Bad Credit Mortgages For First-Time Buyers

Getting your first mortgage can be an overwhelming experience, and if you have bad credit, this can feel like an additional barrier, leaving you wondering whether you’ll ever own your own home. But it really doesn’t have to be that way.   

Bad credit could happen to anyone at any time and is a common reason why mortgage applications are rejected. But bad credit isn’t permanent and can be fixed. So, if this is where you’re at right now, don’t worry! You’re not alone, and help is available. 

With our expertise and guidance, your dream of opening the door to your very first home can become a reality. Read on to find out how we could make your mortgage possible when others can’t.

Can you get a mortgage with bad credit if you’re a first-time buyer? 

Yes, it’s possible. The fact that you’re a first-time buyer isn’t really relevant when getting a bad credit mortgage. More importantly, a mortgage lender will want to know what type of credit issue is showing on your record, when it happened, how it occurred, and the amount involved. 

As a first-time buyer, going with what you know and applying directly with your local high-street mortgage lender can be tempting. But too many mainstream lenders see low credit scores as a red flag, leaving you right back at square one with a ‘computer says no’ rejection. 

Getting your first mortgage can be pretty daunting, even more so when bad credit is involved. That’s why it's wise to use the services of a mortgage broker with experience helping people in a similar situation to the one you’re currently in. 

Your mortgage broker will know exactly which mortgage lenders are best placed to accept the type of credit issue(s) you have on your record and will guide you through the process from start to finish. 

These specialist lenders look more favourably on people with bad credit and consider each application on a case-by-case basis, giving you a far better chance of securing the mortgage you need. 

Do mortgage lenders only look at your credit history?

No, they don’t. A mortgage lender will look at your application overall - your age, income/outgoings, employment record and deposit size. They will also look at how you’ve managed your finances since the credit issue occurred and whether you’ve taken any steps to improve your credit score.

Your credit history does, undoubtedly, play a big part in deciding whether your application will be successful, but it’s not the only consideration. So, for example, it’s possible to get a mortgage despite having a low credit score if you have a solid employment record, a high amount of disposable income, and a large deposit. 

Is it harder for first-time buyers to get a mortgage with bad credit?

No, not necessarily, but it depends on the type of credit issue you’ve had. For first-time buyers, it could simply be that you’ve not yet had enough experience applying for credit and, as a result, either have a low credit score or no credit history at all. 

The other most common types of credit issues that can lower your credit score include:

• Late or Missed Payments

• A history of Payday Loans

• County Court Judgments (CCJs)

• Defaults

• Individual Voluntary Arrangements (IVAs)

• Debt Management Plans (DMPs)

• Bankruptcy 

If any of the above credit issues are registered on your Credit Report, this will reduce the number of lenders willing to consider your application, making it more difficult to get a mortgage than for someone with a perfect credit record. 

With a smaller pool of lenders available, this can also mean the interest rate on your mortgage repayments will be higher, and you may need a larger deposit to offset the perceived additional risk taken on by the lender. 

The added difficulty can come from working your way through the mortgage process for the first time and getting to grips with all the twists and turns it can bring, including how to deal with a bad credit issue if one (or more) is registered on your record. 

This is where we could help! Our team of experts have all the knowledge and experience you’ll need to take the stress out of getting a mortgage for the first time. They’ll know which lenders will accept your application, saving you time and avoiding unnecessary rejections. 

All you have to do is make an enquiry, and one of our Mortgage Experts will get in touch with you straight away.  

What minimum credit score do first-time buyers need for a bad credit mortgage? 

There isn’t a specific minimum credit score needed for a bad credit mortgage. There’s two reasons for this. One is that three Credit Reference Agencies (CRAs) compile information on your financial history, and each uses a different scoring system, so picking one fixed score limit isn’t possible.  

Secondly, mortgage lenders will look at each application overall when making their decision, and your credit score is one - important - part of that process. Other factors to consider are your age, disposable income, employment history, mortgage deposit and the type of property you’re looking to buy. 

How to get a bad credit mortgage as a first-time buyer

If you’re a first-time buyer with bad credit, you can significantly improve your chances of getting a mortgage by taking the following steps. 

Check your Credit Report

First things first, check your Credit Report so you know your current credit score and what information is held. More specifically, you can find out what bad credit issues have caused the low score and when they were first registered. 

Each of the three main Credit Reference Agencies (CRAs), Experian, Equifax, and TransUnion, holds slightly different information about your financial history. You can contact each agency separately to find your credit score. 

Alternatively, you can go to Checkmyfile** and receive a detailed overview of the information held by all three agencies regarding your credit record on the same report.  

Checkmyfile allows you to download your report for free with a 30-day trial and then £14.99 monthly (you can cancel anytime). 

**When you click through to our affiliate links, we may earn a small commission at no extra cost to you. We only recommend sites we trust and believe in. 

Improve your credit score

Once you’ve downloaded your Credit Report, it's important to take some time rebuilding your credit score. A better score could make all the difference and mean you should have a wider group of lenders available. 

The measures you can take, some of which are pretty straightforward, include:

• Checking you’re registered on the electoral roll* at the correct address

• Settling any outstanding debts relating to any credit issue you’ve had

• Make sure all your regular outgoings and financial commitments are paid on time and in full

• Only use existing credit accounts (credit cards, overdrafts, etc.) when necessary and keep the repayments up to date

• Check you’re named on at least some of the household bills if you live with someone, and these payments are coming from your own (or a joint) bank account

• Don’t apply for any other credit accounts if you’re about to apply for a mortgage

Finally, keep checking your credit reports regularly to see how your credit score is improving.  

Save up for a deposit

The size of mortgage deposit you’ll need will largely depend on the type of bad credit issue you’ve had and when it happened. But the more you can save for a deposit, the better chance you’ll have of getting a mortgage, as this reduces the overall risk for a lender. 

If your low credit score relates to a relatively minor issue—say, a couple of late payments from two or more years ago—then the amount of deposit you’ll need could be as low as 5%-10%. If it’s more serious—a discharged bankruptcy, for example—then you’ll need a much higher deposit (typically, 20% -25%). 

Speak to a bad credit mortgage broker 

Specialist mortgage lenders - the ones who are best placed to help people with complex bad credit issues - are usually only accessible through a mortgage broker. 

An experienced bad credit mortgage broker can quickly review your situation and then help identify the right mortgage lender to handle your application on your behalf. This will save you a lot of time and give you a far greater chance of getting the mortgage you need. 

Do you need to have a guarantor if you’re a first-time buyer with bad credit?

No, a guarantor is certainly not compulsory and wouldn’t override a mortgage lender’s decision to reject your mortgage application, whatever the reason. If the bad credit issue registered on your record falls outside the lender’s acceptable criteria, adding a guarantor won’t change this outcome. 

A guarantor mortgage is a good option for first-time buyers if you’re finding it difficult to get accepted for a mortgage. But that could be due to concerns a lender has over your annual income or deposit/loan-to-value, rather than just your credit score.

This type of mortgage provides additional security for a mortgage lender by the guarantor (usually a parent or other close family member) agreeing to cover the repayments if you can’t pay. 

Other alternatives available to you include joint borrower sole proprietor mortgages, where a child and (usually) their parent(s) are jointly responsible for the repayments. Still, the child retains sole ownership of the property.  

Both these options offer you the opportunity to fulfil your dream of making it onto the property ladder while making each regular repayment allows you to build your credit rating.