Are you looking to buy a house but afraid of getting rejected due to your adverse credit score? If the answer is yes, there's good news for you.
Thanks to the array of mortgages available, you can buy a house even with a poor credit rating. If you can't stand any more rejections due to your credit score, this article discusses some of the things to consider with a bad credit score mortgage.
The Difference Between a Good and Bad Credit Score Mortgage
Both mortgage types share a handful of differences that are important to consider when applying for a mortgage with the lender.
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Good Credit Score Mortgage
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Bad Credit Score Mortgage
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Good credit mortgages often come with a competitive interest rate.
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A bad credit score mortgage can have a slightly higher interest rate and the required deposit to find can be higher.
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A good credit score will give you a wider pick of the lenders available.
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A credit score that has been impacted by a previous entry may mean that a specialist lender offering more flexibility needs to be approached.
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The required deposit required can be lower.
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You may need to put down a bigger deposit……but not always.
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A good credit score should make it easier to find a lender.
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A specialist mortgage broker may need to be asked to approach other lenders on your behalf.
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The is no definition of what a good credit score is. The lender often will have its own scoring system and criteria. That said, a high score often means there is less to cause an issue later.
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Just because a credit reference agency marks you as having a poor score, does not mean the lender will agree with them. Their lending criteria is just as important.
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Criteria is often general and designed to meet most applicants.
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Criteria can be more specific to dates and amounts of adverse history. Other criteria can become restrictive depending on the severity of the credit file.
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What are the requirements for a bad credit mortgage?
If you're planning to apply for a bad credit mortgage, the best practice is to prepare and plan before you make your application to a prospective lender.
To ensure that you qualify for a bad credit mortgage, most lenders will enquire about your:
- Income
- Outgoings
- Credit History
- Savings
Once you have everything ready with you, check these tips to improve your chances of getting your mortgage request approved.
- Show your payment history to the lender making sure you have been making your payments on time.
- Try to reduce your expenses as much as possible and look to save at the end of the month.
- Check your credit file is accurate.
- Are you able to show a deposit that meets the lender's minimum levels?
- Check your eligibility to pre-qualify for a mortgage and obtain a decision in principle if you can.
How can I get a bad credit mortgage?
Whilst it's possible to get a bad credit mortgage, having the right lender makes all the difference. As a rule of thumb, look for mortgage lenders who offer loans at competitive rates and whose lending criteria is flexible to any issues you have had in the past.
Speak to a specialist mortgage broker who has access to a range of lenders who allow for credit score that have been impacted by previous entries.
A step-by-step guide to finding bad credit mortgages
Now that you know it's possible to get a bad credit score mortgage, here's a step-by-step guide to making the process easier.
Whether you're a first-time buyer or frequently buy or rent houses, read this guide to find the best bad credit mortgage.
- Look for a responsible lender with experience and knowledge of the UK mortgage industry.
- Next, check the current market conditions and calculate the mortgage repayments with a mortgage calculator.
- Create and study your mortgage plan closely with a mortgage expert.
Why are bad credit mortgages taking so long to get approved?
There can be a multitude of reasons for the delay in the approval of your mortgage application.
If you're facing unexpected delays in your bad credit mortgage being approved, it may be due to the issues mentioned below.
- Late or missed payments
- Bad credit history
- Overdrawn bank account
- Previous bankruptcy
- Poor debt management
- High percentage usage of available credit limits
- Unnecessary spending and lack of savings.
Having looked at these well in advance of making an application to the right lender will improve your chances of being accepted.
What's the ideal credit score for a mortgage?
Many lenders have their own credit scoring system and use credit reference agencies only for the data that they hold. This means that if you are showing a poor credit score, it doesn’t always mean you are going to be declined.
However, a bad credit mortgage can be obtained with a lower credit score compared to regular mortgages which can be the lifeline that you are looking for.
We've compiled a few useful types of bad credit mortgages you can apply for even with a bad or poor credit score:
- Mortgages that allow for late or missed payments
- Mortgages where the credit file shows evidence of CCJs
- Discharged bankruptcy
- Mortgages where there has been a debt management program
- Evidence of an IVA being discharged or satisfactorily conducted
- Mortgages where the applicant has previously had defaults
What are the common bad credit mortgage rates?
There is not a standard interest rate for each mortgage across all the different lenders, rather it depends on several factors including the lender's own criteria and the applicant's credit history.
Therefore, it's best to clearly discuss the deposit size, type of bad credit mortgage, interest rate, repayment duration, and other necessary details with a mortgage specialist to make sure the best deal for the situation is being applied for.