Can I get a mortgage with bad credit?
Posted on 3rd July 2023 at 14:25
Bad credit is quite subjective, what some people may see as bad credit may be nothing in comparison to other people’s perception of bad credit. Firstly, we need to establish what bad credit is and what it isnt. Bad credit isnt having a low credit score because a low credit score can be due several factors that wouldn’t impact your ability to get a mortgage. A low score can be a result of having no credit history at all because you’ve never had a credit card or had any need to borrow money for anything. Or something as simple as not registering to vote at your current address.
Bad credit is things such as late payments, defaults, CCJs or bankruptcies. These are deemed bad credit by lenders as they show a history of poor credit management. Lenders run strict assessments on income and outgoings, money laundering and credit checks to ensure that not only can you afford this mortgage, but they protect themselves financially. At the end of the day, they are lending you a large sum of money, so they want some assurances that you are going to repay that money in full and on time. So, a history of missed payments on smaller amounts of credit isnt going to give them the confidence they need when it comes to lending you £100,000s.
But hope is not lost!
Every lender is different and comes with their own set of criteria unique to them. Just like when your mum told you ‘There’s plenty more fish in the sea’ when your boyfriend dumps you, the same can be said for lenders. Some lenders have a hard and fast rule on what they will and won’t lend on, but some have a computer says ‘Yes’ approach. So, if your total credit file is strong enough to pass their internal system then they will lend to you no bother. It may be a cause that a high street lender (often the cheapest type of lender) will lend to you with their cheaper rates but will cap how much they will lend to you. This is often capped at a % of the house price, so a particular lender may lend you 85% of the purchase price instead of 90-95%. They just want you to have more skin in the game for them to be comfortable.
There are some lenders who specialise in people with bad credit and have a set range of mortgage products aimed this target market. The criteria are tiered so if you have had no defaults or CCJs within the last 24 months you will qualify for one range. If you have had a clear credit file in the last 36 months, you will qualify for an even better range.
This is where an independent becomes extremely handy because they will have access to these specialist lenders. Here at Green & Green we have access to a range of specialist lenders including a lender who lends to people after bankruptcy. Their product range is fairly rigid, and the rates and fees are higher, but they will lend to most people in most situations.
So, the short answer is yes. You can get a mortgage with bad credit, but you may need to flexible with your deposit and interest rate to qualify. But the good news is as time goes by and you keep up your payments your credit score and credit file will improve meaning you will qualify for those cheaper lenders in the future when your mortgage is due for renewal. You may just need to bite the bullet in the short term to buy your next house and then remortgage to a cheaper mortgage product in the future as your financial position improves.
For more information on bad credit mortgages or how we can help please get in touch below
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