Seeing if you could qualify for a mortgage

Before we lend to you, we want to make sure that your repayments don’t become a problem for you. Credit scoring helps us to do this.

As well as assessing the information you give us on your application form, we will also look at information given to us by Credit Reference Agencies, which tell us how you've managed other credit in the past, such as loans and credit cards. Based on this, we can predict the likelihood of you being able to meet the mortgage payments, so it helps with our decision as to whether your application should go ahead.

The following sections will give you a clear and detailed guide to the areas we look at when coming to our decision: 

1. Affordability
2. How much could you borrow?
3. Your credit profile
4. Other things we consider
5. What happens if my application is declined?

1. Affordability – can you afford the repayments

The first question we ask is simple: can you afford to repay the amount you want to borrow?  To help us make our decision, we ask you to provide details of your income and outgoings.

We recommend you look at your recent payslips and bank statements to get the most up-to-date figures you can. If you are self-employed, we will ask to see three years’ financial statements.

There are three main areas that we look at when deciding whether you can afford the amount you want to borrow:

Income

We’ll consider different kinds of income, including overtime, commission and benefits.

If your income changes from month to month, we’ll take an average over the last three months or more. If you’re self-employed, for example, if you own a significant part of the company or partnership where you work, or if you’re a sub-contractor, we’ll use evidence of your income from the last 3 years’ financial statements.

Household expenditure

When working out how much you can afford to repay, we’ll use information provided by Government agencies about average household costs to make allowance for typical expenditure, including things like:

  • utility bills
  • housekeeping costs
  • transport and
  • travel and entertainment.

Financial commitments

We’ll ask you for details of all your financial commitments such as loans, overdrafts, credit and store cards, hire purchase agreements and maintenance payments.

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2. How much could you borrow?

Use the 'How much could I borrow' calculator to see what we might be able to lend you. Simply fill in a few details for all applicants.

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3. Your credit profile

Your credit profile is a history of the types of credit you use and how you’ve managed your bills in the past.

We’ll use details of your accounts and financial commitments with us, as well as information supplied by Credit Reference Agencies including previous applications you’ve made to borrow and whether you have always made repayments on time.

The agencies we use are:

Experian; Credit Report Services, PO Box 1135, Warrington WA55 1EP
Telephone: 0844 481 8000
www.experian.co.uk

Callcredit Limited; Consumer Services Team, PO Box 491, Leeds LS3 1WZ
Telephone: 0870 060 1414
www.callcredit.co.uk

Equifax Plc; Credit File Advice Centre, PO Box 1140, Bradford BD1 5US
Telephone: 0844 335 0550
www.equifax.co.uk

You can get details of the information they hold about you by visiting the websites above or by sending each of them a written request and a cheque for £2. If you see that they are holding particular information about you that’s wrong, you should forward the correct information straight away.

If you would prefer to talk to someone about your credit profile, ask your mortgage specialist in branch for more details about the Credit Expert service through Halifax, provided by Experian.

If you’ve had problems with obtaining credit in the past, there are things you can do to improve your credit history:

  • If you have credit cards, pay off more than the minimum payment, or in full if you can
  • Don’t leave credit cards dormant and cancel unused accounts
  • If you have missed payments, bring your accounts up to date
  • Ensure any company you deal with has your correct name and current address
  • Don’t apply for too much credit in a short space of time, including credit cards, loans or mobile phone contracts
  • Make sure you are on the electoral register

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4. Others things we consider

As well as looking at affordability and your credit history, there are a number of other important considerations when deciding if we can agree a mortgage for you.

Deposit

We will need you to provide a deposit on the property you want to buy. Typically, if you can get a larger deposit together we’ll often be able to offer you a lower rate.

The amount of deposit required will also depend on the property you want to purchase and the mortgage product you apply for.

Your deposit may be from your personal savings but we’ll also accept it if it’s a gift from a relative or an inheritance.

We may ask you for proof of your deposit when you apply.

Your mortgage specialist can provide you with more details.

Property

We want to make sure that the property value reflects the purchase price, and that there are no problems that could affect its value.

Generally, we consider lending on all types of property but there are exceptions such as house boats or mobile homes. We also have a minimum property value of £40,000.

An initial assessment will be made at the time of the application to make sure the property type and location are suitable for mortgage lending and if your application is successful a more detailed valuation will be carried out.

Age

You’ll need to be at least 18 years old to apply for a mortgage. Where your mortgage will take you past your 65th birthday or your anticipated retirement age if lower, we’ll need to consider how you’ll repay the mortgage once you retire. The mortgage must end before your 75th birthday.

Employment

You’ll need to be employed or self-employed in a permanent job. We can’t lend to seasonal or temporary workers because we need to make sure the mortgage repayments can be made in the long term.

Identification

To prevent fraud and comply with regulation, we’ll need to confirm your identity. We’ll ask you to bring in identification including your passport or driving licence.

We’ll also ask for documents that confirm your address, such as bank/building society/credit card statements, council tax or utility bills (for the last three months) or recent HM Revenue and Customs documentation.

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5. What happens if my application is declined?

We approve 9 out of 10 mortgage applications*, but if we have to turn an application down, we will help you to understand why, offer alternatives if we can and try to provide guidance to improve your chances of being successful next time. For example, if we don’t think you’ll be able to afford the repayments on the mortgage, we may be able to offer you a lower amount or help you identify additional sources of deposit.

If we have declined the application because of something in your credit profile we’ll give you as much information as we can and suggest ways to improve your credit record or correct it if it’s wrong. Your mortgage specialist can provide access to Experian’s Credit Expert through Halifax. Credit Expert will be able to offer you expert advice over the phone and help you to identify ways to improve your credit profile.

We hope this information has helped you understand how we make our decisions on your mortgage application. If you have more questions or queries please contact one of our mortgage specialists in branch or by phone, who will be more than happy to help.

*Based on internal Halifax application data from 01/10/2012 to 31/01/2013.

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