Want to Buy Your First Home but Have Bad Credit? Here’s Everything You Need to Know

Your Essential Guide

If you have a poor credit score, it’s easy to assume that you won’t be able to get a mortgage. However, bad credit doesn’t have to be a barrier to property ownership! With the right information and approach, there’s every chance that you will be able to secure a mortgage and get onto the property ladder. Here’s everything you need to know about bad credit mortgages.

Bad Credit Mortgages

Bad credit mortgages are exactly what they sound like: mortgages for people with poor credit scores. You may also see them described as subprime mortgages. They differ from regular mortgages in a number of ways, which can include:
Higher interest rates: Since lenders view bad credit borrowers as higher risk, these mortgages often come with higher interest rates than standard mortgages.
Larger deposits: Typically, a larger deposit is required for these kinds of mortgages. This reduces the lender’s risk and increases your chances of approval.
Strict eligibility criteria: Lenders may scrutinise your financial situation more closely, requiring detailed documentation of your income, employment history and current debts.
Guarantors: To give the lender additional confidence that the mortgage will be paid back, you may be asked to have a guarantor.
Despite these challenges, bad credit mortgages can be an excellent option for first-time buyers who are prepared to meet the requirements and can afford higher interest rates and larger deposits. You won’t have to wait to own a home, and can actually improve your credit score over time by keeping up with your mortgage repayments.

The Role of a Trusted Mortgage Broker

Navigating the world of mortgages as a first-time buyer can be complex, especially with bad credit. This is where a trusted mortgage broker can be invaluable. Mortgage brokers act as intermediaries between you and potential lenders and will help you to find the best deal for your circumstances. Mortgage brokers have access to a wide range of lenders, and they will provide tailored advice, helping you understand your options and guiding you through the application process.
Additionally, brokers handle much of the paperwork and communication with lenders, saving you time and reducing the stress associated with securing a mortgage. You already have enough to worry about, so why not leave the hard work to someone else?

Steps to Improve Your Credit Score

While bad credit mortgages are an option, improving your credit score is always a good thing to do. It can help you to negotiate better terms in the future and also work in your favour if you want to re-mortgage. First of all, obtain a copy of your credit report from all three major credit reference agencies (Experian, Equifax, and TransUnion) to understand your credit history and identify any errors. Then, once you are sure your score is correct, focus on paying bills on time and reducing your debt. You should also avoid new credit applications wherever possible.

What Next?

Bad credit doesn’t have to stop you from becoming a homeowner. By exploring all of your options with the help of a broker, you’ll soon discover that there may be a mortgage that meets your needs.