Getting a Mortgage with Bad Credit: How to Get Approval from Poor Credit Mortgage Lenders

Refinancing with bad credit is undoubtedly more difficult, but it needn’t be an insurmountable obstacle. Those who have missed and made late payments on past/existing credit agreements will find that lenders will have reported this to all three major credit reference agencies (Experian, Equifax and TransUnion). This makes securing finance or remortgaging far more difficult. Getting a mortgage with bad credit can prove difficult, but there are ways to get around this problem.

Getting a Mortgage with Bad Credit

In order to get approval, it is important to establish the criteria that poor credit mortgage lenders will want to satisfy. The best way of achieving this objective is by understanding that financial institutions are seeking to protect their balance sheets by ensuring that each borrower is in a position to maintain their repayments. In the event of default, they want to be able to recover their money through mortgage repossession. This means that the level of home equity needs to be sufficient to cover the loans secured on the property.

Poor Credit Mortgage Lenders Require a Stable Employment History

The longer the applicant has been in the same job, the more likely they are to receive approval for an adverse credit mortgage deal. Those in temporary employment or who are still in their probationary period are unlikely to get their application for refinancing approved. The application will either be immediately declined or, in the best case scenario, the cost of borrowing money will be extremely high.

Income to Debt Ratio

All poor credit mortgage lenders will want to see that a potential customer has a sustainable level of debt relative to their income. The higher the borrower’s debt, the more likely they are to default on a bad credit mortgage. This is because they have less scope to pay their bills in the event of a change of personal circumstances. Those who have an income to debt ratio of less than 36% are more likely to get approval for a bad credit mortgage deal.

Required House Deposit for an Adverse Credit Mortgage

An adverse credit mortgage is far more likely if the borrower is able to provide a house deposit of 20% of greater. This is because the poor credit mortgage lender needs to be able tor recover their money should the borrower default on the arrangement.

How to Get a Bad Credit Mortgage

Whilst getting a mortgage with bad credit is undoubtedly more difficult, it is possible to increase the likelihood of approval. Those who are able to demonstrate a stable employment history, have a house deposit of upwards of 20% and an income to debt ratio of under 36% are far more likely to be approved. Don’t make too many applications for credit as each search will show on a credit report for a period of 12 months.