How To Get a Mortgage with Bad Credit

When suffering from bad credit, it may feel like all hope is lost when applying for a mortgage. Despite this belief, getting a mortgage with bad credit is still possible. While there may be some increased costs involved, there are plenty of bad credit mortgages available specifically for those with low credit scores.

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Buying a property with minimal funds and a poor credit rating might seem like a long shot – to some, it could even seem impossible. Some people may even avoid applying for mortgages for fear of being rejected.

However, there are a variety of mortgages available for people with bad credit, and experienced brokers can help you navigate the realm of bad credit mortgages without necessarily having to settle for a sky-high interest rate.

Find everything you need to know about how to get a mortgage loan with bad credit below.

What Is Bad Credit?

Certain factors can make lenders view you as a higher risk, including:

  • Missing payments, for instance, bills or credit card payments.
  • If you have a short credit history.
  • Having lots of new credit accounts, such as car finance.
  • Defaulting on a loan.
  • Applying for credit too often.

The first thing to bear in mind before starting your mortgage search, however, is that brokers will use their own unique criteria when it comes to your credit rating. So, if you have been rejected for credit this isn’t the end of the line – there may well be other lenders who view you more positively.

How ‘Bad Credit’ Mortgages Work

If you are looking at getting a mortgage with a bad credit rating, you may be wondering how your ‘bad credit’ mortgage deal might differ from a regular mortgage. In general, the two mortgage types are very similar. However, there may be certain differences for a ‘bad credit’ mortgage, depending on the lender:

  • Interest rates may be higher.
  • There may be a lower limit on how much you can borrow.
  • A higher deposit (for instance 20-25%) may be required.

The reason for this is that individuals with worse credit can be viewed as a higher risk by the lender, so the factors above are designed to off-set this.

Can a ‘Bad Credit’ Mortgage Be Good?

Traditionally, ‘bad credit’ mortgage brokers and lenders could be unscrupulous, offering sky-high interest rates and unattractive mortgage deals. With stricter regulations on the industry, the landscape has changed. Now, most lenders positioning themselves in the ‘bad credit’ sector work tirelessly to find the correct finance for every individual. In many cases, these specialist lenders can help improve a client’s situation by reducing their monthly costs.

It may sound odd, but by taking out a ‘bad credit’ mortgage loan at a higher rate and ensuring that you meet the repayments, you can work to improve your credit score. After a year or two of making regular repayments, you may be able to re-mortgage on a standard interest rate and save money. This can help you to overcome your patchy credit history and get back on track in the easiest way possible.

Getting a Mortgage with Bad Credit: How a Broker Can Help

Enlisting the services of a friendly, specialist mortgage broker is often the best course of action if you feel your credit score might be a sticking point with lenders.

The role of the broker is not only to find the specialist lender who can meet your requirements but also to source you the best possible deal.

If you have a poor credit rating, the worst thing you can do at this stage is to take out a mortgage with high interest and unaffordable repayments. Defaulting on a large loan like a mortgage will seriously harm your credit rating and for this reason, a mortgage broker will always try to make sure you can manage the repayments.

Do You Need a ‘Bad Credit’ Mortgage?

If you are looking for the perfect ‘bad credit’ mortgage broker to guide you through the process of finding a mortgage, look no further. Find out how we could help you increase your chances of securing a mortgage with bad credit by contacting our friendly team of experienced residential mortgage brokers. Call us today on 02920 766 565.

Article By Mark Hughes

December 22nd, 2020

Mark has 15 years’ experience within the financial industry working for high street banks and specialist brokers and now focuses on Bridging finance and Second charge loans.

He would describe his style of brokering as being heavily based on knowledge and efficiency.

See more articles by Mark

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