.png)
In short. Mostly yes! Sometimes no. However, it will require specialist advice.
It’s possible to get a bad credit mortgage, but you will more than likely not be getting the cheapest rate on the market and instead have to take a higher rate of interest. You may also need to come up with a larger deposit.
Before we go on, here’s the mandatory disclaimer so my compliance doesn’t come after me.
You should only be getting a mortgage if you can afford the payments. If you can’t keep up with the payments, you may run the risk of losing your home.
Now the boring stuff is done. Time for the juicy stuff. Mortgages with bad credit. I’m going to break down everything bad credit and show you how you can get a mortgage with bad credit.
What is bad credit?
I guess we should start here. What is bad credit? It seems so ambiguous. Some may see it as 1 missed payment 3 years ago, some may see it as a low credit score, some may see it as being behind on current monthly payments. You may even think you have a bad credit score as you were rejected for additional credit in the past. Remember, different lenders have different criteria. Some lenders may see you as high risk whilst others… don’t.
So, there’s no definite rule of bad credit, just bad credit for that lender.
However, you may be seen as higher risk if you default on loans, continually apply for additional credit, missing monthly credit card loans. If you think you have bad credit, then I strongly suggest you download your credit file from CheckMyFile.
CheckMyFile gets your credit report from all the credit agencies (Experian, Expedia, Transunion), allowing you to see them all in one place.
To view your credit report, please follow the link below:
Try it FREE for 30 days, then £14.99 a month - cancel online anytime.
I make a small commission off this just an FYI so help me out!
You may download your report and cancel it straight away so you aren’t charged a penny.
Now the shameless plug is done let’s continue.
How do “bad credit” mortgages work?
Bad credit mortgages are mostly the same as regular mortgages just with a few stipulations:
· They are likely to have higher interest rates
· They are likely to require a larger deposit
There is a reason for this though. As a higher risk person, lenders need to assure themselves that they can get more of their money back quickly and that they are more secure if the house needs to be taken back come the worst. It’s like many things, higher risk needs higher return or it’s not worth it.
You wouldn’t bet on the green at a roulette table if it gave you the same return as the red or the black.
My credit score is bad, but I haven’t missed any payments, what happens now?
I am going to let you in on a secret here that not many people will tell you. Credit score doesn’t really matter. Yup, you heard me. Credit score doesn’t really matter. It’s the content of your credit report that really matters.
Low credit scores can happen due to numerous factors that have nothing to do with you missing payments on your credit file. Lenders know this, they know that you can have a bad credit score but have no missed payments. They prefer to see that you haven’t missed payments and have had a good history in the past 3 years than a higher credit score.
Can I get a mortgage with bad credit?
There are a few things to take into account here. The lender will not only look at your credit history, but your income and outgoings to see if you manage your money efficiently and can afford the payments. It’s nice having 5,000 coming in but if 5,000 goes out how can they expect you to pay more for a monthly mortgage repayment…?
Here are the steps you can take to get into better shape with lenders so you have the best chance possible of finding the lowest rate available:
· Pay your bills ON TIME! - This shows you are sensible and can commit to monthly payments.
· Live below your means – This might be a tough one to swallow but that doesn’t mean never leaving the house, never having a takeaway, and not going socialising. It just means to keep an eye on your monthly outgoings and really think do I need that? Try to have some leftovers at the end of the month.
· Look within your budget – As stated earlier, you may need higher deposits for your bad credit mortgage. So, look for somewhere more in budget and try not to stretch your deposit too thin as you may not be able to get the house anyway.
· Get a decision in principle – These give you a guide on what you are able to afford so you can go house shopping knowing you have the backing of a bank to get you your next home! Best place to do this is through a broker (shameless plug) as we know the best lenders for your credit situations to get a decision in principle with (we also don’t charge for this).
· Review your credit report – Sometimes things can be incorrectly put on your profile. Makes sure you check for these and amend them with the creditor if you believe there has been a mistake.
· Stop taking out new credit – Don’t open more lines of credit than absolutely necessary. Lenders will wonder why you need such a high level of credit and may think of this negatively in the application.
· Start only using 25% of your credit limits – This shows that you can be responsible with credit and can keep up to date with repaying credit whilst not relying on it to get through life.
What to do next?
The next steps are to be getting in touch with someone who is an expert in mortgages with bad credit. Someone who knows how to place yourself in the best way possible to get your first or next mortgage in place, so you, can buy your dream home!
Use the contact us page to get more info and start your dream home journey.
Comments