Can Those with Bad Credit Ever Become Homeowners?
It’s becoming harder than ever to get on the property ladder, and with mortgage regulations becoming so strict, if you have any bad credit you may worry that you’ll never be able to own your own home. However, with a bit of planning and organisation, even those who are currently in debt could well become homeowners in future. Here are a few hints for those who have bad credit, but still want to get on the property ladder in the future.
Pay off as much debt as possible
Mortgage lenders no longer just look at your income when you apply for their products. They also look at how much your outgoings are, and if you’re paying off massive credit card bills or loans, then they’ll worry about your ability to stay on top of things financially. Try to pay off things like credit cards as quickly as you can, and see if you can make overpayments on loans so you can pay them off faster.
Make your monthly payments on time
Past bad credit doesn’t have to exclude you from a mortgage forever, but lenders will want to see that you have learned from your mistakes. If you’re planning to buy in the next couple of years, then it’s important not to miss payments on any secured or unsecured credit in this time. Although bad credit such as missed payments, CCJs, and defaults will stay on your file for up to six years, building up a couple of years of good credit will mean more lenders are available to you.
Save a big deposit
The bigger deposit you have to buy a home, the more likely you are to be accepted for a mortgage. Lenders will sometimes look more favourably on applications where you’ve saved your own deposit rather than being helped by parents or using an inheritance, so try to put some money aside each month.
Look for a mortgage broker
Applying for a mortgage is difficult for even those with excellent credit, and if you have even the smallest blemish on your credit report, it’s worth going to a mortgage broker. They’ll have access to bad credit mortgages and other specialist products, which makes it easier for those who’ve had financial difficulties in the past to get accepted. Using a broker means that you don’t have to make endless applications, and this makes any mortgage application much easier.
Try to keep our life stable
Some things that could make your overall credit rating worse include moving around a lot, moving jobs too often, or moving out of the country for a period. If you’re aiming to buy in a couple of years, then try not to make any big life changes during that time. The more stable your history, the most likely a lender will look at you favourably.
While bad credit can make it more difficult to obtain a mortgage, it’s certainly not impossible. The more time that passes between a period of bad credit and applying for a mortgage, the more likely you are to be accepted. Set yourself a goal, start saving, and you might be surprised how many options will be open in future.