Almas Uddin
Founder and Mortgage Advisor
05 Dec 2023
How to Secure Competitive First Time Buyer Mortgage Rates
Applying for a mortgage with bad credit issues can be extremely stressful. However, it doesn't mean to say you won't find a competitive mortgage!
The best option is to work with an independent broker who can advise which lenders will consider your application. As bad credit experts, mortgage advisors also assesses your credit score, can advise on strengthening your application, and recommend mortgage products that are best suited to your circumstances.
For help with your bad credit mortgage, give us a ring on 0330 304 3040, or drop a message to [email protected].
How Can a Bad Credit Broker Help me Get a Mortgage?
The key is to apply to the right lender - and depending on what credit issues you have, this might need to be a precise search.
From there, we identify the right mortgage provider. That means analysing their criteria, evaluating the rates on offer, and knowing which banks will automatically reject an adverse credit applicant.
Once we are happy that we've found the best deal, we work with you to put together an application for an agreement in principle. This outlines what the lender will offer and can be based on indicative information if you haven't found the right property yet.
Then it's a case of deciding what home you'd like to buy. An agreement in principle is a powerful negotiating tool since it shows that you are ready to proceed when a price is agreed. It can also offset any apprehension about moving forward with a sale if any credit checks are run.
You'll need to appoint a solicitor unless it is a remortgage application too. The property must be valued, although in most cases, the lender will organise this. You can choose to have a further valuation or full structural survey carried out if you wish.
When everything is complete, the lender provides a full mortgage offer, provided the valuation is as expected. You will then need to provide your documentation proving your income and ID, for example, and instruct the solicitors to proceed with the purchase paperwork.
The final step is exchanging contracts, collecting signatures and signing - at which stage the property transaction is completed.
What Documents Will I Need to Apply for a Bad Credit Mortgage?
The typical documents remain the same:
- Proof of ID and address.
- Bank statements and payslips.
- Proof of your deposit funds, including where it's been sourced.
- Property details.
- Estate agent and solicitor's contact details.
Lenders will also need to see credit reports, and if you have a bad credit history, it's essential to have these ready and be upfront about any issues on your application.
How do Mortgage Lenders Assess the Application Paperwork?
Lenders need to look at lots of factors before deciding whether to offer a mortgage - and your credit file is just one.
- Income assessments are used to calculate the maximum the lender can offer. For self-employed applicants or contractors, you will usually need three years of trading accounts. However, lenders are all different, and so a broker can recommend the lender whose policies align with your income structure and trading history.
- Outgoings are also reviewed, with debt repayments deducted from your income to calculate whether you would be able to afford the mortgage costs comfortably.
- Your age is a factor for some lenders, who place age caps on the maximum age you can be at the point of application or the end of the mortgage term.
- The property is analyses to check that it offers suitable security against the size of the mortgage loan you are applying for. Non-standard properties or unusual homes are less saleable in a repossession scenario, and therefore a specialist lender may be required.
- Loan to Value refers to the mortgage application amount against the value of the property. The higher the LTV, the riskier the loan - so, for example, if you want to buy a property worth £200,000 and need a £100,000 mortgage, the LTV is only 50% and is easier to achieve competitive interest rates against.
- Deposit source matters since lenders have rules about where they can accept a deposit. Savings and gifts from immediate family members are the most commonly accepted sources.
- Credit history is always assessed for any mortgage application. Most high street banks will automatically reject any applicant with any bad credit. In contrast, others will be far more pragmatic and may ask to clarify the circumstances that led to the issues.
Is Insurance Mandatory on a Bad Credit Mortgage Application?
You will need buildings insurance to be approved for a mortgage. Other insurances, such as contents cover, life insurance and income protection, are available at your discretion.
Having robust insurances can reduce the risk associated with your mortgage application, so it's well worth considering. Revolution can advise on the most competitive policies on any insurance you require alongside managing your mortgage application.
Can I Get a Bad Credit Mortgage if I Want to Buy a Rental Property or am Self-Employed?
In most cases, yes, you can. Some lenders will have a generic minimum income level for rental properties but will be more concerned with the rental income from the property than with your personal finances.
Self-employed applicants are usually eligible for bad credit mortgages, just as any employed applicant. Still, if you have less than the standard three years of trading accounts, you will need help from a broker to identify which lenders will consider applications with less business history.
When is the Right Time to Apply for an Adverse Credit Mortgage?
We'd recommend applying for an agreement in principle as early on in the process as possible. That means you can be confident about what you can borrow and won't end up applying for a mortgage that will be deemed unaffordable.
Can I Apply for a Mortgage with any Types of Credit History?
It very much depends on when your credit problems happened, why, and if they have since been repaid. As with every mortgage application, success relies on applying to the right lender who has flexible terms that permit them to consider lending to you.
Specialist bad credit lenders can also offer a mortgage even if you have more severe credit reports such as repossessions and bankruptcies.
If you have minor credit issues such as an overdraft, it is unlikely to have a significant impact on your mortgage application.
Expert Advice on Bad Credit Mortgage Applications
Should you need help finding a mortgage or any home loan in a bad credit situation, an experienced whole-of-market broker should be your first port of call.
Give Revolution Brokers a ring on 0330 304 3040, or email us at [email protected] to arrange a good time to talk.
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