If you have a bad credit score, it can be trickier to get a mortgage. However, don’t lose hope, as credit issues do not rule out the possibility of owning your own home.
Securing a mortgage with bad credit is possible, even if you have county court judgements on your credit file. Your chances improve with a substantial deposit as it reduces the lender’s risk. However, your options may be limited, and securing a competitive interest rate may be more challenging.
It’s important to seek professional advice if you are looking for a bad credit mortgage, as they have access to a wide range of lenders, including specialist lenders. In the meantime, read on for our helpful guide.
Goldmanread is experienced in helping clients with credit issues to secure a mortgage. We can assess your circumstances, explore all of the options available to you and make the mortgage application on your behalf. To discuss your bad credit mortgage requirements, please get in touch.
How much deposit do you need if you have a poor credit rating?
When it comes to bad credit mortgage deposits, most high street lenders require at least 15% of the purchase price (or 15% equity in your property).
By far, the best deals available will be offered to those with a bigger deposit of 25% or more. At this point, most lenders will consider you for a mortgage, even if you have had severe credit problems in the past, including a County Court Judgement.
Some lenders will consider your application with a lower deposit of, say 10%, if the instance of bad credit is light or a one-off issue, such as missed payments on a credit agreement.
When you get to 95% LTV, i.e. if you only have a 5% deposit, it becomes more tricky to find a willing mortgage lender.
However, it is always worth discussing your goals with a mortgage broker, as sometimes mortgage lenders are willing to take a more considerate view if you have a valid reason for bad credit, such as job loss or illness.
Are mortgage lenders more likely to approve you for a mortgage if you have a large deposit?
Regardless of your credit history, the more significant your deposit, the more security the mortgage lender has for the loan. So, in theory, your application is more likely to be successful with a larger deposit, and you can benefit from lower interest rates.
However, the level of your deposit is not the only consideration that lenders have. They will also assess your affordability, i.e., your ability to meet the monthly repayments, by looking at your income and expenditure.
Lenders prefer borrowers with a consistent annual salary and a comparatively low rate of expenditure. If you have bad credit, a high income can certainly help your application.
There are various other criteria, such as age and property type, which vary from lender to lender.
How to get a bad credit mortgage with a larger deposit
If you’re setting out to get a mortgage with bad credit, here are some steps you should consider taking.
1) Check your credit file
When seeking a mortgage lender offering bad credit mortgages, one of the most important things is to know the extent of your credit issues by looking at your credit file.
It is possible to come across inaccuracies on your credit report, such as out-of-date information. You may also find an unrealistic view of your monthly outgoings, as your report is only updated every three months. You may even find an instance of fraudulent activity. It’s important to rectify these mistakes well in advance of your mortgage application.
2) Improve your credit score
Even if you have a bad credit history, there are actions you can take to improve your credit score. By taking sensible action, you are more likely to have access to lenders offering high income multiples and more competitive interest rates.
- By repaying your outstanding debts, you can improve your poor credit score.
- It’s important to stay within your credit limit for a length of time in order for your score to improve.
- A history of late payments can affect your credit score, so it may be possible to improve your score by meeting your credit commitments on time for an extended period. Generally, if you have had at least 12 months without any late payments, it should have a positive effect.
3) Work out your loan-to-value ratio
Loan-to-Value (LTV) is an excellent example of confusing industry jargon used by mortgage brokers and lenders. In simple terms, LTV is the ratio of your loan to the property value. So, for example, if your mortgage is £50K and your chosen property is worth £100K, your LTV is 50/100 or 50%.
3) Speak to a mortgage broker
The adverse credit mortgage market is complex. So, once you know the details of your outstanding adverse credit and your LTV, it’s wise to speak with a specialist mortgage broker.
With their knowledge of the mortgage market, they can advise if you meet the minimum credit score required to get a mortgage.
A mortgage broker will advise you on how much deposit you need to put down and the range of options available, such as a guarantor mortgage or mortgage deals from a specialist lender.
A joint mortgage with someone with a good credit history may be the answer. Your combined income means you are more likely to satisfy a mortgage lender’s requirements and get a higher home loan.
Goldmanread is an expert in arranging bad credit mortgages
At Goldmanread, we have been providing mortgage advice since 2009. During that time, we have helped many clients with a bad credit history to secure a mortgage deal.
As an experienced and independent mortgage advisor, we have access to many mortgage lenders, including specialist lenders who consider clients with bad credit issues.
We are familiar with the lending criteria of most banks and building societies and will look to find you the most competitive interest rate available in your circumstances.
We will fully explore your mortgage options and aim to find a lender who offers monthly repayments within your budget. Our aim is to save you money and save you from paying higher interest rates than necessary.
Contact us today to discuss your bad credit mortgage options.
Frequently asked questions about getting a mortgage with bad credit using a large deposit
How will a large deposit affect my mortgage repayments?
Having a larger deposit means you can access a wider range of lenders and qualify for more competitive interest rates, even if you have bad credit. That means lower monthly repayments.
What is the largest deposit you can put on a house?
In theory, there is no limit to the amount of deposit you can put down on a house. It depends on whether the lender has a minimum loan value.
Can I get a mortgage with severe credit issues?
Most lenders assess applicants based on the severity of their bad credit history. Incidents like unauthorised overdraft charges and one-off late payments are generally considered lower risk than mortgage arrears and defaults. It’s even possible to get a mortgage with a county court judgment on your credit report.
What do lenders consider a ‘bad’ credit score?
This is impossible to answer, as each lender has unique lending criteria. However, according to Experian’s ratings, a ‘good’ credit score is between 881 and 960, a ‘fair’ credit score is between 721 and 880 and anything below 720 is considered ‘poor’.
What documentation do I need to provide for a bad credit mortgage application?
For a bad credit mortgage application, you’ll need proof of income, bank statements, details of existing debts, a detailed credit report, and proof of ID.
Lenders may also request additional documents to assess your financial situation and creditworthiness. It’s crucial to be prepared with complete and accurate documentation to improve your chances of approval.