If you are looking to buy a house but have a history of bad credit you may be wondering if it is even a possibility for you. But there are more options for you out there than you think as there are many lenders willing to offer flexibility depending on how well you can fit into their other criteria. MoneyNest’s advisors are experts in all things bad credit and will provide you with the right help to find the best mortgage for you.
We have put together our 5 best tips to help you buy a house with bad credit below:
The first step we always recommend is to download your credit reports from the three major credit reference agencies used in the UK: Equifax, TransUnion and Experian. Different lenders will use different agencies to evaluate your application so by viewing all three you can see where you stand with your credit history overall. One credit reference agency may report all of the credit issues you have had whilst the other may only report the more severe credit. Our bad credit brokers can use this to match you with the lender who will see your application in the best light. Also, there can be inaccuracies on your credit report which are damaging your report further. These could be active accounts that should have been closed or a payment that was reported missed when you had paid. If this is the case you can get in touch with the company to fix this and this will reflect on your credit report within 3 months.
The agencies will use different scoring systems to measure your credit, so you should expect different numbers from each one. A score in one of the top two ranges will be classed as a better score and the lowest ranges may indicate that you have bad credit. It is important to note that lenders only use the score as an indication and are actually far more interested in the contents of your report. They will want to know what type of bad credit you have, if you have paid it off and how long has passed since it was registered.
It is a good idea to work on your credit history and evaluate how you can improve it. There are not many quick fixes out there that will help your current mortgage application but anything you do now will help for future applications or rate changes.
Mortgages for bad credit can be quite technical so getting the best bad credit mortgage broker can save you a lot of time, stress and money. A mortgage broker differs to a bank as they have access to the whole market which means a lot more choice for you. They work closely with the right lenders and can fight your corner to put forward a great case to the lender.
Bad credit mortgage brokers can help those struggling with the following credit issues:
If you have any of the above in your credit report, you may have already had a mortgage declined and you are now unsure where to go next. A bad credit mortgage specialist can find a more lenient lender who will judge your application on how long the issues have been registered, the severity of them and if you fit into their other eligibility criteria.
You need to know your deposit before you start looking for a house as it will determine how much of a loan you are offered and ultimately the home you could afford. But when you have bad credit you may be asked to provide a larger deposit depending on how severe your adverse credit is and how old it is. The more of deposit you provide the more risk you offset from the lender, meaning you will have more choice of lenders willing to look at your application.
Your deposit will alter your loan to value (LTV) which is the mortgage you need versus the amount of equity or a deposit you have. A high LTV may deter mainstream lenders from offering you a mortgage if you have bad credit which is why we recommend you are matched with one of our bad credit mortgage specialists. They can search for a lender who suits your credit history and worst-case scenario advise you on how to improve your chances of getting mortgage further down the line if it is not possible right now as your credit is very severe and very new.
Lenders will like to see that you have satisfied your bad credit as it indicates that you are no longer in financial difficulty and are ready to take on new lending. This could mean a larger choice of lenders and access to more competitive rates. It also reduces your financial commitments that must be factored in to the affordability calculator brokers will use, which could allow for a much bigger mortgage.
We know it is not always possible to settle your debts so there will be options out there that our mortgage brokers can help with but it may mean you need to increase your deposit or accept a higher interest rate.
A history of adverse credit makes you a higher risk to lenders. To compensate for that risk some bad credit lenders will offer you mortgage deals which come with higher interest rates. The rate will be entirely down to your individual circumstances as it will be based on your bad credit but we have provided an indication of some of the rates you could expect:
However, you may start with a high interest rate on your mortgage but that does not mean you will have that rate for the whole mortgage term. Each time your deal comes to an end you can revaluate your mortgage and see if your credit history has improved enough to be eligible for more competitive rates.
Overall, our tips for buying a house with bad credit give you an idea of the process to securing a mortgage. These are goals you can work towards but we recommend you get in touch with one of our mortgage superheroes to evaluate your case properly. They can help you with your home buying journey and you may find a mortgage can be in sight a lot quicker and easier than you once thought!
