When buying your perfect home, one of the biggest obstacles in the way can be securing your mortgage. The process can be tough enough as it is but getting a mortgage with a bad credit rating can throw even more complications into the mix. Experts at Housebuyers4U looked at some of the most common questions when applying for mortgages with bad credit and have provided a quick guide to improving your situation.
Can I get a mortgage with bad credit?
The first question most people want to know is whether it is possible to get a mortgage when you have bad credit, to which the answer is yes – you can. However, there are a few additional points that you’ll need to consider, and options will be more limited. The first point is that you’ll need to approach specialist lenders who deal specifically in handling mortgages geared toward those with bad credit.
What types of mortgage can I get with bad credit?
When taking out a mortgage with any lender, they’ll typically look at 3 key factors when deciding whether it’s responsible to offer an applicant a mortgage. These include:
- An applicant’s credit report
- Any CCJs (County Court Judgements) held by the applicant
- Any instances of bankruptcy an applicant has had
Any one of these points can be enough to make a lender unlikely to accept your mortgage application unless you go to a specialist lender. Lenders who specialise in bad credit applications will be able to offer you ‘sub-prime’ or ‘adverse-credit’ mortgages which have additional terms on top of what you’d expect from standard mortgages:
- You will potentially be expected to pay a higher rate of interest than normal
- You will need to put down a larger initial deposit (around 20-30% loan to value ratio)
As with all mortgages, you will also need to evidence that you have a steady income and can afford the repayments on your mortgage. All of this is an effort to mitigate the potential risk that these lenders are taking on, but provided you can fulfil these additional points you will likely be able to secure the funds you need.
How can I improve my mortgage application?
There are a number of things you can do that’ll help improve your chances when applying for your mortgage with bad credit:
- Repairing your credit history by making an effort to pay bills on time, clear any outstanding balances on credit cards and show a general responsibility with money
- Wait for a while if you’ve just gone through a particularly rough patch with finance, as some lenders can be more lenient with some issues after time has passed
- Be honest with the lenders you’re talking to, as they’ll have to carry out financial checks anyway and lying on an application can see the whole thing being scrapped
Starting to repair your credit history and taking a proactive approach to improving your credit score will help you secure a better mortgage in the future, and even with a low score there are options out there if you’re fine with accepting the extra conditions – it’s all about finding the solution which works best for you.
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