Securing a mortgage may seem like a tricky process to many, and when it’s a poor credit mortgage, things can seem really intimidating. However, it can get much easier if you have the right understanding and knowledge! 

These are mortgages specifically for those with poor credit. So have a less-than-ideal credit history? No need to worry, you too can buy a home despite past financial difficulties! Let this article guide you through it. 

What is a Poor Credit Mortgage?

It is a type of home loan that is specifically for those who had difficulty handling their finances in the past. While they sound helpful and they are, the issue is that these mortgages typically have higher interest rates and require larger deposits. This makes sense as low credit is seen as high risk to the lenders.

The criteria for home mortgages for poor credit also lack leniency. This means lenders may be a bit stricter than usual by assessing your financial situation in greater detail. They are still a valuable option for those looking to climb up the property ladder. 

Is Getting a Mortgage With Poor Credit Possible?

If you are wondering, “Poor credit, can I get a mortgage?” The short answer is yes! The long answer is that factors such as a stable job, steady, and the ability to pay large deposits will enhance your chances more than you think, despite the stain of a poor credit history. 

Reports show that those with a credit score between 561 and 720 may face obstacles if they are looking to obtain a standard mortgage. However, specialist lenders look for this particular demographic and allow them to secure a mortgage with poor credit. 

Types of Poor Credit Mortgage

There are a few types of mortgages you can choose from. Specialist ones are specifically tailored for those with credit issues, and they have a higher interest rate and less favorable terms.

Then there’s a guarantor mortgage. You would require a third party to help you out. A close friend or usually a family member can agree to pay your repayments if you fail to do it yourself. This provides the lenders with extra credibility and security.

A second mortgage for poor credit is also an option as homeowners may opt for it to unlock equity off their property.

The Criteria for Qualifying

Poor credit may lead to trust issues in the lenders, so they may scrutinize a few things. Here are some things to focus on.

• Deposits matter. A larger deposit will come across as a lower risk to lenders. Suppose you are applying for a mortgage on a £200,000 home, others would probably pay a standard 10%. If you offer 15-20%, the scales may be tipped towards you.
• Employment stability. The reason why jobs can make or break your mortgage application is that they are evidence of your reliability. A consistent and stable income is a green flag and shows that you are a hard worker. 
• Debt-to-Income (DTI) ratio is important. A high ratio is not preferable at all as lenders would consider you to be in too much debt to take on a mortgage. Lenders typically prefer a DTI below 35%. 
• Time since credit issues. A missed payment from five years ago isn’t as problematic as one from last year. So the longer it has been since your last financial mistake, the better. It’s a wise decision to be patient and wait it out before applying for a mortgage. 

Improving Your Chances

Poor credit may dent your chances at a mortgage but there are a few tricks and tips to boost your shot! Here are some things you should do to portray yourself as the best candidate to your lender.

• Check your credit reports. Make sure that all of the important information is accurate and updated. Any mistakes should be corrected as soon as possible. Imagine being rejected because a phone bill you already paid is mistakenly filed as overdue. Don’t want that? Review your report thoroughly. 
• Save a bigger deposit. Increase your loan-to-value ratio by making big deposits. Do not opt for unreasonable amounts or something impossible for you. However, going as high as you can makes you an attractive borrower. 
• Work with a specialist mortgage broker. A mortgage broker who specializes in poor credit cases can bring more to the table than you can expect. They can connect you to poor credit mortgage lenders. They are your personal financial matchmaker. Even if mainstream banks have turned you away, these specialist brokers are your lifeline,  open to working with you despite any past financial issues.

• Use a Guarantor: If you can show your lenders that there’s someone who trusts you enough to cover your mortgage payments if you can’t, their financial backing assures the lender and gives them extra confidence. So don’t be afraid to seek help from loved ones and make sure that all involved parties understand the legal and financial commitments involved.

These few things can take you from a high-risk borrower to a potential applicant. If you can crack these, poor credit will seem like a much smaller issue. 

Conclusion

Getting a poor credit mortgage in the UK is achievable. Careful planning will also make the process much easier. So do not let poor credit stop you from making your dreams come true. Homeownership is within reach. 

Take the first step towards your dream home with our UK Mortgage Finder. Let us help you secure the best options, even with poor credit.