Mortgages can be a bit of a minefield, and many borrowers with limited experience may not be sure how to get a mortgage with bad credit. Google searches for ‘how can I get a mortgage with bad credit’ often don’t produce any helpful or specific information. Results are often littered with best buy tables for grade A credit scores displaying mortgages that you probably won’t qualify for, and other products that may not apply to you, not to mention the sites selling PPI claim help, and loads of other spam.
Here, we want to make it clear what mortgages you’d have a chance with, give you an idea of cost so you know its within budget or not, and show you the steps to help show how to get a bad credit mortgage.
- The process for arranging a bad credit mortgage
- Which types of credit issues are acceptable
- Bad credit mortgage costs
- Adverse credit mortgage FAQ
Process for arranging a bad credit mortgage:
To apply for a mortgage with bad credit, and make sure you get accepted for the best deal you can get, there’s a few things to keep in mind along the way.
1) Get your credit files
This has to be step 1. How do you expect to know the best lender for you if you don’t know how severe your credit issues are? The strange thing is, different credit firms and banks report their information back to different reference agencies, and what’s showing with one may not show with another. So, with potential mortgage lenders using the 3 main credit reference agencies Experian, Equifax, and Call credit, if you had just your Experian credit file which says you’re clean credit, but applied to a lender that uses Equifax, you may find yourself being declined and wondering why.
For this exact reason, because the 3 files can differ massively in terms of what is actually registered, it’s vital to have a copy of each.
NOTE: You will NOT be penalised or scored any differently for searching your own credit file with these agencies, credit score is only affected by applications for credit. AND – ITS FREE! Sign up for the free trials below and order your reports now.
Sign up for your free trials here…
2) Don’t make multiple searches
IMPORTANT! Don’t go to your bank or make multiple applications online! Most people bank with high street organisations, none of which cater for borrowers with adverse credit. ‘Advisers’ in these banks are targeted to get you credit scored and out the door asap, and will often do so with little regard to the effect it may have on your credit score. Applying with a lender that will not lend to you can be a damaging exercise, not to mention a waste of time.
If you have adverse credit and aren’t sure if people can still get a mortgage with poor credit score, then you need to seek advice.
3) Get a reasonably priced broker
The advice you can get from a broker who knows what they are doing, who knows which lenders will consider you before you even apply, is often invaluable. Still, it’s important not to pay the earth. Maximum fees tend to be 2% of the loan amount, however these are top end and its rare a broker will ask for the full amount. Generally anywhere from £0 for straightforward cases, to £300 for cases that need some work, up to £1000 for more tricky circumstances, would be a fair pricing scale. Every case is different however, and your adviser should make things clear to you and gain your agreement before proceeding with any actual applications. To get a quote from one of the specialists we work with get in touch
4) Find additional deposit or repair credit file and Re-apply
If you have credit issues preventing you from mortgaging at a specific loan to value (LTV), sometimes lowering the risk to the lender can help. Where it’s unlikely an applicant with a £1,000 default registered a few months earlier will get approved at 90% LTV, raising capital so the LTV is 85% may just be enough for a lender to do it. If not, and there’s nothing that can be done, time will really be the only healer. There are however, certain things you can do to improve your credit score more quickly, see our article on improving score here for more info.
TOP TIP: One of the best things you can do to increase your credit score is to obtain an adverse specific credit card, and spend and repay in full on a monthly basis – this helps to prove you can borrow and live within your means at the same time, and you’ll notice your score improve over the coming weeks and months. There are 2 options here, the first is a standard credit card specifically for those with bad credit, the second is for those who are declined for standard cards and need a guaranteed-acceptance card (usually if you have had more severe and more recent adverse credit). We’d recommend trying for the Aqua card first, then go for the Mastercard if declined.
Bad credit mortgage costs
Obviously rates and fees will be higher than if you were clean credit, because the number of lenders is limited and having a poorer credit history means you are considered by lenders as higher risk – so they charge more to offset this. You’ll be surprised however, at just how competitive the rates are, and that you can get a mortgage with poor credit at rates not too dissimilar to mainstream deals.
What credit issues are acceptable for mortgages:
Our bad credit tables give an outline of the types and dates of different credit issues, indicating what may be likely and unlikely in terms of mortgage approval. View our bad credit page and scroll down to the tables.
We have arranged mortgages for people with poor credit in the following situations:
Adverse credit mortgage FAQQI’ve heard sub-prime mortgages don’t exist now, can you still get a mortgage with bad credit?
Yes. It’s a common misconception that post credit crunch ALL adverse credit lenders have left the market, and it’s an out dated view. In 2008 adverse lending dried up like never before, but since 2010, things have really picked up, and new lenders continue to re-join the market, whilst those that remained have began to loosen their criteria and allow those with more colourful credit histories to apply again. We aren’t where we were in 2007, but things are improving massively. QWhere can i get a mortgage with bad credit?
‘Who will give me a mortgage with bad credit’ is another common question. There are numerous lenders that consider applicants with a whole range of credit problems, but it really depends on your situation. Some high street lenders consider smaller, historical issues where the rest of the application is a sound investment, whereas many of the more severe issues can only be approved via a mortgage broker with adverse lending specialists. QWhat is the difference between credit score and credit history?
‘Score’ is lender specific based on their set criteria, ‘history’ is your past financial conduct, usually only mapped over the last 6 years. Lenders interpret your credit score based on numerous factors from your credit history added to the circumstances of your application (age, income, LTV, location etc). Not all lenders will perform a credit score and will literally have underwriters that review the case as a whole. All lenders will look at your credit history.
Generally though, a ‘bad credit history mortgage’, is the same as a ‘mortgage with bad credit score’, is the same as a ‘mortgage with bad credit rating’. QHow do I apply for a mortgage with bad credit?
Applying for a mortgage with bad credit is best done via a broker with access to all the lenders, as many of the lenders only accept applications from intermediaries. You’ll hear them advertise, as we do, as being ‘whole of market’. A broker will find you the best deal from all the lenders that would consider you.
The brokers we work with accept customers from all over the UK, and we can deal with you via email, the phone and even video call if you like! QAre there any lenders that don’t credit check?
Firstly, there aren’t any bad credit mortgage loans with guaranteed approval. A lender will always want to know who they are lending to, and this is done by looking at the applicant’s credit history. If you have none, then there’s a chance your score will be low. All lenders credit check. If you’re looking for a no credit check mortgage then you may be better off searching for lenders who don’t credit score – many of these exist these days, and take a very flexible view of credit worthy borrowers with either more colourful history or no history at all.
To ask an expert a question about bad credit history mortgages, click the enquiry form below…