Can You Get a Mortgage with a Bad Credit Rating?

If you have a bad credit rating, you may still be able to obtain a mortgage; however, you’ll need to be aware that it’s likely you’ll have to put down a bigger deposit and pay a higher interest rate. There are some mortgages out there that have been specifically designed for those with bad credit, and some mortgage lenders even specialise in this area.

Known as sub-prime mortgages, adverse credit mortgages or bad credit mortgages, they are a great way for someone who has previously had financial problems to get on the housing ladder.

Bad Credit Ratings – What Are They?

You may believe you’ve got a bad credit rating if you’ve previously been rejected for a credit application in the past. But it’s important to remember that all lenders have their own lending criteria, and some lenders will view you in a more positive light than others. Therefore, there’s no set rule determining ‘bad credit’.

There are, however, some factors that can be found on a credit report that are very likely to make lenders believe you’re a high risk such as loan defaults, too frequent applications for credit and missing credit card payments.

How Does A Bad Credit Mortgage Work?

In essence, a bad credit mortgage is the same as a regular mortgage, but it will usually have a higher rate of interest, a lower borrowing limit, and a higher deposit requirement. This is due to the fact that having a low credit score makes you a higher risk to the lender.

Am I Able to Obtain A Mortgage If I Have Bad Credit?

On making a mortgage application, the lender will look at your credit history for evidence about how well you’re able to handle your finances. They’ll consider your savings, monthly outgoings and income to check whether you can afford to make repayments each month, particularly if your income goes down or the interest rate goes up.

You can obtain a mortgage if you have bad credit; however, it’ll help if you can show yourself in a good light. That means you should budget sensibly and take good care of your credit history. You can do this by:

• Meeting all of your usual payments in full and on time
• Reviewing your spending, keeping your outgoings each month consistent and reducing costs wherever possible
• Reviewing your credit report on a regular basis and ensuring it’s up to date and accurate
• Adding notes of correction onto your credit report if there is a reasonable explanation for your previous financial problems
• Only choose a home you’re realistically able to afford
• Have a guarantor who can reassure your lender that your payments will still be covered in the event of a problem
• Save a deposit of 20% of the purchase price

If you take the above steps, you’ll be putting yourself in the best position to be able to obtain a mortgage from your chosen lender, even if you have had financial difficulties in the past.

We have a wide panel of conveyancing solicitors who will be able to help you secure the best deal for your conveyancing costs if you have bad credit.