Bad Credit Mortgage
Purchasing a Property with Poor Credit
It is generally assumed that if your credit score is not as strong as it could be, getting a mortgage is out of the question. In reality, this is not necessarily the case.
Irrespective of how damaged (or underdeveloped) your credit record may be, there are options to explore beyond conventional High Street mortgages. The key to success lies in targeting the right lenders with your applications, with the help of an experienced broker.
As it becomes increasingly difficult to maintain a flawless credit history, more specialist lenders than ever before are opening their doors to poor credit applicants. Just as long as you can comfortably afford to take out a mortgage, there is a good chance you will qualify – if you take your application to the right lender.
Bad Credit Mortgages: The Basics
Traditionally, bad credit mortgages have always attached higher rates of interest and elevated overall borrowing costs. This is to augment the assumed ‘higher risk’ of lending to a poor-credit applicant.
This does not necessarily mean that accessing an extremely competitive and affordable deal with poor credit is impossible. Working with a specialist ‘sub-prime’ mortgage provider, your requirements and overall financial position will be taken into account – not just your credit history.
If it is clear you are in a strong financial position and can easily meet your long-term repayment obligations, you may qualify for a deal as competitive as any traditional High Street mortgage.
Though in order to do so, you will almost always be expected to provide a relatively sizeable deposit and offer comprehensive proof of income.
Do I Have Poor Credit?
The only realistic way to establish whether or not you have poor credit is to check your credit score. There are various apps and online facilities these days via which you can view your credit history, or you can take your questions and concerns to an independent broker.
If you have ever missed a planned payment in the past – utility bills, credit cards, mobile phone bills, personal loans etc. – each oversight will have left its mark on your credit history. It is comparatively rare for anyone to have a 100% unblemished credit record, which is why minor oversights are not normally taken into account.
By contrast, any evidence of a debt management plan, bankruptcy, specialist consolidation loan or general default could stand in your way. As could a combination of multiple smaller discrepancies over the years.
Should you have any questions or concerns, it is essential to discuss them with an independent broker before applying.
What Are Bad Credit Mortgages?
As the name suggests, bad credit mortgages are home loans designed specifically for applicants with an imperfect credit history. They are also sometimes referred to as subprime mortgages or adverse credit mortgages, though the product itself remains the same.
Most lenders naturally assume that when an applicant has an imperfect credit score, they represent a higher-risk candidate for non-repayment. This is why the vast majority of major high street banks are unwilling to work with poor-credit applicants.
Away from the High Street, specialist subprime lenders are more flexible and accommodating. By taking all aspects of the applicant’s financial status into account, they are able to determine who is genuinely able to afford a mortgage.
Just as poor credit does not mean you cannot afford to buy your own home, a flawless credit history does not necessarily mean you can.
Getting a Mortgage with a Poor Credit Rating
The key to getting a mortgage (at a competitive rate of interest) with poor credit lies in exclusively targeting the right lenders. This is a process that begins with an extensive independent consultation with a broker, who can help you assess your eligibility for a mortgage, your budget, your credit status and so on.
After which, a whole-market comparison can be carried out to find the best sub-prime deals available. The vast majority of which will not be available via the usual High Street lenders, or may only be accessible via approved brokers.
It is important to remember that every unsuccessful mortgage application you submit could inflict further damage on your credit report. If you are not 100% confident you will qualify, it is not worth taking the risk. Always consult with a broker to find the right lender for you, preserving your credit history in the process.
How Can I Improve my Credit Score?
Boosting your credit score is something that takes time, so it is advisable to get started as soon as possible. Upon examining your credit file, you may notice discrepancies that can be brought to the attention of those responsible. If corrected due to inaccuracies, this will be reflected immediately with an improved credit score.
Other than this, the most effective ongoing strategies for building better credit include the following:
- Paying all bills and debts on time
- Adding your name to the electoral roll
- Avoiding consolidation where possible
- Using loans and credit cards responsibly
- Not applying for too many lending facilities
- Keeping on top of your debts
- Avoiding payday loans
As all of these things take time, it is unlikely that taking action today will result in your qualification for a standard mortgage in the near future.
If you have any questions or concerns regarding your credit score and potential eligibility for a mortgage, organise a consultation with a reputable independent broker at the earliest possible stage.