First Time Buyer Mortgage Bad Credit History
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First Time Buyer Mortgage Bad Credit History
Sam Bull explains how the mortgage process works if you are a First Time Buyer with bad credit.
Can you buy a house with bad credit as a First Time Buyer?
Yes there are many mortgage lenders who are happy to help First Time Buyers with a mortgage, even if they have issues with their credit.
Mortgage lenders all allow different levels of bad credit, depending on how long ago the issues were. We would request a copy of the First Time Buyer’s credit report, which will show the payment history on all their credit accounts in the last six years.
We can then make an appropriate mortgage recommendation with a lender that can consider that specific credit report.
Can I get a mortgage as a First Time Buyer if I have a CCJ, IVA, default, a bankruptcy or payday loans?
There are mortgage lenders who will lend to First Time Buyers in all of those scenarios – if you’ve had a payday loan, default, CCJ, IVA or bankruptcy.
Having taken a payday loan does not necessarily mean you’ve got bad credit. We would request a copy of your credit report and look at the date of the payday loan. We’ll make sure you haven’t missed any other payments in the last six years – but assuming it’s just a payday loan, that’s not going to be a problem. Plenty of mortgage lenders would be happy to lend.
With First Time Buyers who have a default or CCJ registered on their credit reports, again, we would look at the credit report, review the date and amount of the default or CCJ and whether it has been satisfied. Again, we’d be able to identify a suitable mortgage lender.
With bankruptcy and IVAs, most mortgage lenders require First Time Buyers to have been discharged for six years. However, we do have mortgage lenders who would consider lending to First Time Buyers who have been discharged from an IVA or bankruptcy for three years. That might offer a helpful solution to those clients.
Do First Time Buyers need a credit score? Can I get a mortgage if my credit score is very poor?
First Time Buyers will need to pass the mortgage lender’s credit check, and lenders will generally review the applicant’s credit report and run an internal credit score. This is based on the applicant’s deposit size, income, expenditure and payment history over the last six years.
If First Time Buyers have a very poor credit score, which is unusual, we would request a copy of the credit report to see exactly what the issues are, and then find a suitable mortgage lender based on what the report shows.
What is the best home loan for a First Time Buyer with bad credit?
We work with many mortgage lenders who are happy to lend to First Time Buyers with bad credit. It would be a normal residential mortgage. Once we’ve reviewed the applicant’s credit history, we would find the most suitable mortgage lender depending on what arrears show on the report.
There are many different mortgage lenders. It will depend on the client’s personal circumstances as to which lender we proceed with.
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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.
How much deposit will I need and how much can I borrow if I have bad credit?
First Time Buyers with bad credit will need a minimum of a 5% deposit when applying for a mortgage. The exact amount of deposit will depend on how heavy and how recent the bad credit is.
A 5% deposit would be the minimum amount, but a mortgage lender may request either a 10% or a 15% deposit depending on the details. Once we’ve reviewed the credit report, we’d be able to give advice on that.
First Time Buyers with bad credit can generally borrow up to six times their income. However, it will depend on how much they earn, what deposit they’ve got, their credit history and expenditure.
Although the maximum is up to six times income, it may only be four or 4.5 times their income. It will differ depending on the client’s circumstances.
What is the process of applying for a mortgage with bad credit as a First Time Buyer?
It’s very much the same process for First Time Buyers with bad credit as for anyone else. We carry out an initial fact find with the client and request a copy of their credit report, three pay slips and three bank statements. We’d then make a recommendation of the most suitable mortgage lender.
If the client then wants to proceed, we’d carry out a credit check to get a Mortgage in Principle. Once the applicant has had an offer accepted on a property we would then submit the full mortgage application. It’s very much the same process as for any buyer.
What steps can I take to improve my chances of getting a mortgage with bad credit as a First Time Buyer?
First of all we recommend that First Time Buyers make sure they are on the electoral register. That will help with the credit check and help the lender find your address history. Make sure you are up to date on all credit commitments and not in arrears on any borrowing.
It’s helpful for First Time Buyers to pay down any revolving credit, such as a credit card, to below 50% of the overall credit limit. We’d also advise you not to go over any agreed limits on a credit card or overdraft. It’s also important to satisfy any outstanding arrears, defaults or CCJs prior to making an application for a mortgage.
What else do we need to know about getting a First Time Buyer Mortgage with bad credit history?
First Time Buyers with bad credit can get a mortgage, but it’s not the best idea to apply direct to a bank. This would potentially lead to an unnecessary credit check and a mortgage application potentially being declined.
It’s much better to liaise with a mortgage broker who has experience in helping clients with bad credit. We can make a suitable recommendation of a specific mortgage lender to help.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.