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Bad Credit Mortgages - buying a home with poor credit

When you apply for a mortgage, the lender will run a credit check to see how reliable you are at repaying your debts. So, what will it mean for your mortgage plans if your credit rating is less than perfect?

Can I get a mortgage with bad credit?

Having bad credit is not necessarily a barrier to getting a mortgage. There are various lenders that will accept you with a poor credit rating – but what has caused your poor credit is an important factor. Some credit issues are more serious than others.

How can a Mortgage Broker help?

Mortgage Brokers are professionals who specialise in the mortgage market. Our job is to work on your behalf to find the most suitable options for you to buy a home. 

We can introduce you to specialist bad credit mortgage lenders who are only accessible through a broker. We know which specialist lenders are open to working with different types of poor credit, and will make a recommendation to you. 

Importantly, we will also make sure you understand all the details about the mortgage process and help you apply for the loan.

What are the causes of bad credit?

Your credit file tells financial providers about you and how risky it might be to lend you money. If you have always made your payments on time, stayed in credit with your bank and remained within your credit card limits, your credit rating should be good. 

Things that could give you a poor credit report include:

  • Missing finance payments 
  • Going over your credit limit
  • Missing one or more month’s payments on a mortgage or other loan (arrears) 
  • Defaulting – failing to pay back money by a deadline
  • Debts against your home
  • Taking out a payday loan
  • Receiving a County Court Judgement (CCJ)
  • Entering a Debt Management Plan
  • Bankruptcy
  • Individual Voluntary Arrangements (IVA)
  • Having goods repossessed

Why is the deposit amount critical if I have bad credit?

Many mortgage lenders allow you to borrow with a deposit as low as 5 or 10%, but for a poor credit mortgage you might need 15-20%. A larger deposit makes you seem less risky to the lender, so they are more likely to accept you. Small deposits also mean you are likely to be charged higher interest rates. 

If a 15% deposit is out of your reach, you could explore the government’s Help to Buy schemes. Open to First Time Buyers buying new build homes, this scheme makes it easier to get on the property ladder by topping up your deposit from 5% to 20%. Note, however, that Help to Buy is not open to anyone who has been declared bankrupt in the past six years.

What if I am declined for a mortgage?

Be aware that making multiple mortgage applications can make your credit score worse – especially if you get rejected. It’s always better to seek support and advice on a mortgage. Not only can we avoid you being declined, but we can also explore all the options with you to make sure you can get a competitive deal. 

Being declined for a mortgage is not the end of the world – you can usually go on to get a loan elsewhere. The main challenge is that it can cause unwanted delays with your house purchase and create unnecessary stress.

How can I improve my chances of getting my mortgage application accepted?

The number one piece of advice is to work with a broker like us. We will never put you forward for a mortgage unless we are certain you will gain approval.

Getting a mortgage is all about meeting the lender’s criteria – and we understand what each mortgage provider is looking for. We’ll spend time getting you in the best possible position before we pursue an application.

There are also various ways you could improve your credit rating. Checking that you are on the electoral roll is an important move, as is staying at the same address for a year or two – frequent moves can make your credit score worse. 

Take time to make sure you have all the documents you’ll need for a mortgage application, including a valid passport and/or driving licence, recent bank statements and payslips, plus a utility bill for proof of address.

Mortgages by McAteer Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority. We are registered in England.