First Time Buyer Mortgage Bad Credit History

Can you buy a house with bad credit as a First Time Buyer?

Absolutely. There’s always ways and means. It does depend entirely on what’s registered, when it was registered, how much it was for, and whether the account has since been settled.

All those things will play a part for a First Time Buyer in terms of what deposit you would need, the affordability, the loan size and the choice of lender that we can go to.

Can I get a mortgage as a First Time Buyer if I have a County Court Judgement (CCJ), Individual Voluntary Arrangement (IVA), a default, a bankruptcy or if I have a payday loan?

Yes, but it does depend on what’s registered, when it was registered, whether it’s settled and how much it was for.

That will certainly apply to a CCJ, IVA, default and bankruptcy. With payday loans, those are not so much bad credit, but lenders do look at them as an indicator of your ability to manage your finances on a month to month basis.

If it was a one-off and over a year ago, that’s unlikely to cause any big issues. But if you’ve been using payday loans regularly over the last 12 months, it may indicate an issue with managing finances. A lender might question whether to lend to you under those circumstances.

Some of those loans are referred to as ‘credit repair’ by the people that sell them. It’s not credit repair. Ultimately, borrowing money and paying it back is important in maintaining a good credit file. But payday loans are short-term finance to plug a gap in that particular month, and lenders don’t particularly like them, especially if they are recent.

Do First Time Buyers need a credit score? Can I get a mortgage if my credit score is very poor?

Ultimately, everybody will have a credit score, whatever that might be. Everyone has one pretty much from the day they turn 18.

You can get a mortgage with a poor credit score, but it’s more about what’s registered, when it was registered, whether it has been brought up to date and settled. All of these things will play a part in whether you’ll be able to get that mortgage – and are probably more important than the score itself.

How much deposit will I need? How much can I borrow if I have bad credit as a First Time Buyer?

The deposit will depend on your circumstances. The minimum is still 5%, but depending on the level of adverse recorded, you may need a slightly larger amount.

In terms of how much you can borrow, that’s still defined by lenders’ individual affordability rules. Typically you would be looking at somewhere between four and 5.5 times your income, depending on the lender.

Of course, your existing outgoings will be taken into account in assessment of that affordability. That is also stress tested against an elevated interest rate – to make sure the mortgage is not just affordable now, but also hopefully into the future, as well.

What’s the process of applying for a mortgage with bad credit as a First Time Buyer?

There are no specific differences, but your advisor will just work a little bit harder because if you’ve got some adverse credit, we’ll need a copy of your credit file. We’ll need to see where it lines up against individual lenders.

That will lead us to the most appropriate lender for your circumstances, with the best possible rate. But in terms of the process of working with an advisor, it’s still the same. You’ll still need to provide the same documentation. The only additional thing is a copy of your credit file.

A lender could potentially ask for an explanation as to how your adverse credit became a thing in your life. Unfortunately, it does happen to a large number of people. It’s not important that it has happened – what’s important is that we know about it and that we can work around it effectively with you.

What steps can I take to improve my chances of getting a mortgage with bad credit as a First Time Buyer?

Let’s get those payments up to date as quickly as possible. Settle it if that’s a reasonable thing to do. Then, once you’ve worked hard to do that, make sure that you keep it that way.

How can a mortgage broker help here?

Always use a broker. There are so many different lenders out there – some you may have never heard of. If there’s one out there for you, we’re going to be the people to find them.

Ultimately, we’re here to do the hard yards for you and make sure that you get the best possible deal. There’s nothing worse than feeling like something’s closed off to you. We love to open doors to people that expect them to be closed. It gives us a tremendous amount of pride to take those steps alongside you, and help you do something you thought wasn’t possible.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.