Shared Ownership Mortgage With Bad Credit

Can you get a Shared Ownership Mortgage with Bad Credit?

Yes, it’s possible to get a Shared Ownership mortgage with bad credit, but it will be more difficult than if you had a perfect credit score. It really depends on the type of bad credit issue you’ve had, when it happened and how much it was for. Choosing the right lender will also be a big factor. 

With all this in mind it’s wise to seek the help of a mortgage broker with experience in this area. They will have in-depth knowledge of the Shared Ownership process and will know how to make your application look great, even with a poor credit rating. You’ll also need a specialist bad credit mortgage lender and your broker will know who they are.

Specialist lenders are mortgage companies who deal exclusively with people in complex financial situations. They're a great option if you have bad credit history. Our Mortgage Experts can help you find the lenders who are most likely to accept your application.

What is Shared Ownership?

Shared Ownership (also known as ‘part rent, part buy’) is where you buy part of a property and rent the rest. You take out a mortgage on the bit you're buying, then pay a reduced rent on the bit you don't own. You’re able to buy between 25-75% of the home, and can buy some or all of the remaining share later on when you can afford to. 

Shared Ownership is only available for new-build homes and some existing properties via specific resale programmes from housing associations. They’re always leasehold, meaning you won’t own the land your property is built on and may have to pay ground rent and maintenance costs.

How does bad credit affect my chances of getting a Shared Ownership mortgage?

Having bad credit doesn't mean you can't get a shared ownership mortgage. It can make things more difficult compared to someone with a good credit score, but it doesn't make homeownership impossible.

Most big banks aren't likely to accept you for a mortgage if you have bad credit, but there's specialist lenders who'll consider you. If you have adverse credit history then you may be asked to pay a higher interest rate or put down a bigger deposit. That's why it's a good idea to work with a specialist mortgage broker like us. Our Mortgage Experts are experienced in Shared Ownership and bad credit mortgages, and will work hard to find the right lender for your needs.

Be prepared to discuss your credit history with your Mortgage Expert. They'll listen without judgement and provide the right advice. They can then explain to lenders your reasons for falling into bad credit and what you've been doing to improve your credit score. 

If you’re ready to speak to someone, you can make an enquiry now.

What credit issues affect Shared Ownership mortgages?

Getting accepted for a shared ownership mortgage with bad credit will largely depend on the type of credit issues that are on your file. Lenders will consider what caused the issue, how long ago it happened, the amounts involved and what you've been doing to improve your credit score. 

With any credit issues, it's best to tackle them head on. Facing poor finances can cause a lot of anxiety, but finding out where you stand is the first step to putting things right.

First thing to do is to find out your credit score. For this, we recommend using Checkmyfile**. Your credit report from Checkmyfile will show you data from all three main credit reference agencies in the UK (Experian, Equifax, TransUnion) and gives you a more complete picture of your credit rating.

Read our Guide: Checkmyfile Explained to find out how to use their service. 

**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.

Here are some of the credit issues that can affect your shared ownership mortgage application: 

Late payments

Life happens. Most people pay a bill late at some point in their lives. They aren't generally seen as severe credit issues by mortgage lenders. Lenders will check to see how many late payments you have and how long ago it happened. 

Defaults

Defaults happen when you don't pay a bill at all, and stay on your credit file for six years. A default is the most common cause of bad credit in mortgage applicants. When applying for a Shared Ownership mortgage with defaults, lenders will check how many defaults you have, how long ago they happened, and how much money was involved. They'll also consider whether you paid them off and how much deposit you've managed to save. 

Individual Voluntary Arrangement (IVA)

An IVA is a legal agreement between you and the people you owe money to, allowing you to pay off your debts at an affordable rate. If you’re still paying into an IVA, most, if not all, mortgage lenders won't accept you for a shared ownership mortgage.

Lenders will mainly look at how long it’s been since your IVA was fully repaid and how you’re credit record looks since it happened.

Bankruptcy

Bankruptcy is declared when you can’t pay any of your debts. It will be hard to get a shared ownership mortgage after being bankrupt, if it’s still showing on your Credit Report (which it will for six years), but some specialist lenders will consider your application once a few years have passed.

