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Who offers mortgages for bad credit?

For some, having a bad credit score might seem like the final nail in the coffin of your mortgage application. However, it doesn’t have to be this way. Read on and find out about bad credit mortgages!

If you have a poor credit score it will be unlikely that you’ll get the best mortgage deal that the world has to offer. However, it doesn’t mean that you won’t be able to get a mortgage deal at all. Banks and building societies across the property market are always providing bad credit mortgages with some degree of compromise between the lender and the borrower. Read on to find out what the options could be for you.

Why are bad credit mortgages harder to come by?

Unfortunately for most borrowers, having a poor credit rating will mean that you present too much of a risk for lenders to offer you a more conventional mortgage deal. Bad credit mortgages were originally credited for the financial crash all the way back in 2008. Over this period, multiple banks gave out thousands of bad credit mortgages after putting a huge emphasis on profit making in this period.

The things that factor in to having a poor credit score can vary from missing bill repayments to bankruptcy. This means that the impact of this on your credit score will depend on the severity of your financial problems. We recommend that you obtain a copy of your latest credit report then go and check this over with a mortgage broker or your lender as they’ll be able to tell you what the impact of this will be.

How should I go about applying for a bad credit mortgage?

If you’re going to be making a bad credit mortgage application to banks and building societies we advise that you don’t apply for as many as possible. By taking a scattergun approach to your mortgage applications in the hope that one will go through you’re only going to end up making your credit score worse. This is because if you have multiple applications rejected in short space of time your credit score will go down.

What we recommend is that you talk to your mortgage lender so you can explain your financial situation to them properly. This means that you’ll be able to work out what the likelihood is that you’ll have your mortgage application accepted by lenders. This can massively play into your hands, as it means you can find out whether you’ll have your application accepted without doing any harm to your credit history. So, make sure you ask your prospective mortgage lender or a mortgage advisor if you want extra advice!

What will the application involve for a bad credit mortgage?

Getting a bad credit mortgage isn’t the easiest thing to come by. But, the most important thing is that they’re possible to find. Your mortgage lender is going to ask you to provide proof of your salary so that they can assess whether you’ll be able to afford mortgage repayments. Evidence of this can come in the form of any tax calculation documents or pay slips that you might have lying around the house.

Going back to what we said about credit ratings, the lender is going to ask you about your credit problems. This means that they’re going to be asking why you’ve incurred your credit problems and assess how serious they are.

How can you improve your bad credit mortgage deal?

Since the 2015 Mortgage Market Review, mortgage lenders must now conduct affordability assessments to see if you can afford the monthly repayments alongside your day-to-day living expenses as well as look at your credit history. This means that there are things that you’ll be able to do to improve your chance of being accepted by mortgage lenders. Let’s take a look at some of the things that you can do.

Your deposit amount can have a huge influence on the deals that banks and building societies will be prepared to offer you. If you pay a large deposit sum, which is roughly in excess of 20% of the property’s price this is going to look way more favourable towards lenders. Why? This is because lower deposit mortgages often have much stricter acceptance criteria.

The way that most lenders see it is that the less equity you have in your home then you will be much more likely to default on future mortgage repayments. For example, if you had to sell your property as a result of this, then your lender could lose a lot of money. 

Therefore, the larger your deposit is, then the better chance you’ll have of getting a mortgage that suits you!

What if I can’t afford a larger deposit?

We know that if you’re looking to get a bad credit mortgage the likelihood is that your finances aren’t the best in the world. So, how on earth are you going to afford a bigger deposit amount?

One way that you could tackle this problem is by getting help from a family member. A lot of lenders are willing to accept sums of money that are ‘gifted’ from family members. This means that this amount cannot be a loan and there should be no expectancy that you pay it back. Sounds like a pretty attractive proposition doesn’t it? All you have to do is provide a form to the person gifting you money where they tell you the conditions under which they’re providing you money.

 

We have loads of articles on all types of mortgages, from fixed rate mortgages, variable rate mortgages, offset mortgages and buy to let mortgages (and more!). MO even have advice and tips about life insurance and improving your credit rating too! All for free (so put your credit card away!).

LauraWaller

Laura Waller

Laura Waller has been working in the mortgages industry since 2013, joining an independent brokerage in Essex. Laura has CeMAP 2 & 3 – Certificates in Mortgages Advice and Practice. Since then Laura oversees marketing for Mortgages Online, using her experience and expertise to write articles and blogs about mortgages and related topics.

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