Bad or Low Credit Mortgages

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Are you wondering if you can get a mortgage on bad or low credit? With the right precautions and procedures, it is certainly possible to get a mortgage even on low credit. However, you’ll have to pay higher interest rates and a larger deposit amount may also be required. Moving towards the procedure let see what really is a bad or low credit score. There are various credit rating agencies throughout the UK that all comply with credit ratings as issued by the FCA. Make sure that the agency you use for credit ratings is in the listed in the Financial Services. Credit scores can vary from 300 to about 800. Some average values for the credit ratings are as follows:

Exceptional: 800-850 – 21%

Very good: 740-799 – 25%

Good: 670-739 – 21%

Fair – 580-669 – 17%

Very poor: 300-579 – 16%

The lower the borrower’s credit score, the higher the interest rates. This is how low credit mortgages work. Even though the mechanism for low credit mortgage is same as any other mortgage plan but low credit mortgages cost a lot more than good credit mortgages.This is due to the increase in the interest rates and a higher amount of down-payment. For bad credit mortgages the down payment can go as high as up to 30% whereas the usual down payment is 5-10%. Even the slightest increase in the interest rates could cost you thousands of dollars over the entire loan period.

Having a bad credit score still wouldn’t close all doors for you, there are a lot more than credit scores that the lenders look at such as your income, the amount of debt that you carry, employment history, credit purchases, etc. Fortunately, it is possible to get a mortgage even with poor credit. All you need to do is take care of the image that you portray in front of the lender. That means taking care of your credit history, budget, etc. The lenders don’t only pay focus on the credit score but also view your income, how much you spend to make an assumption on how responsible you will be with repayments. This is to make sure that you can handle monthly repayments, particularly as conditions change such as rising interest rates or a decline in your salary. Furthermore, some lenders offer loans that are specifically personalized for people who have low-income levels or are first-time buyers. These loans do not require a high credit score and are worth a shot.

You must be aware of the fact that getting a mortgage with bad credit will most certainly cost an additional amount of money and time. You must explore all your options and survey the market to secure the best possible offer.

  • Search for a variety of lenders

Don’t settle for the classic ways of getting a mortgage. The market also has numerous non-bank lenders, online banking, credit unions, cooperative banks, financial advisors, and mortgage brokers. Adding on there are bad credit mortgage lenders who specifically lend to people with bad credit.

  • Co-signer

If you have bad credit, you should consider co-signing your mortgage by approaching a friend, relative or partner with higher credit. The credit of the co-signer will provide a lift to your application, but if you decline, the co-signer will then be responsible for repaying the whole loan, not just a portion. Even, the co-signer’s credit may be affected if payments are delayed or skipped.

  • First-time buyer programs

Various programs facilitate the first-time homebuyers. You may want to look into such programs, in case you could qualify. You can still apply for these programs even if you had already owned property or land since they only check for a purchase within the period of the last three years.

Remortgage with bad credit

Remortgaging with bad credit is also an option. Both your current loans can be combined into one manageable monthly payment. Before you hedge other loans against your home, you can really need to consider it deeply. If you cannot keep up the repayments on your mortgage or any loan protected on it, your house will be confiscated.

Increase Chances of Approval

Here are a few things you may need to consider in order to get a mortgage with low credit.

  • Responsible Impression

Portray a positive and responsible image to the lender. Show a serious mindset to the lender when it comes to payments. Pay all your utility bills and other payments punctually. This would drastically increase your chances even if you have made inconsistent payments in the past.

  • Huge Deposit

Getting a mortgage with low credit comes with a large amount of deposit to be on hand which is at least 20-25% of the value of the property. Therefore, make sure you have that as it will attract the lender and develop more interest. You can also offer a greater down payment, as it would indicate that you are financially stronger now.

  • Savings

Keep your spending in check and maintain a regular flow of outgoings. Try and save a little amount at the end of each month as you may need some cash on the side in case of emergencies and the habit of saving will benefit in the near future as well.

  • Credit Report

Periodically check your credit report – test to ensure it is up-to-date and all the data on it is correct. If you see something that needs to be corrected, email the proper lender to demand an extension. You can always take help from a mortgage advisor. Mostly mortgage advise costs a lot but at Independent Mortgage Brokers our advisors provide free mortgage advice. You can always get in touch and have our skilled mortgage advisors take a look at your credit file as well as your overall application Hereat Independent Mortgage Brokers, we will make sure we get you the best mortgage deal. You can reach to us through our website and our advisors can also provide you with online mortgage advice.

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FCA disclaimer

Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.