Can I get a mortgage with a low credit score?
If your mortgage application has been declined because of a low credit score, it’s still possible to get what’s known as a Bad Credit Mortgage. These mortgages have been designed for people with a low credit score. They tend to be offered by lenders which have a greater appetite for risk than some of the more traditional high street banks and building societies.
Because there is more risk involved in lending to someone with a low credit score, you’ll probably have to pay higher interest rates and may even need to come up with a larger deposit. Therefore, it’s crucial to remember that you should get a mortgage only if you can afford the monthly repayments. If you can’t, your home may be at risk.
Why do I have a low credit score?
In a perfect world, everyone would have a squeaky-clean credit score. However, the reality is that even if you have the best of intentions, your credit score may not be perfect.
Things like missing repayments, using credit too often, carrying too much debt or defaulting on a loan can all harm your credit score.
If you have these on your record, certain lenders may view you as a risk.
However, different mortgage lenders have different criteria for lending money. Some lenders are bound by strict rules and protocols and don’t have a very big appetite for risk, which means if you have a low credit score, you may get declined. On the other hand, some lenders have a greater appetite for risk and may lend to you even if you have a low credit score.
Certain lenders have created specific products which balance the risk of them lending to someone with a low credit score with the potential returns they can generate. These lenders will, of course, price their mortgages accordingly and you can generally expect that the more risk involved in lending you a mortgage, the higher the interest rate will be. The trick is finding a mortgage broker who can help you navigate this confusing marketplace to find you the right deal. That’s where My Mortgage Pro can help.
What is a bad credit mortgage?
Bad credit mortgages are just like regular mortgages, but they have been designed specifically for people with low credit scores.
Because there is more risk involved for the lender, they tend to come with higher interest rates and stricter limits on how much you can borrow. That’s because the risk is mitigated by the higher interest rates and larger deposit you pay. If your credit score is high, lenders will view you as less of a risk and so your chances of getting a regular mortgage, with lower interest rates, approved are higher.
If your credit score is low, lenders will view you as riskier, meaning your options narrow. There are many types of bad credit mortgages available, including fixed, variable, and discounted rates. The interest rate you’ll pay, and the amount you’ll be able to borrow will vary from lender to lender and will depend on your credit score.
Can I get a mortgage with a low credit score?
If you have a low credit score, the best rates and the number of mortgages available to you will be more limited.
But, with the right support, you should still be able to find one that’s right for you. So, it is possible to get a mortgage with a low credit score, but you’ll need to demonstrate to the lender that you can afford the repayments and can manage your finances sensibly.
To get a mortgage with a low credit score, you’ll need to share information about your income, outgoings and savings with your lender.
There are other things you can do to show them you are a responsible borrower, too. These include things like meeting all your regular payments – such as utility bills and credit cards – on time, reducing your monthly outgoings, and not taking on any new debt.
If you can save more money for a deposit, this can only be a good thing. And if you can get someone – such as a parent or relative – to act as a guarantor, this will also reassure lenders that your monthly payments will be covered if you can’t keep up with them.
Contact us for more information about getting a mortgage with a low credit score
My Mortgage Pro is a professional mortgage information service. While we don’t give advice, we aim to provide you with simple, jargon-free, no-nonsense information about mortgages to help you make the right choice. We can also connect you with a specialist mortgage advisor from our parent company James Alexander FS who are authorised and regulated by the Financial Conduct Authority, who will provide advice tailored to your specific circumstances and help you find a mortgage with a low credit score, fast.
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