The biggest misconception we encounter is faith in the inscrutable power of the modern lending market — the credit score.
Some brokers we speak to believe it will remain the biggest consideration, even when dealing directly with a human underwriter. Most believe it will always count against their client to some extent.
In fact, it’s not the ball and chain many assume it to be.
Done properly, underwriting finance on a case-by-case basis gives providers the power to adopt different strategies that benefit borrowers, including:
- Setting the credit score aside entirely and focusing on the realities of a customer’s real financial situation;
- Taking into account rental top-ups, so the expected income generated by a property is reflected in the landlord’s affordability calculations;
- Considering various types of income;
- No arbitrary limits on how many rental top-ups should be considered.
What brokers should do
And that’s the way it should be. Human underwriting suggests a degree of common sense and flexibility applies — and that’s absolutely essential.
It is not a box-ticking exercise and should not just be a computer-based scoring system by another name. This is especially important for customers with slightly unusual circumstances.
So how do you get the most out of human underwriting?
- Get on the front foot and speak to a business development manager (BDM) before submitting an application. You will be told what really matters in each case, allowing you to make the time spent compiling evidence really count.
- Don’t assume a single issue will sink an application and focus on the positives. Providers using human underwriting are doing so because they want to say ‘yes’. They’re willing to invest more time and resources identifying the valuable customers that more rigid companies allow to slip through their fingers. Be transparent and build a case for approval.
- Move early. Difficult cases are often on a deadline. Give yourself and the BDMs as much time as you can to find a solution.
Put common sense back in
A good example was a customer who accidentally missed a credit agreement payment, after mistakenly believing he had set up a direct debit. This had badly affected his credit score.
Other providers had already turned him away on that basis alone. We took a different view and simply asked for evidence that he had been in possession of the funds needed to make the payment when it was missed.
A second customer — a portfolio landlord — had bridging finance to fund a new project that was secured across six properties. This was proving costly and she wanted to refinance those loans.
Many lenders do not want to lend against a portfolio exceeding three or four properties. We looked at the whole portfolio and were able to take all the rental income and the individual finance to value ratios into account.
This is how human underwriting can put common sense back into affordability checks.
Access to underwriters should be the norm because plenty of credible customers end up in unusual situations. It’s only good service to see an opportunity where others see a nuisance.