Wondering how to apply for a mortgage with a bad credit score? Buying a house with bad credit can be difficult but it is not impossible!
Although it is vital you go through the necessary steps to improve your credit score and ensure you are making the right decision.
So, you are probably thinking what can I do to improve my credit score? Here are some things that you can do to improve your credit score and increase the likeliness of getting a mortgage in the current position you are in.
What is a bad credit mortgage?
“A bad credit mortgage is for borrowers with adverse credit, a poor credit score or low credit rating”. According to Pete Mugleston. A bad credit application will be provided with loans by specialist providers, but the rates and payments may be higher than for customers who don’t have bad credit. If you have enough income or a healthy deposit, it may be possible to find a competitive deal.
Specialists who sell niche financial products like this tend to be more flexible in their lending and decisions will be based on the age, severity, and cause of the credit issue in question, as well as how likely they are to reoccur.
How to get a mortgage with bad credit?
Below are some of the most important questions you should be asking to get a better understanding of the house:
- Sort your finances - It is advisable to postpone buying a home until you are sure that you are in a stronger financial position. In the meantime, it is important that you try to build back your credit rating by making payments for bills etc and try to save more for your deposit. Although that could take months or even years, it’ll give you access to more competitive mortgage rates in the future, which will save you money in the long run.
- Check your credit record - It is important to have a clear understanding of your credit score before you start to make any decisions about buying a home. You can check your credit record by searching online but it will only give you a general idea of your creditworthiness. Each lender will score you differently against their own criteria.
- Rebuild your credit score - Once you’ve assessed your credit problems, you can work on fixing them. Anything from a single missed payment to bankruptcy can affect your ability to get a mortgage. You should start pushing up your credit score well in advance of a mortgage application by making all repayments for bills and credit on time. You can do this with a credit-builder credit once you feel ready to handle the responsibility and the repayments.
- Save for a bigger deposit - The more deposit you have, the better chance you have of finding a mortgage you're eligible for, especially in this kind of situation. Lenders might ask that you have a larger deposit if you have bad credit – for example around 20-30%, instead of 5-10%. That’ll give you a lower loan-to-value of 70-80%, which can be easier to get accepted for, which will therefore be better for you in the long run.
- Get a guarantor - If you're unable to get a mortgage because of bad credit, a family member might be willing to be named as a guarantor. You will both need to clearly understand the implication involved in doing this before any decision is made. If you do become unable to pay your mortgage payments, this will fall back on your guarantor, and they will be asked to pay the money. You and your guarantor will be tied to each other financially. Any missed repayments in the future will affect both your credit ratings.
- Speak to an advisor - A mortgage advisor at Mortgage Propeller will help you find the right product for your needs and help you with your application. They could help you to find a deal you’re likely to be accepted for with past credit issues.
The best way for someone with a poor credit history to get a mortgage is through a broker with access to the whole market. That way, you can rest assured that the most favorable deals you’re eligible for will be within reach.
Ready to go for it? Download the checklist by scrolling below! It includes:
• Things to ensure you do before applying for a mortgage with bad credit