Buying a house is difficult. Even after you have raised thousands of pounds for a deposit, you then have to convince a bank or mortgage company to lend you that multiple times to cover the rest of the purchase price.
Even people with perfect credit histories can be tripped up when lenders review your bank statements to make sure they’re affordable and looking good. everything they consider to be a “red flag” .
We’ve also heard of people being turned down because they’ve never been in debt – so despite their careful budgeting keeping them out of the red, the lender had no evidence of how they would react when they lent money. money.
But that doesn’t mean people with less than perfect credit histories should give up on their dreams of owning a home.
What you need to know about mortgages
What you need to do to get a mortgage with bad credit
“Each lender’s criteria are slightly different and with over 100 lenders in the UK mortgage market it is definitely worth seeking independent advice.
“What one lender may find unacceptable, another may be happy with.”
In extreme cases, and if you need quick access to financing, it may be worth considering a “bad credit” mortgage.
Specialty lenders such as Precise Mortgages, Platform and Kensington accept irregularities in credit history, but the interest rates on their transactions will be higher.
If you are considering any of these loans, consult an independent financial advisor to determine if it is a financially viable option in the long term. You can find one near you here .
Everything you need to know about credit reports
Bad credit isn’t for life – or potentially even the rest of the week
The other thing to keep in mind is that credit scores change.
And that means if you can’t find a loan lender to offer you a mortgage now, if you act now, you can fix it.
“Most credit problems can be corrected,” Lipnicki said.
“If you haven’t already, the first step is to get your credit report and see what’s really there.
“You can go to suppliers like Caboche for a free report and others like Equifax and Experiential will offer a 30-day free trial. If the information on your credit report is false or unfair, you should dispute it with that particular company because mistakes are more common than you might think. ”
In fact, a simple wait can be enough as long as you keep paying.
“Most late or missed payments will disappear from the record after some time, but it will take longer for secured debts such as a mortgage. County Court Judgments (CCJs) and Individual Voluntary Arrangements (IVA) as well as discharged bankruptcies are more serious, but even these on time will not prevent you from getting a mortgage, ”Lipnicki said.
The secrets to climbing the housing ladder
Another point to remember is that the larger your deposit, the more options you have – which means a better chance of finding a loan to lend you.
“The larger the deposit, the more choices you will have, as lenders will perceive you as less risk. If you can save a 20% deposit, the market really grows and you get more choice and cheaper rates.” , said Lipnicki.
“Remember, however, that other costs have to be taken into account, such as transfer fees, appraisal fees as well as stamp duties.”
5 formulas to help you buy faster
As well as saving more, there is help available to increase your chances of moving up the property ladder, so it’s worth checking out.
Here are 5 of the biggest of the moment.
1. Purchase assistance
You may have seen billboards and posters promoting “Purchase assistance” – but what is it exactly?
There are two sides to this scheme – Purchase Assistance: Shared Ownership and Purchase Assistance: Equity Loan.
The actions part was launched in 2013 and is available until 2020.
It is open to first-time buyers and people who are moving house, but is limited to new homes. Under this part of the program, the buyer is only required to increase the value of the property by 5% as a deposit.
The government will then lend you up to 20% of the value of a property in the form of an “equity loan”. The remaining balance can then be supplemented with a mortgage.
What you should know:
The purchase aid covers only new construction properties with a value of less than £ 600,000
It will operate until 2020
There is no interest to pay for the first 5 years
In year 6, the interest (called “loan fees”) amounts to 1.75%
When you just sell your house, the government will take back its 20% share.
The idea with using to buy an equity loan is that, because you only borrow 75% from the mortgage lender, the rates will be cheaper than on a 95% mortgage.
But don’t assume that’s always the case. Check out our guide on First-time mortgages explained .
2. Assistance with the purchase of ISA
Confusingly, this has nothing to do with purchasing assistance programs. Instead, they’re a tax-free savings plan for those who put up a deposit.
You can start one with £ 1,000, then save £ 200 per month for a deposit and eventually earn a government bonus of 25% of the amount saved, up to a maximum of £ 3,000.
The likes of Virgin Money, Buckinghamshire, and Nationwide pay around 2% on their purchase assistance ISAs while Barclays offers 2.53%.
One caveat – you are not getting government money. Instead, it is given to your lender as part of a deposit through your lawyer when you trade contracts.
If you decide not to buy a house, you will not receive government assistance.
3. Right to buy
Renters in England, Wales and Northern Ireland who rent a house from their local council may be able to buy their house at a reduced price.
You will need to have rented for at least three years and there may be other eligibility requirements, which you will need to check with your own board.
The program is currently being extended to include tenants from housing associations in England.
For more information visit righttobuy.gov.uk.
4. Shared ownership
This is when you buy only part of a house from the town hall or a housing association and then rent the remaining part.
You will need a mortgage for your part, which can be anywhere from a quarter to three quarters of the value of the house.
You then pay rent on the remaining share and have the option to buy a larger share later. It’s a great way to take small steps on the housing ladder.
Learn more by visiting moneyadviceservice.org.uk.
5. Lifetime ISA
The new government Lifetime ISA has now launched – a program designed to give a boost to both new buyers and those saving for retirement. Eventually, it will replace the help to buy ISA.
The account offers a tax-free bonus of up to £ 1,000 per year (25% of your savings) to buy your first home or save for your retirement – but you must be 40 or under to qualify.
You can set aside up to £ 4,000 each year. The government will then increase returns by 25 pence for every £ 1 saved up to that amount at the end of each fiscal year.
If you are a first-time buyer then you can choose to use your savings as a deposit on a property worth up to £ 450,000.
But there is a problem, only one bank currently offers one as a traditional savings account , although many offer it as a stock and stock account.
While shocks and stocks often produce a better return over a few years than traditional savings, it puts you at risk of a stock market crash just when you need to cash out your money to buy a home.
Keep an eye on our page here for all updates.