25 April 2022

Getting a mortgage when you have bad credit can be tough, especially if you have serious red flags in your credit history, but it's not impossible.

This guide aims to direct you how best to apply for a mortgage with bad credit, and you should also talk directly to impartial mortgage brokers, who can advise on your individual situation.

Can I get a mortgage if I have bad credit?

In short, yes. It is often possible to be given a mortgage with poor credit history, but the options to your disposal might be limited. Lenders will always perform a credit check on anyone who applies for a mortgage, and warning signs on your credit history will stand out. The level of seriousness depends on not only the amount(s) of money involved, but also the timeline of your credit rating.

Some high-street banks may downright refuse you a mortgage if you have poor credit history, but building societies have occasionally proved to be more flexible. There are even specialist ‘bad-credit mortgage lenders’ – some cater specifically for those who have faced difficult life events, such as divorce or serious illness.

Said lenders are usually much more flexible when they consider mortgage applications, but the trend is that they charge higher-than-average interest rates as well as demanding larger deposits.

How to land a mortgage despite bad credit

Even if you have a bad credit score, there are still a number of steps you can take to give yourself the best possible chance of getting a mortgage:

• Ask if your partner has debt: your partner’s credit score gets taken into account when you buy together. Make sure neither of you have any outstanding payments.

• Fix your own credit history: a history of paying on time and in full boosts your credit rating because it shows your reliability.

• Be patient: the seriousness of marks on your history can reduce over time, particularly if you are now better off financially.

• Present as a lower risk: it is best to apply when you have a steady, stable income and offer as high a deposit as possible. This may mean considering cheaper homes.

• You have to be honest: you can’t hide anything from mortgage lenders – their detailed searches will find any bad credit, and lying means they can’t trust you.

• Be prepared to explain your situation: lenders will want to know why you got into financial trouble and what you have done to change that.

Should I buy now, or wait until I have improved my score?

Like we’ve said, it is possible to get a mortgage with a poor credit history, but waiting until your score has improved means that you will increase your chances of being accepted for a ‘normal’ mortgage. We’ve weighed up whether it’s worth the wait:

The pros of buying with poor credit

• You will have plenty of choice: there are over 1,600 mortgage deals available to customers with poor credit.

• Ownership comes faster: not waiting to improve your credit score means you will start your journey to homeownership sooner.

The risks of buying with poor credit

• More expensive rates: more often than not, having a poor credit history means you'll have to pay higher interest rates.

• Paying a bigger deposit: securing a mortgage whilst having bad credit most likely means you’ll have to fork out a much bigger deposit than you would after waiting for a better score.

Remortgaging when you have bad credit

Like a mortgage, it is possible to remortgage with bad credit, but it is definitely worth waiting while you try to improve your credit score, if you have the time of course. This is because you can remortgage with a high-street lender if your credit score has risen with a specialist lender.

The current value of your property, the equity you hold in it, your credit rating and your income are all important factors in whether or not you will be able to land a better rate – lenders will also calculate the affordability of the mortgage to make sure all payments will be made in the future.

If you struggle, or are struggling, to be accepted for a remortgage, you should consider getting a second-charge mortgage.

For more information or to get expert advice on mortgages with bad credit, visit our Mortgage Advice Bureau page: https://www.linleyandsimpson.co.uk/mortgages

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