Getting a mortgage in the credit crunch

By Chris Clare in Mortgages on April 13th, 2008

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by Chris Clare

The onset of the credit crunch is making it ever more difficult to get a mortgage and you may have found that the credit score that you achieved last year does not lead to you instantly obtaining the best market rates this year.

To explain this you first need to understand the reasons affecting your attempts to get the best rates possible from the lenders in this sector. There are two main factors that that need to be taken into account. The first is the credit crunch itself and the second is to do with the methods used by the lenders when assessing your credit score.

The credit crunch is a situation that the mortgage markets around the world but particularly UK mortgage find themselves in. It is all about lenders not being able to raise the funds that they in turn lend to you. Lenders typically borrow money from the money markets in order to lend out to you the borrower. Due to the poor lending in the US the organisations that lend this money do not want to lend any more as the risk are currently to high.

Mortgage lenders can still get money but currently they can only get it if they commit to vetting borrowers a lot more strictly than they have been in the past. This has resulted in the second reason why you may find it harder to get a loan and that is credit scoring.

Lenders assess the credit score by way of a computerised system which calculates the borrowers ability to obtain credit. Basically, the higher the score the less the borrower is seen as being a liability.The lower the score the higher the interest rate to cover the loan. This is known as sub prime lending.

There are a lot of different ways in which your score is calculated, most of which you will not be told about as you may be seen to be able to manipulate the answers to your advantage. Having said that, there are tricks to making sure that your credit profile looks as healthy as possible. First of all, it is advantageous to have a stable address history. If your contact address has changed several times in the last 6 years, it can make you look financially unattractive.

Ensuring you are on the voters roll is a must, lenders like to know that the addresses that they are searching are actually the addresses you have really lived at this is usually confirmed by the fact that you are on the electoral roll or voters roll as it is also known.

Having a landline phone is also a must, it has to be said this does not have a huge effect but it is better than just having a mobile phone. Having a stable employment history is also a must again lenders do not want to see people changing jobs every couple of months this spells trouble and they feel it could leave you without a job in the future and them without mortgage payments.

Most importantly it is imperitive to have credit in some shape or form and also to make sure that you don’t miss any payments due. If the system does not detect credit then it has no basis to assess you on. But a healthy credit background with regular monthly repayments lets the lender know that you will be less of a liability as far as their money is concerned.

In conclusion, the best advise is to show your financial history in the best possible light and you should be able to get a mortgage just as you would have been able before the credit crunch. Always remember that it is a mortgage advisor’s job to help you get the best out of your money, so never underestimate or overlook the professional help which they can offer you.

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