What Checks Do Mortgage Lenders Do Before Completion?

Getting a mortgage can be a tricky process to navigate. Even when an agreement in principle (AIP) has been made, a lender can withdraw their offer at the last minute following their final credit check.

By following this guide, you’ll have a better understanding of what a lender is looking for, why they could still decline your application so late in the process, and some steps you can take should the worst happen to you.

What is a final mortgage credit check?

For most people buying a house, the final credit check should merely confirm what the mortgage lender already knows about their financial circumstances.

Before your AIP, they will have already examined your suitability by looking at your:

• Evidence of earnings
• Credit reports
• Income and outgoings
• Other outstanding debts
• Age

However, the homebuying process can be notoriously lengthy, and several months may have passed since these checks were carried out. This means your lender will want to ensure nothing has changed before they release the funds to you at the completion stage.

This final check is usually one of the last steps in the process, and it takes place after contracts have been exchanged. If anything related to your credit score or affordability has changed significantly, your lender can withdraw their mortgage offer.

A sale falling through at the last minute can cause significant stress. An experienced mortgage broker will have encountered this type of scenario before and can help manage the situation, should it arise, and regain control of your plans.

What does the lender look for?

All lenders want the same thing: complete confidence that the money they lend to you can be repaid. So, when it comes to the final checks before a mortgage offer, a lender is simply acting in a diligent manner by conducting one last review of your finances before giving the green light.

They will want to double-check:

• How much do you still owe on credit cards, loans, other mortgages, and overdrafts? Has anything changed since the previous check?
  • Importantly, are you still up to date with all your payments?
• Has your credit score changed? If so (negatively), what has caused this?
• Are you still with the same employer and level of earnings?
  • How could this impact your ability to repay the mortgage if this has changed?
• Are the funds for your deposit still available? If not, why not?
• If it’s been several months since the process began, they may request a new valuation on the property to ensure the valuation and condition is still the same

What happens if you fail the last credit check?

Worst-case scenario: Your lender will withdraw their original AIP, and your mortgage will not be approved, at least not until the issue that caused this has been resolved. If it can’t be resolved, you won’t be able to borrow the money you need to buy your property.

Lenders have the right to withdraw their offer if it becomes clear that your circumstances have changed, if the original offer was made in error, or if incorrect information was provided. Unfortunately, in some cases, this can happen even on the day of completion.

Failing affordability is the most common reason for this. Buying a house can be a long and drawn-out process sometimes, and life goes on. A common trap is new car finance. Our network of advisers will always remind you not to take out any new credit agreements during the homebuying process.

What steps can you take if this happens?

If you’ve recently failed the last credit check and subsequently had your mortgage offer withdrawn by a lender, don’t panic!  There are a few simple steps you can take that will help you get the process back on track:

1. Get a copy of your credit record to establish the issue. Is it something that can be remedied easily? For example, is it one missed payment on a loan that can be repaid quickly?
2. Is it because you changed jobs? If so, can you provide new evidence of earnings and/or a new employment contract?
3. Speak to an experienced mortgage broker. They will already know how to approach situations like this and ensure you make the right decisions swiftly so you can avoid missing out on the property you want to buy.

Our unique broker-matching service is designed to find the right advisor to deal with your specific needs. If you make an enquiry we will arrange for an expert in this area to speak to you straight away.

How to boost your chances of passing the final credit checks

To avoid falling at the last hurdle, there are several things you should avoid doing during the mortgage application process, which could affect your financial situation, namely:

• Speak to a mortgage broker (see the next section for more on this)
• Don’t apply for any new lines of credit
• Don’t miss any bills or loan payments
• If you change jobs, let the lender know straight away and provide all your new employment details (salary, contract terms, etc)
• Don’t leave out any key information when you first apply – if in doubt, speak to your broker and ask for advice

Speak to an experienced mortgage broker

Failing the final credit check after going through the process can be pretty demoralising. But there are things you can do to avoid this from happening.

If the worst happens, it doesn’t mean that all is lost. An experienced mortgage broker can guide you back onto the right track and help identify and then resolve the issues that may have caused this.

We can make sure you are matched with someone who understands your specific needs. Give us a call on 0330 822 0505 or get in touch, and we will arrange for an expert to speak to you directly.