Mortgage and that too with bad credit, for sure you are not expecting a cakewalk. Things are sure to be difficult while in your journey to borrow funds to buy your own home. However, the pleasant fact is some possibilities may show if you explore the solutions that are applicable in such circumstances.
Pre-condition – improve credit rating before you apply for mortgage
The first rule in mortgage is ‘PLAY SAFE’ and it applies more stringently if the applicant has a poor credit score. There are several ways that can help you get rid of the mark of poor payment history. Then your chances to qualify for funds are sure to get better.
Check your credit records to make sure they are flawless – May be you don’t know but even a small wrong information in your financial records can cause a degrade in your credit rating. Spelling of your name, address, any particular financial transaction that you didn’t do but shows in your credit records etc. can be destructive. Check your file and if there is any mistake, get it removed or rectified.
Close unused credit cards, store cards, bank account – The financial commitments on which you do not even respond do great loss to your finances. They consume a big part of your credit worthiness. Besides, this makes the mortgage lender think that you are not responsible towards your finances. Such perception can make your application an easy prey of rejection.
Make repayments on time – From bills to instalments, make your payments on time. Lenders always appreciate improved financial behaviour. Keep it in practice and apply for mortgage after a few months and by that time you will be having an increased score. This inspires better chances to get funds.
Once you get some upgrade in credit score performance you can apply to a mortgage lender.
The actual work starts – welcome to the mortgage world
Despite efforts, a little time may take to get you a good credit rating. But that should not make you drop your plan to buy your own dream home. Start working by finding choices for mortgages for bad credit. The options are in abundance and for faster results, it is better to choose online lenders. They have comparatively faster procedures and also a liberal approach towards less-than-stellar credit score performance. This is why they offer choices like bad credit mortgage.
Repayment capacity is your charioteer
What makes the lender consider your loan application despite the absence of good credit rating? Yes, your repayment capacity. That is judged through your current income status, bank statements and additional source of income (if any).
It is very important for the lender to know how efficient you are in paying the instalments. Just as you want to play safe, the other side too has concerns on risky applicants. Once you prove yourself efficient on this part, you can easily get the approval.
Few tips to make your efforts foolproof
Although you are trying best to look like a promising borrower with your efforts to improve in finances. However, mortgage is a big obligation that includes huge loan amount. To remove all possibilities or rejection, you need to do few more things that are vital as well as supportive.
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Arrange bigger amount for deposit
Normally 5% deposit is required in mortgage but as you do not have a good credit score, your burden is little more on this part. A deposit amount that covers up to 20 – 30% of the total cost of the property is idol. This may sound quite big but this is the key to get an easy ‘yes’ on mortgage application. Bigger deposit also helps to have a smaller loan amount. This means less burden of obligation.
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Get a guarantor
This too is a good option especially if you fail to arrange deposit between 20 – 30%. At least manage between 15 – 20% and pair it with a guarantor. This is sure to bring a good response from the lender. The concern of the lending companies is always the repayment capacity. The applicant, who invests honest efforts to prove that, always gets accepted. This in fact, helps to get the desired loan amount otherwise, to fill the gap you may need to apply for a short-term loan. That is not a better option usually. Do not forget, your guarantor should have a good credit score. Best is to bring someone with excellent credit rating.
Avoid these mistakes while applying
The above are the supportive steps to get mortgage but you may also need to pay heed to few mistakes that may spoil the whole game.
- Do not apply to many lenders at the same time – Applying for the mortgages for bad credit is a complicated thing. Ignorance on an important aspect may make all your efforts useless. Normally in the haste to get funds, people apply to many lenders at the same time. This is a blunder mistake. Apply to only one lender at a time. Multiple applications bring the threat of multiple search footprints and the lending companies take you as credit hungry. May be you are but don’t show it at least by approaching to many lenders at the same time.
- Once you finalise a lender stick to its guidelines – You have all the right to talk about your concerns. However, you also need to follow the guidelines of the lender, which are in accordance of the industry norms and policies. Do not indulge in irrational arguments, in case of bad credit score, you need to be on your toes. Cooperate with the lender and provide every required information. Yes, there are options out there but you cannot be overconfident about that. At last, you have to rely only on one option. Whatever you choose, just stick to it and follow the rules, it is for your own good.
Actually….
Nothing is impossible if it is done in the right way. Getting mortgage despite bad credit is also same. Keep doing right and required things and you will get the funds for your home sweet home. 🙂
Molly Harris, the professional loan officer and author having more than a decade of experience in her career. She has the passion of solving the problem of those who are looking for the best mortgage while visiting Shinemortgages. She works hard while searching for the best loan solutions tailored to her clients’ financial goals. From first-time home buyers to seasoned investors, Molly’s expertise and dedication cannot match anyone. One can read her research-based blogs here and get the proper guidance. Molly Harris has possessed Master’s degree in Finance field and currently pursuing doctorate research on the UK mortgage.