County Court Judgments (CCJs)

CCJ stands for County Court Judgment and happens when you owe money to someone who then takes court action against you. If you have a CCJ on your file, lenders will look at how much money was involved, how long ago it was registered and if you paid the debt off. Most lenders prefer your CCJs to have happened a while ago, but some will consider applications where the timescale is within a few months.

Debt Management Plans (DMPs)

Debt management plans are a way of paying off your debts at a manageable rate. DMPs are for 'non-priority debts' such as credit cards, store cards or personal loans. You make one monthly payment to a DMP provider who then pays your creditors for you. If you’re currently in a DMP, you might also have late payments or defaults on your file, which can affect a lender's decision to grant you a shared ownership mortgage.

If you're credit record has been affected by any of the credit issues mentioned above it’s best to talk to a specialist mortgage advisor to understand your options and to find out which mortgage lenders could help. 

What credit score do I need to get a Shared Ownership mortgage?

There isn’t a specific score needed to get a shared ownership mortgage, because there's no such thing as a universally-recognised credit score that ‘guarantees’ you’ll secure a home loan (or any finance, for that matter). 

When you apply for a Shared Ownership mortgage, lenders look at a number of factors to assess your risk and work out if you'll be able to make the repayments without struggling. The higher your score, the more chance you'll have of being accepted for a mortgage.

Checking your score across all the main UK credit agencies, which you can do with Checkmyfile, will give you an indication of where your credit score currently sits and, from there, you can look at what steps you can take to improve your current rating.

How do I apply for a Shared Ownership mortgage?

After you’ve registered for the Shared Ownership scheme you can start house-hunting. Your local housing association will need to carry out a financial assessment to see how much you can buy and how much you’ll need to rent. 

You should start to gather the paperwork you need for your shared ownership mortgage application so you’re as prepared as possible. You'll need:

• Proof of identity

• Proof of your current address (usually a utility bill)

• Employment details and proof of income

• Payslips or accounts if you’re self-employed

• Proof of your deposit

• A credit report

Some mortgage lenders don’t offer shared ownership mortgages, so it’s a good idea to work with a mortgage broker who can find you the right deal. Especially if you have a poor credit history. Our Mortgage Experts have seen it all and aren’t judgemental. Make an enquiry to find out your options.

How can I improve my chances of getting accepted for a Shared Ownership mortgage with bad credit?

Applying for a Shared Ownership mortgage can feel daunting. It's even more stressful if you're worried about your credit history. The good news is, it's possible to get a Shared Ownership mortgage with bad credit, you'll just need to give yourself the best chance of being accepted. 

Some tips for boosting your application: 

1. Check your credit score
   Find out where you stand, then you'll know what issue is impacting your credit score and can take steps to improve your record.

2. Freshen up your credit report 
   Some surprisingly small factors can have an impact on your credit rating. Some quick changes you can make the boost your score:
   
   Register to vote where you live currently
   Check for faults on your record and ask the creditor to remove them
   Space out any credit applications 
   Put your name on household bills
   Pay more than the minimum on your monthly credit card statement
   Don't withdraw cash from your credit card
   Don't use too much of the credit available to you

3. Be patient
   Any marks on your record will lose their impact over time. If you’re continually working to improve your financial situation then lenders will look on this favourably. If you can, it might be better to wait for a while and work on your score, before applying for a mortgage.

4. Be honest
   Don't try to hide negative credit issues. Mortgage applications are thorough, so it's likely you'll be found out. Instead, be upfront and explain why you found yourself in financial difficulty, and what you’ve been doing to get out of it since. Life happens, and you’re only human.

5. Use a mortgage broker
   If you have a history of bad credit, it’s a good idea to work with a specialist mortgage broker. Our Mortgage Experts know which lenders will consider your application and look at your unique circumstances. They'll guide you through the whole journey, from application to completion. They know the market, and will make your application look as appealing as possible to the right mortgage lenders.
   
   Brokers can help to ease the stress and anxiety that comes with a mortgage application. They'll know how to tackle complex situations, speed up the process, and keep you protected throughout. Read more in our Guide: 6 Reasons Why You Should Use a Mortgage Broker