100% yes, it’s possible. We help lots of people get a mortgage whilst they are in Debt Management Plans. Although as expected, it can be more challenging than if you didn’t have one.
The banks or lenders that will consider your mortgage application whilst you are in an active DMP will likely charge you a higher interest rate and demand a higher percentage deposit to reduce their risk.
Having a DMP means that you are currently in a plan to manage your debts. This will almost certainly have an impact on your credit score as well as affect your debt-to-income ratio and affordability as the ongoing monthly payment for the DMP will also be factored in for affordability. These are the three main factors that a lender will consider when underwriting your mortgage application.
Although your credit score has been effected due to being within a DMP as it is a sign that you were/are having financial difficulties. If the payments have been maintained and the DMP conducted satisfactory, this can also demonstrate your financial responsibility and show that you had taken steps to take back control of your finances, which could work in your favour.
Your debt-to-income ratio (DTIR) could also be affected by the DMP, as lenders will consider the amount of debt that you have vs your household income when underwriting your application. Entering into a debt management plan can significantly reduce your monthly outgoings as you will be making smaller payments through the plan than you were before, however this also means that the length of time it takes to repay your debts will also be increased. This could impact your ability to apply for new credit.
Lenders will need to understand what happened in your life that a DMP is required to gain back control of your finance, usually these can be pinned to a life event such as relationship breakdown or loss of employment.
Due to the importance of a back story, when our clients are in a DMP we help them to pull this together for their mortgage application so that the underwriter understands what happened and the steps taken to get your finances back on track. The stronger the steps taken and changes to your circumstances will help the underwriter understand that the risk has been reduced and that your application should be accepted.
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