Bad Credit Mortgages

Credit checks are a crucial step in getting a mortgage – but what happens if your credit record is less than perfect? If you have concerns about your credit score, talk to us for advice.

Can I get a mortgage with bad credit?

It’s possible to get a mortgage if you have poor credit and some lenders specialise in mortgages for people with imperfect credit scores.

As always, the details will depend on your specific situation and how severe the credit issues are. It’s important to seek advice rather than applying for mortgages direct – you may well be rejected for a standard product from a high street bank.

What causes bad credit?

Your credit record tells financial brands a bit about you and whether lending you money may be risky. If you have always made your payments on time, stayed in credit with your bank and stuck to your credit card limits, you should have a good credit rating.

Things that could give you a poor credit report include:

• Missing finance payments

• Going over your credit limit

• Missing one or more month’s payments on a mortgage or other loan (arrears)

• Defaulting – failing to pay back money by a deadline

More serious challenges include:

• Taking out a payday loan

• Receiving a County Court Judgement (CCJ)

• Entering a Debt Management Plan

• Bankruptcy

• Individual Voluntary Arrangements (IVA)

• Having goods repossessed

Do lenders specialise in mortgages for people with bad credit?

Every lender is different and has their own unique criteria. Some high street lenders will allow for a certain level of adverse credit, while others won’t.

Certain lenders will even support people with fairly serious credit problems, as long as you can explain the cause of the issue and that you are taking steps to address it. Generally, if the debt was more than two years ago and has been repaid, we will often be able to find you a mortgage deal.

You may have to pay higher interest rates on a bad credit mortgage as the lender is taking a bigger risk. Larger deposits are a common requirement for bad credit mortgages too.

How much deposit will I need for a mortgage if I have Bad Credit?

While it’s possible to buy a home with a deposit as little as 5%, if you have a poor credit record you might need 15 to 20%. The bigger your deposit, the more likely you are to find a lender that will accept you.

If a 15% deposit is out of your reach, you could explore some of the government schemes such as Shared Ownership or Deposit Unlock. These initiatives aim to make it easier to get on the property ladder – especially for First Time Buyers. You will still need to find a mortgage lender.

How does affordability affect a mortgage with poor credit?

Mortgage lenders will look at your debt-to-income ratio as part of their affordability checks. That means they will compare your fixed monthly spending against your income – to see how much money you have left over.

Having significant outgoings can affect the amount you’re able to borrow. It may be that you are repaying an outstanding debt which leaves you with less money each month.

The best approach is to talk to us – we’ll look at your financial situation and give you honest advice about affordability and how to achieve your property goals.

How can I improve my chances of a mortgage?

Making multiple mortgage applications can actually make your credit score worse, so do seek our help to find you a mortgage that fits your situation.

It may be that you need to wait a while before you are ready to apply. There are various ways to improve your credit rating in that time. Check you are on the electoral roll and stay at the same address for a year or two as frequent moves can affect your credit score.

Make sure you have all the documents you’ll need for a mortgage application ready. These include a valid passport and/or driving licence, recent bank statements and payslips, plus a utility bill for proof of address.

How can The Mortgage Company Nottingham help?

As professionals specialising in the mortgage market, it’s our job to help people buy a home.

We will look at your credit file and your financial situation. If needed, we can introduce you to specialist lenders who are only accessible through a broker. We’ll compare various mortgage deals, make sure you understand all the pros and cons and finally help you in applying for a mortgage.

Your property may be repossessed if you do not keep up repayments on your mortgage.

The Mortgage Company (Nottingham) Ltd is an appointed representative of Sesame Ltd which is authorised and regulated by the Financial Conduct Authority. We are registered in England and Wales.