There are 3 things that come in to play when trying to get any mortgage with poor credit, and this includes an application as a First Time Buyer Mortgage with bad credit:
- Credit History (not credit score)
For the purposes of this post, I will concentrate on points 2 and 3 and assume affordability stacks up.
The first question we ask is “What bad credit do you have?”.
By this we are trying to determine the issues we are trying to overcome in assessing your chances of success in applying for a first time buyer Mortgage with bad credit.
For example, does the bad credit you have include Defaults and/or CCJs, late payments, bankruptcy, debt management plans or a combination of the above. Some rank worse than others when trying to place a case so it is important to know what we are trying to overcome from the outset.
We always tell customers to be open and honest with us. Give us the good, the bad and the ugly, the more we know upfront, the more accurate an answer we can give you. Some people think by withholding information or hiding it, it is less likely to get picked up, in reality all it does it cause delays and problems. By telling us everything, we can make the decision as to whether the lender needs telling based on past experiences.
The second question is when was the bad credit registered. The more recent the adverse the harder it is to overcome. Typically we can overcome Defaults if they were registered over 6 months ago, whereas Bankruptcy would typically need to have been discharged for 3 years – although we do have an exclusive deal that can look to accept you after 1 year discharged. The other thing to note is Defaults and CCJs typically go off the registration date, where as Bankruptcy usually goes off the discharge date – so you can see how things do differ.
These 2 things combined give us an indication of whether or not there are lenders where you will fit criteria.
To a lesser extent, we could do with the amounts involved and whether or not they were satisfied, but that tends to only really play a role if we are talking small defaults over a year or 2 old.
If you are unsure about what is on your credit report, you can get a copy from the someone like Equifax (£2 or 30 day free trial – just remember to cancel it) or noddle.co.uk (free, but not always as thorough).
What size deposit do I need with bad or poor credit?
The general rule of thumb is with a 15% deposit quite a lot can be overcome. By that we mean Defaults/CCJs over 12 months old. That does not mean you need a 15% deposit, nor does it mean if you do have a 15% deposit we can guarantee you a mortgage, it just means with a deposit of 15% or more, there is a good chance we can find lenders willing to consider an application from you.
If you have 5-10% deposit but the bad credit is over say 3 years old or is just a one off small default, it is probably still worth having a chat as we may be able to package the case up for a lender prepared to accept a minor blip.
The market is forever changing so even if you have looked in the past or been told you unable to get a mortgage, why not get in touch? If you do not ask…
With anything like this the devil is always in the detail. If this post has not answered your question or you are still unsure, give us a shout – 0161 327 2799 – for the sake of a 5-10 minute conversation we can give you some answers specific to your circumstances and maybe offer you some pointers to help improve your chances of acceptance.