Chances are, if you’re anything like me and living in rented (or at home with your parents) you’re dreaming about the day you can buy your own home. Living with your parents can be a little stifling when you reach adulthood, and renting is essentially just throwing away your money. When I think of how much I have spent on rental over the years it’s painful (I worked it out and it’s over £20,000!)
However, with the financial state of the world at the moment and so many of us having bad credit, when it comes to getting a mortgage you may find you run into trouble. If you don’t have a good history of keeping your finances in order the bank can refuse to loan you the money as they won’t want to risk such a large amount of somebody with a less than ideal past.
But, never fear, this doesn’t mean you will never be able to move home; there are ways in which you can secure a mortgage with a less than perfect credit rating.
Get Your Credit Score
First thing’s first – find out your credit score. This will enable you to work out where you stand. There are a few websites where you can do this, but two of the best ones in the UK (I’ve found) are www.experian.co.uk and www.noddle.co.uk. There is a free sign-up and trial period which will get you started, after which you’ll have to pay monthly, but they’re worth having if you’re monitoring your position over time.
Contact The Bank
If you’re looking to borrow money from a bank, talking to them is going to be key. Your credit rating might not be perfect, but it might not be the end of the world. If you speak to your bank’s financial advisor they’ll be able to tell you whether you meet their criteria and whether they’ll be happy to give you a mortgage. The answer might not be yes straight away, but knowing where you stand will allow you to work out your plan to move forward with.
Keep A Steady Flow Of Income
It goes without saying that a key part of being given a mortgage is that the bank can see you’re good to pay it back each month, therefore you need a regular income. This will reassure them that you are capable of making the repayments and will definitely work in your favour.
Look At Your Employment Status
Although those who are self-employed can be earning just as much, if not more, than those of us working for other people, quite often lenders see self-employment as a risk as there is always the risk that work could disappear and your income could disappear too. With full employment for another business, if you’re going to be made redundant there are procedures that need to be adhered to, and there are hoops to jump through once a employee has passed their trial period. Self-employment for a lot of us is the dream, but bear in mind it could affect the amount of choice you have when it comes to lenders and deals.
Eliminate Your Debt
Debt is a major factor when looking to secure a mortgage, so work hard to clear it if you can. In basic terms, the lower your debt, the higher your chances of getting a mortgage. Of course, lowering your debt is not easy – I’ve been there, done that and couldn’t afford to buy the t-shirt because I was skint. But, getting yourself out of debt is worth the heartache in the long run. When paying debts off, always focus on the ones that are charging you interest first. If you don’t pay interest on any of your accounts, then work on your biggest debt first – make sure you’re paying the minimum required payment on all of the others and as much as possible off of the biggest one. Set up a Direct Debit for the minimum amount on each of the cards too, to make sure you don’t miss any payment deadlines.
Lower Your Debt To Income Ratio
If you find it hard to eliminate your debt, try and get it down to being less than your income. If your income is higher than your debt, lenders are more welcoming because they can see you earn enough money each month to meet the required payments. Debt is important, but income is essential. Alternatively, consider raising your monthly income by taking on more overtime or getting a second job.
Find A Flexible Lender
If all else fails, don’t panic too much as you may still be able to find a lender who isn’t too bothered about your credit rating. But be aware – there are lots of cowboys and loan sharks out there so you need to make sure you’re dealing with a reputable company and not one who is going to leave you in trouble. To avoid the dangerous lenders, head to badcreditmortgagebroker.co.uk, a company with a very good reputation when it comes to delivering to their clients and a good track record makes them the perfect partner when you need advice and guidance. You aren’t obligated to use their services as there are lots of other options, but this is one company you know you can trust.
Find A Co-Signer
A co-signer is like a guarantor – somebody who signs their name to say that they will cover the mortgage repayments if, for some reason, you are not able to. This acts as a safety blanket for lenders who might be a little anxious about loaning you the money you need. Obviously this is a big commitment for someone to make, so it’s not something you’ll find a stranger doing for you, but close friends and family may well be happy to do this in order to help you get your own home. One thing to remember is that this person must have a stellar credit rating themselves, otherwise you’re back to square one. If they’re good for this and happy to sign, the bank will be more likely to consider you – it’s not guaranteed, but it’s a helping hand for sure.
Accept A Lesser Deal
The deal you are looking for may not be possible because of your credit score but that doesn’t knock the chance of having a mortgage on the head totally; you’re just not eligible for that one. At this point you may need to think about compromising, perhaps by accepting a deal with a higher interest rate. However, be sure you ask lots of questions and find out all the pros and cons, because it’s a hefty commitment you’re making and you need to be sure you’re making the right choice.
Talk A Good Game
Depending on the lender, they may be willing to offer you a deal if you can explain why your finances are in a mess. Everyone that can show they have a legitimate reason they are in debt is more likely to get a mortgage. Lenders are looking for you to show them that it is a fluke, and it won’t happen again. If there isn’t a pattern with regards to your finances, you may be able to charm your way to a loan. Never underestimate the power of human interaction because it could be the difference between moving and staying put.
Regardless of your finances, there is always a way to get a loan. And, as you can see from the above, they are all legitimate and above board. It takes a lot of hard work, heartache and graft, but it is not impossible, so never give up.
* In Association with Brand *