Getting a mortgage can be a daunting process, especially if you have bad credit. Lenders look at a lot of things when checking your mortgage application - this includes checking your credit history and your deposit.
In this Guide, you'll find information on how to get a mortgage with bad credit, and what you'll need for a deposit.
How much deposit you’ll need to put down will depend on your individual situation, and will vary between lenders. Lenders have their own criteria to work out how much of a risk it would be to lend money to you.
Generally, the more money you can put down up front, the less of a risk you pose. This is especially the case if you have a history of bad credit. The bigger your deposit, the less money you’ll need to borrow (LTV), and the better your interest rate will be. Having a bigger deposit shows the lender that you’ve been savvy with your saving, and have got a good grip on your finances.
If you have more serious credit issues such as CCJs or IVAs, lenders may only agree to grant you a mortgage if you put down a larger deposit. To put it another way, if you’ve been bankrupt, a lender sees you as more risky than someone who’s missed a few mobile phone payments.
However, if you can’t save a lot of money for a deposit, there are schemes available such as Help to Buy and Shared Ownership which only require a smaller amount up front. If you need a mortgage and have bad credit, it’s a good idea to work with a specialist mortgage broker. Our Mortgage Experts have seen it all - they won’t be judgemental. They have plenty of experience getting mortgages for people in your situation. Get in touch to find out your options.
It's a mortgage myth that you can't get a mortgage with bad credit. It's definitely possible to get a mortgage with a poor credit history, but it's more difficult than it would be if you had a perfect credit score. Whether you get accepted for a mortgage can depend on the type of credit issues that are on your file. Lenders will want to know what caused the issue, how long ago it happened, and what you've been doing since to improve.
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. To find out your score, we recommend using checkmyfile*. checkmyfile shows you data from across the big credit reference agencies (Experian, Equifax, TransUnion) and gives you a fuller picture of your credit file. Read our Guide: checkmyfile Explained to find out how to use their useful service.
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Here are some of the credit issues that can affect your mortgage application:
Bankruptcy is when you can’t pay any of your debts, so you officially and legally make that known to the people you owe money to. It will be hard to get a mortgage after being bankrupt, but finding the right mortgage lender who specialises in helping people get a mortgage after bankruptcy can make homeownership possible. You should work with a specialist bad credit mortgage broker if you've been bankrupt and need a mortgage. They'll be able to find the right lender for you.
County Court Judgements (CCJs)
CCJ stands for County Court Judgement 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 you with a recent one.
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 mortgage. If you're in a DMP it’s best to talk to a specialist mortgage advisor to understand your options.
Defaults happen when you don't pay a bill at all. They 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 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.
An IVA is an alternative to bankruptcy. It's 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 have an IVA, most banks won't accept you for a mortgage. But there's specialist lenders who will.
Lenders will be able to see in your credit report if you’re currently in an IVA. They’ll also be able to see if you had one previously. Be prepared for lenders to ask for payment evidence from the last two years. Lenders will mainly be concerned with how long ago the IVA happened, and whether you have any other credit issues.
Most people pay a bill late at some point in their lives. Late payments generally aren't seen as severe by mortgage lenders. Lenders will check to see how many late payments you have and how long ago it happened.
Always be prepared to discuss and explain your credit history with your mortgage broker. They’ll then be able to explain the situation to lenders when they’re making an application for you. A lot of mainstream lenders don’t accept people with bad credit, but it just means you need to find the right specialist lender instead.
How much deposit you’ll need to put down will depend on a number of factors, and which lender you apply to. But speaking to our Mortgage Experts is a good place to start.
Get in touch to find out your options.
Most lenders prefer you to have a bigger deposit if you’re applying for a mortgage with bad credit. However, it’s still possible to get a good mortgage deal, you’ll probably just need the help of a mortgage broker.
Our Mortgage Experts live and breathe the mortgage market. They’re great at at putting together applications, and they have good relationships with specialist lenders. Working with one of our Mortgage Experts means you’ve got someone on your side that will fight your corner if needed.
