Getting a mortgage with bad credit is possible; even those who have experienced bankruptcy can successfully apply for a mortgage; doing so is just a more long-winded process than those with a satisfactory credit score.
Typically, those with bad credit scores will probably be expected to pay higher interest rates and put down a larger payment alongside having a steady income, money for a down payment and a history of paying your bills. Although having a good credit score is ideal for house purchases, it’s not impossible to buy a home with bad credit, so we’ve created this quick guide to help those with bad credit understand how.
Seek Professional Help
We recommend consulting with a professional for those with poor credit scores before making any decisions. Specialist mortgage advisors will offer those with lousy credit multiple options from adverse credit mortgages to sub-prime mortgages. They will be more familiar with working alongside people with bad credit and the unique requirements to get an application approved; plus, due to their experience, they may be able to get you a better deal.
To help you further, consider enlisting the services of companies such as Money Nest, whose expert advisors will be able to put you in contact with the appropriate broker for your situation. Visit their website to find out more information and see how their services could help you apply for a mortgage with bad credit.
Save More Towards Your Down Payment
As someone with a poor credit score, you will be susceptible to higher interest rates, and you’ll have to put down a larger down payment of at least 10-15%. If you aim to save around 15% towards your down payment, a lender or broker may positively consider your application. Additionally, suppose you’re finding it difficult to scrape together enough money for the more considerable percentage of your down payment.
In that case, you could consider asking friends and family to borrow some money until you can afford to repay them. Although this will subject you to money-laundering checks and you’ll have to ensure that the money is in the form of a gift, not a loan; otherwise, this could work against your favour and count as extra debt.
Access Your Finances
Ensure that all your finances are in order before applying for a mortgage and that all your debts are consolidated, as you will need to provide your lender or broker with evidence that you can pay your bills on time across several weeks. Aim to pay off any outstanding and long-term household bills and credit card repayments using debit payments instead of credit.
You’ll also want to aim to cut down on unnecessary purchases such as gym memberships, TV subscriptions, eating out, etc. You could put the money you save towards your down payment as any savings will benefit you no matter how small.
Get A Guarantor
Another way to boost the chances of your mortgage application being accepted is by asking a friend or family member to be a guarantor. If you cannot meet your monthly mortgage payments, your guarantor will take over your payments, so it’s worth making sure that they can fund their own home and yours if this does happen.