Mortgages for those with credit difficulties

[anna_whd]

Hi there,

I just wanted to get some advice on whether it was possible to get a mortgage when you do not have a good credit history and have outstanding debt. My partner and I now have a decent income but because of loans when I was a student, we will be paying them off forever, as well as paying rent. I dont know if it is even possible for us to get a mortgage or if we just be laughed out of the door! But it seems silly, we want to be paying off the money, and paying into a property - is it possible? I appreciate that,even if it is we would be paying a higher rate but I would still like to look into it. Please help! Anna

[brian]

The thing about credit history is that a lot of it is based on your payments - so having debt doesn't automatically mean bad credit history - but failing to pay debt can.

So it's certainly worth talking to a mortgage advisor - don't worry, they won't laugh, as mortgage brokers will get a heft commission on any mortgage they can sell - but if you really do require a more specialist bad debt mortgage, then you may have problems either finding a lender to lend to you, or else getting a rate that you're happy with - let alone even getting a mortgage for the sum you actually want. Then again, that's why they call it the property ladder.

A note, though - banks are getting more wary of offering bad credit mortgages at present while interest rates are climbing, so you may find your options restricted if you really do have a bad credit history (ie, failure to pay debts on time).

So it's certainly worth asking a broker, but take note not simply of mortgage rates, but also setup fees, and weigh up your options - you're not tied to any single brokerage or lender, so get an idea of your options first before moving on.

And best of luck with everything.

[brianabbott]

Hi Anna,

It is possible to get a mortgage with a poor credit history, but it is most likely that you will need a specialist lender and not a lender on the high street. If you have missed payments on a loan in the last 12 months or have defaulted on loans (not paid your loan for about 6 months usually), you will fail a credit score with high street lenders. Defaults don't have to have occurred in the last 12 months in order to fail. However, there are specialist lenders who will lend in these circumstances.

The interest rate and loan to value (loan size expressed as a percentage of the value of the property) are determined by the severity of the credit problems. You may be surprised at how reasonable interest rates can be for people with credit problems.

There are special mortgage products for people with CCJs. Again the interest rates are determined by severity of the adverse credit. Some lenders ignore CCJs under a certain amount, some ignore CCJs which have been paid off, some are ignored if registered over so many years ago. Criteria gets more in depth than this, but you get the idea.

Discharged bankrupts can get mortgages, even if discharged a month ago. People currently in an IVA can get a mortgage (a voluntary arrangement made with creditors - a step taken to try to avoid bankruptcy).

So as you can see there is nothing to worry about as far as getting a mortgage is concerned, but remember that you will need a deposit. You will have the chance to improve your credit rating by successfully obtaining a specialist mortgage product and maintaining your mortgage payments. A transfer to a mainstream lender may be possible further down the line.

As far as having debt is concerned, that will not stop you getting a mortgage per se, however it will reduce your borrowing capacity. All lenders have diferent ways of calculating how much you can borrow and affordability tests will be applied.

I hope that helps.

Regards,

Brian Abbott
Independent Mortgage Consultant
FSA No. 463188
07932 188 030

Brian Abbott trading as Mortgage Minds is an Appointed Representative of the Mortgage Times Group Limited which is authorised and regulated by the Financial Services Authority number 303007
Your home may be repossessed if you do not keep up payments on your mortgage

[anna_whd]

Thank you both very much for your replies, they are really helpful. Can you perhaps just tell me how I find a specialist lender? Are there approved lists or is it just an independent advisor I need? I am also unsure re the deposit - I am hoping to have some money which could be used for such a purpose but am I not better using it to pay off outstanding debts?

[brianabbott]

Hi Anna,

I am a 'whole of market' mortgage broker, so I have access to specialist lenders who may be able to help you. Please ring me if you wish. My mobile number is in my previous post or you can ring this one 0191 455 0573

Regards,

Brian Abbott

[tater03]

I would agree that the best thing to do is talk to some mortgage brokers and they will tell you what you need to do. At least ours did when we were first looking into buying a house and weren't sure how our credit would effect it.

[vicki2]

Using a mortgage broker for the first time home buyer is the way to go ...they can lead you through the labriythe of options much more quickly than trying to sort it all out yourself. Good luck to you.

[parise1]

You can being to prepare by trying to pay off on your credit. This will bring your credit rating up and then you will be in the playing field of looking for a house. They at least want to see you attempt to take care of your debt,

[tater03]

That is true. I would get a copy of your credit report and start making some payments to your creditors. Sometimes they will even lower the amount that needs to be paid if you contact them.

[cassiem0221]

If you do have issues being approved for a mortgage, it may be worth your time to check out some of these people who claim to be "credit repair specialists" who knows... one of them may be able to help you!