Make an enquiry to speak to an expert.
Unfortunately, there aren’t any mortgages available on the market if you don’t have any deposit to put down. If they ever do return, you’d probably need a perfect credit score to get accepted.
If you want to be a homeowner but can’t save a deposit, you could consider a guarantor mortgage. This is where someone else agrees to pay your mortgage if you can’t. Guarantor mortgages provide a layer of security for lenders. If they know the repayments will be made, you’ll be considered less risky.
It’s a big ask though. Whoever agrees to be your guarantor could lose their home if you don’t keep up payments on yours. So always be sure it’s someone you trust and who trusts you.
If you have bad credit and are worried about having a small deposit, there are a number of government schemes available to help you buy a property.
Help to Buy
Help to Buy is where the government grants you an equity loan to put towards the cost of a new-build home (up to 20% of the property price). You can get a Help to Buy mortgage with only a 5% deposit - a good option if you can’t save much money and want a newly-built home. Read more about Help to Buy.
Right to Buy
The Right to Buy scheme allows council tenants in England to buy their council home. If you qualify for Right to Buy, you'll be able to buy your home at a discount. Most mortgage lenders will then accept your discount as a deposit. Read more about Right to Buy.
Shared Ownership is where you buy part of a property from a council or housing association, and rent the rest. You take out a mortgage on the part you're buying, then pay a reduced rent on the part you don't own. You can buy some or all of the remaining property share later on. Specific shared ownership schemes are also available for people with disabilities and older people. Read more about Shared Ownership.
If you need a joint mortgage but one of you has bad credit, that doesn’t mean you can’t still find your dream home. Some big banks and high street lenders might ask you to put down a bigger deposit or pay a higher interest rate. But there are specialist lenders who deal exclusively with bad credit applicants, and will look at your application based on your individual circumstances.
Lenders tend to pay closer attention to the person with bad credit. But they’ll also be checking other aspects such as your combined income. Let’s say you had perfect credit and your partner doesn’t, but they earn a decent wage. It could work in your favour as their bigger salary could enable you to borrow more money and buy a bigger property.
Read more in our Guide: Getting a Joint Mortgage When One Applicant Has Bad Credit
Everyone’s circumstances are different. If your situation isn’t straightforward, it’s a good idea to work with a specialist mortgage broker. Our Mortgage Experts have seen it all. They know the market and have good relationships with lenders. They’ll make your application look good and find the right mortgage for you. Get started.
If you’re looking for a Buy to Let mortgage with bad credit, you pose a higher risk to lenders as your outgoings will be higher. Most lenders will ask for a deposit of at least 20%, so be prepared to pay this as a minimum.
There are some specialist lenders who might only ask for 15%, depending on the severity of your previous credit issues. You’ll also need to meet their minimum income requirements.
If you’re buying a second home with bad credit history, most lenders will need a minimum of 25% deposit. The same applies if you’re taking out a second charge mortgage and have poor credit.
We get how it feels when you’re refused a mortgage. We have first-hand experience of how your mental health can be affected when you get knocked back. We're working hard to spread awareness and tackle the stigma that comes with bad credit issues. Life happens. There's many reasons why you might fall into bad credit, and while getting a mortgage with a poor credit history can be trickier compared to someone with perfect credit, that doesn't mean it's impossible.
When applying for a mortgage with bad credit, it's best to speak to a specialist mortgage broker who can assess your unique situation and explain your options. Our Mortgage Experts know the market, which lenders are right for you, and how to give your application a good chance of being accepted. Get started.
Our Mortgage Experts are fully-qualified with experience in bad credit, self-employed and complex mortgages. They have a proven track record of getting mortgages for people who’ve been rejected elsewhere.
Applying for a mortgage or understanding your options shouldn't be confusing, yet there are just so many myths doing the rounds and it's not easy to know where to turn to get the right advice.
Our calculators give you an idea of what you might be able to borrow, what's affordable and a rough estimate of the kind of property prices you can start to look at.