married or in a civil partnership however then you may find it more difficult to find a lender who is prepared to consider an application from you as a single person - most prefer married couples to apply jointly.

Before you find a house you want to buy and make an offer on, you’ll want to get an agreement in principle. This is not a guaranteed mortgage offer, but it is a statement from a lender that they agree, in theory, that they are likely to give you a mortgage of a stated amount. This agreement in principle gives the vendor and estate agent confidence that you are in a good position to make an offer.

At this point, the lender will have performed some basic checks, including a credit check, to confirm details of your identity and income. The credit check that is done for an agreement in principle can be a soft check or a hard check, depending on the lender. This is an important distinction, so don’t be afraid to ask the lender what kind of credit check they plan to do if you’re not sure.

A soft check or soft search doesn’t leave a mark on your credit file for other lenders to see, so ideally this is what you’d want a lender to be doing at this early stage. A hard search however does leave a footprint. Having one hard search on your credit report probably won’t harm your credit score on its own, but several hard searches in a short period of time can be a red flag for lenders, so it’s important to keep track of them and keep them to a minimum where possible.

Your income comes into play as part of a mortgage lender’s affordability assessments. In the UK, mortgage affordability is calculated primarily based on a multiple of your annual income. Other factors may come into play, but typically the income multiple is a cap in terms of how much a lender is willing to lend.

For most mortgages this multiple is somewhere between 4 and 4.5 times your annual income, so if your salary is £40,000, you’d be able to borrow somewhere between £160,000 and £180,000. If you are applying with a partner for a joint mortgage, then it would be a multiple of your combined salary.

There are some situations where you might be able to get a higher income multiple, for example if you work in certain professions, including teachers, nurses, doctors and solicitors. These are sometimes called professional mortgages, although they are essentially just standard mortgages with preferential terms for some occupations. Other lenders may be open to higher income multiples if you can offer a larger deposit or have other mitigating circumstances.

Yes, it’s not simply a case of looking at your salary and deciding how much you can afford to borrow, lenders will also check your existing credit commitments to see how much you have left over after meeting these. The amount of debt you have as a percentage of your income is known as your debt-to-income ratio. If for example you have £3,000 coming in every month, and loan and credit card repayments totalling £600, this would give you a debt-to-income ratio of 20%.

Lenders prefer your debt-to-income ratio to be as low as possible. It’s all very well having a high income, but if your £3,000 a month salary has to cover £2,000 of existing loan and card repayments then it’s unlikely that you’d be able to secure a mortgage.

Yes, as long as you can evidence your earnings and you earn enough to afford the mortgage you need, then being self-employed doesn’t mean that you won’t be able to get on the property ladder. Lenders prefer to see three years’ worth of proof of earnings, normally in the form of accounts or self-assessment statements - your SA302 tax calculation. They will then use your earnings after expenses but before tax to calculate how much you can afford to borrow.

If you don’t have three years of records then don’t worry, some lenders will be prepared to accept you for a mortgage if you’ve only been self-employed for a short amount of time. It helps in these cases if you’ve had previous experience in the industry you’re now working in, or have contracts in place that show future income. Talk to us about your situation and we will do our best to find you a mortgage that fits your needs.

Yes, you might be able to. It’s impossible to give any guarantees because so much depends on the nature of your credit issues and other factors such as your income and employment, but having bad credit certainly isn't a deal breaker. We’ve secured plenty of mortgages for people who have defaults, missed or late payments or CCJs on their credit records, it’s just a case of being fully aware of any issues in advance and approaching the right specialist lenders.

It’s worth keeping in mind that bad credit mortgage rates are normally higher than for standard mortgages, and you may find potentially stricter terms and higher deposit requirements. Lenders put these measures in place to mitigate the risk that comes with lending to someone with a history of defaulting on loans, and this will unfortunately mean that your mortgage is going to be more expensive, at least initially. If you manage your repayments responsibly though, this can have a positive impact on your credit score. It may mean that after your initial mortgage period, you can remortgage on a better deal and bring those repayments down.