Getting on the property ladder isn’t straightforward. Today, people are moving towards renting and moving out of their parents’ home later to ensure they can afford the cost. That’s because there’s been a drop in first-time buyers, with the figure at 1.5% of all household purchases. Before the turn of the millennium, it was 2.1%, and that’s a significant shift.
So, imagine trying to buy a house without good credit. It doesn’t sound as if it’s doable, and you might have the first-hand experience if your previous spending habits are wreaking havoc currently. But, no one should have to rent an apartment for the rest of their lives or live with their parents. It is going to be hard, but it is possible if you search for the money in the right places and change your attitude to money.
If you want to learn more, you can by reading the advice underneath. Hopefully, it helps to secure you the mortgage you’ve dreamed of regardless of your credit rating.
Organize Your Debt
How much you owe and haven’t paid back is a significant factor when it comes to your credit. It’s almost impossible to get a mortgage if you have the type of arrears that creditors hate. An example of this would be a repossession. The fact the bank had to claim your house as collateral is a black mark on your report that will stay for a long time.
Thankfully, there are levels to the severity of debt, and some are better than others. Having no credit isn’t great, yet you can still find a lender if it’s happened recently. And, the rates aren’t particularly high. You might need to pay up to 10% regarding your deposit, but that isn’t a massive deal.
Aside from little to no credit history, you will want to organize your arrears into two more categories: “low credit score” and “late payment.” These are the lowest tiers in terms of the impact of your debt.
Top-Up Your Deposit
Lenders, especially banks, speak the language of money. Therefore, you can boost your chances of securing a favorable loan if you can find a cash injection. Although it seems impossible, there are avenues for people with bad credit. A fantastic option is a guarantor loan with bad credit that uses someone else’s rating as collateral. You take out the loan, yet they act as a backup in case you default.
Of course, an easier option is to borrow the money directly and save the hassle of late fees and high-interest rates. Still, it’s sometimes better to apply for a loan to top-up your budget for various reasons, the main one being your independence. Plus, it helps your credit rating by proving you are trustworthy. The size of your deposit will depend on the lender as they aren’t all the same.
A general figure you can use as a reference point is 30% of the property’s value. It’s steep, but it’s something you must do to own a home with bad credit.
Don’t Put Your Name On The Application
Any reference to you on the mortgage application will make it harder to be accepted. The excellent news is that you don’t have to sign your name if you and your partner are buying together. Instead, you can use their good credit to get a mortgage that isn’t a rip-off.
Of course, there are drawbacks with this option, the main one being that you aren’t liable for the payments if you split. So, it might be necessary to go to a lawyer and draw up a contract outlining your commitment to the mortgage in case the worse happens. Alternatively, you can divide the responsibility into sections. For instance, you commit to paying X amount per month and save up the money for the insurance and deposit.
As long as you are both comfortable with the arrangement, you should be able to swerve your poor credit rating.
It’s not what you want to hear, but waiting an extra year or eighteen months might be the difference between your application being accepted or rejected. The reason is that debts that impact your score don’t last forever. Some, such as bankruptcy, will stay for a while, whereas others will disappear in three to five years.
Even if you declare bankruptcy, it can help you erase unsecured debts and make your situation less bleak. And, if Chapter 13 doesn’t budge, at least the time you waited helped to save deposit money.
Just remember that getting on the ladder with bad credit takes time. It won’t happen overnight.