Bad Credit Does Not Mean You Cannot Get A Mortgage
It’s natural to assume that a poor credit history automatically counts you out of the running for a mortgage. Particularly in an era where subprime lending isn’t exactly commonplace on the UK High Street, you may wonder whether getting a mortgage at all is a realistic possibility.
As far as most major lenders are concerned, bad credit mortgage products are out of the question. But this doesn’t mean there aren’t alternative options to explore and more accessible products available.
It’s simply a case of knowing where to look for them.
How Credit History Affects Eligibility
The long and short of it is simple – a poor credit history will affect your eligibility for a mortgage. All mortgages are issued as secured loans, though major lenders subject applications to the same scrutiny as unsecured loan applications.
Irrespective of the value of the property used to secure the loan, the application process still involves extensive credit checks, financial status checks, evidence of proof of income and so on. If everything is above board with the one exception of your credit report, you’ll fail to qualify for a traditional High Street mortgage.
Major lenders seem to be oblivious to (or simply uninterested in) the fact that maintaining a flawless credit history these days is borderline impossible. Even the most responsible individuals and households occasionally slip up. Precisely why anyone interested in applying for a mortgage with an imperfect credit score would be wise to set their sights beyond the High Street.
Subprime Mortgage Products
Contrary to popular belief, the subprime lending sector in the United Kingdom is alive and well. A growing number of specialist independent lenders have set their sights on this important consumer lending market.
Subprime mortgages are designed specifically for individuals and joint-applicants with less than perfect credit histories. Rather than simply using credit scores as a ‘binary’ indicator of eligibility, subprime lenders take other factors into account. If the applicant is clearly in a position to comfortably fulfil their contractual obligations, their credit history may be deemed irrelevant.
Of course, it’s unrealistic to expect subprime mortgage products to be offered with the same interest rates and borrowing costs as their conventional counterparts. Where poor credit histories apply, the applicant may naturally be considered ‘higher risk’ by the lender. As a result, they may be subject to slightly higher interest rates and borrowing costs than applicants with a flawless credit history.
In any case, the point of importance is that bad credit does not necessarily mean you cannot get a mortgage. Terms and conditions vary significantly from one lender to the next, but just as long as you set your sights beyond the usual High Street names, you’ve every chance pinpointing your perfect mortgage product.
How to Get a Good Deal on a Subprime Mortgage
Whether you’re applying for a conventional home loan or a subprime mortgage, the importance of comparing the market cannot be overstated. With hundreds of lenders offering thousands of products for all purposes, it simply makes sense to consider as many as possible.
Starting out, it’s a good idea to use an online mortgage calculator to find out how much you can afford to borrow and comfortably repay. After which, there are several steps that can be taken to ensure you get the best possible deal on your subprime mortgage, which include:
- Consult with an independent broker and compare the market in full
- Consider paying a larger deposit if possible for lower interest rates
- Choose a shorter repayment period for more competitive offers
- Examine your credit history and begin building your credit score
- Ask your broker about the possibility of a guarantor loan
- Consider alternative options like bridging loans if viable
Once again, it’s inevitable that a poor credit history can and often does complicate the process of qualifying for a mortgage. Nevertheless, there’s nothing to say you cannot access a competitive mortgage with a reputable lender, irrespective of how imperfect your credit score may be.