Do Emergency Loans Impact Mortgage Approvals?

The simple answer is yes – but only to the extent that any loan has the potential to impact whether a mortgage can be approved. Many of our clients at BMG Money are excited to begin that chapter of their lives, purchasing their first home, and worried about how this may impact them. This blog aims at clearing that up.

Key Facts About Credit History

  • A borrower’s credit history exists as far back as six years.
  • Mortgage lenders will be able to see their full financial background, to determine whether they should be lent to.
  • When a lender reviews credit history, they are looking for patterns – including outstanding and completed payments.
For example, if a borrower was to have an emergency and need a short-term loan, what happened after that would be key to the mortgage broker. Were they able to stay on top of their payments? Or were payments made consistently late? Late loan payments signal an inability to manage finances, just the same as late credit card payments do. Halifax Building Society once stated that they treat emergency loans in the same way as any other kind of personal loan on a person’s credit history. Providing they have been managed properly, and there is no outstanding loan with more than three months on them when an application for a mortgage is made – this information is then included in an affordability assessment. For first time home buyers especially, creating the credit history that lenders look for is key. These people are unlikely to have decades of credit, so lenders will look at every type of contract they’ve entered into – from mobile phone to car payment history – to decide if the person is financially stable. At BMG Money, we work with our clients’ employers, to make sure our loans are always made under manageable conditions and can be paid without creating undue hardships. If you’re getting ready to apply for a mortgage, remember that any credit commitment that you make should be managed sensibly and effectively.
  • Avoid overspending where you can.
  • Shy away from new credit checks in the period running up to your application
  • If you have any outstanding debt, make an effort to pay this off first.
  • Lastly, remember if you are declined your mortgage application, it’s likely because the adviser didn’t want to increase any financial burdens you currently have. Use our credit education guide for tips to help try again soon!

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