How to get a mortgage with a bad credit?

Mortgage with a Bad Credit

It is a very common situation now for a person to have a less than perfect credit rating. This could be for something as simple as missing one or two payments to a credit card or something a little more serious such as a CCJ. Most people will believe that that this means that they are not able to get a mortgage, but there may be a mortgage that is available even in these circumstances. Borrowers will need to be prepared to pay a higher rate of interest and put down a larger deposit on the property.

A bad credit mortgage will work in much the same way as a standard mortgage. Some lenders will require a deposit of up to 30% of the purchase price of the property. As with standard mortgages, they fall into different categories such as fixed rate, variable mortgages and discounted rates. The mortgage can help to ‘fix’ the credit rating as making payments regularly and on time will go in the borrower’s favour. Borrowers who qualify can then normally move their mortgage to a standard mortgage and benefit from the lower interest rates.

The first thing any borrower should do before considering a bad credit loan is check their credit file. This is available from any one of a number of credit agencies for a small fee. It will show all borrowing and will also show any default notices, CCJs or other potential problems. When making plans to apply for a bad credit mortgage it is also important to work out just how much it will cost. This should take into consideration any fees or charges as it is very easy to forget about these. When first considering this as a course of action, find out more about costs by using one of the many price comparison sites. Find out more about each company and their loan products before making any applications at all.

It is important to start making sure that all payments are being made on time to other types of credit lenders. Credit card payments being made on time can have a positive effect on a person’s credit file and will be seen in a favorable light by the lender. It is also important to take a look at income. Is the income regular and a reasonable amount? No lender will agree to a loan if the borrower seems to be unable to make the repayments.

The good news is that these loans have become a little more competitive. Terms and rates for these mortgages are becoming more attractive and borrowers will find that they are able to take advantage of tracker mortgages and variable rate options as well as fixed rate loans which offer peace of mind for those worried about potential rate rises.

A bad credit loan may not sound as though it is the most attractive option, but it has the potential to help a borrower purchase a home of their own and will be instrumental in restoring a person’s good credit rating.