Finding the best bad credit mortgage made easy.
You’re a first-time buyer with bad credit. You’ve been told there’s no way you could get a mortgage with such a low credit score as yours. Sounds like you haven’t looked in the right places. In this article, you’ll learn how to find the right lender to make your dream of owning your first home a reality. You are only three steps away from finding the bad credit mortgage to get you on the property ladder.
Step 1: Understand why you have a bad credit score
The first thing you must do is uncover the reason why you have a bad credit score. Order your credit files from the credit reference agencies (the main ones are Experian, Equifax, and Callcredit). These will detail items such as:
- Your current and previous credit accounts
- Others who you are linked to financially
- Records of CCJs
- Current accounts
- Bankruptcies and IVAs
Your credit score is also harmed by missing payments on credit cards and loans, going over your overdraft limit, or having high levels of debt compared to your credit limits.
With your credit file to hand, you can act to improve your credit score; for example, by cleaning your credit score after an IVA. This will help your chances of getting a mortgage. It’s also good financial housekeeping – if there are any old accounts or fraudulent use of your identity, you should clean them off your file.
Step 2: Understand why mortgage lenders will reject first-time buyers with bad credit
Many banks and building societies base their lending decisions on the numbers. If you have a bad credit score, the bank’s computer will say no. There is no way they will overturn that decision. It just doesn’t happen.
Here’s a word of warning. When you apply for a mortgage and get rejected, it dents your credit file. It does a little bit more damage to your chances of getting a mortgage.
What you need in this case is a bad credit mortgage lender. They look beyond the numbers. Instead, they consider you as a person. They will look at why you have a bad credit score, and how you are managing your money now. Then they make their decision whether to lend or not. Dare I say it, a much more human way to treat first-time buyers with bad credit?
Step 3: Find the best lender for first-time buyers with bad credit
Now, you understand why you have bad credit, and know that you are highly unlikely to get a mortgage from the usual suspects (the banks and building societies). Don’t panic! Don’t feel downhearted! All is not lost.
At the time of writing this article, a search on money.co.uk found 934 bad credit mortgages. There are hundreds of potential options for you. Fixed rates. Variable rates. Deposits as low as 10% of value. All available from a range of specialist bad credit mortgage lenders.
However, before you rush to apply to one of these lenders, you need to know that:
- Most bad credit mortgage lenders only accept applications made via a mortgage broker
- Bad credit lenders have different areas of specialisation
So, in answer to the question “Which lender is best for first-time buyers with bad credit?”, the answer is “It depends”. It depends upon:
- Why you have bad credit
- How much deposit you can raise
- What mortgage conditions will suit your personal circumstances
There is one thing that is certain: you won’t get the best first-time buyer’s mortgage from a mainstream lender if you have bad credit.