How to get a mortgage with bad credit, but good income

By Lisa NichollsCeMAP

Last Reviewed: 20th January 2023

Whilst the thought of having a bad credit mortgage can be unnerving for many, it is important to consider the amount of deposit you will need before you apply, otherwise, your mortgage application may be declined.

If you have adverse credit, then be prepared to put down a more substantial deposit in order to secure your mortgage.

The positive factor to take away from this is that the more money you have to put down as a deposit, the better access you will have to things like mortgage rates.

Luckily, there are plenty of specialist lenders in the mortgage market that will lend to customers with a less than perfect credit history.

Can I get a bad credit mortgage with no deposit?

Obtaining a mortgage without a deposit can prove quite difficult in normal circumstances.

In recent years, mortgage lenders have revised their lending criteria by way of protecting themselves from high-risk borrowing.

Nowadays, lenders look at many factors when considering the amount of deposit, you will need to put down.

These factors include:

  • How long ago the debt was accrued.
  • How much debt was accumulated?
  • Whether the debt has been satisfied or settled?
  • Your current income/expenditure.

If you don’t have a deposit and have bad credit, then you will find very difficult to obtain a mortgage.

How will my credit score affect the amount of deposit I will need?

The first thing lenders usually look at in any mortgage application is the prospective borrowers credit history.

This is used to determine your ability to make your monthly repayments on time and in full.  Quite often, people with bad credit are considered a risk to lenders.

However, there are providers in the market who specialise in mortgages with bad credit.

It is worth noting that if you are rejected for a mortgage, this may have a detrimental affect on your credit score, so it is recommended that you get the best advice before you apply.

What types of bad credit are considered when applying for a mortgage?

Lenders will look at your credit file and consider the following as bad credit:

Realistically, lenders aim to offset the risk to themselves when considering applicants for a bad credit mortgage.

A large deposit is seen as a positive in the application process and may open more options to you than if you had a low or zero deposit.

There are lenders in the market however that do specialise in bad credit mortgages with lower deposits, but you can expect to pay much higher interest rates for that type of mortgage.

I have a substantial deposit already. Can I still get a mortgage with bad credit?

Put quite simply, the more deposit you have, the less mortgage you will need.

Prospective customers who approach the lender with a large deposit to put down on a bad credit mortgage are seen as less risk.

This is due to the fact that you will require a smaller mortgage.

Good news for the borrower is that if you pay a larger deposit, then you will have a higher equity in your property and your mortgage will likely be more affordable.

If you have a large deposit and bad credit, make an enquiry to one of our expert advisors who can help you locate a specialist lender.

Note: Are you looking for commercial property but have a bad credit history? Bad credit commercial mortgages may be an option for you.

My partner has bad credit but mine is good. Does this affect the application?

Whether you apply for a mortgage as an individual or as part of a couple, the lender will look at the credit history/scores of all persons named on the mortgage application.

On one hand the benefits of two applicants is that two incomes will be considered, meaning that you may be eligible for a bigger mortgage but in contrast one applicants bad credit score can have a negative impact and lower the chances of your application being successful.

If your partner has bad credit you may opt to apply solely in your name if the lender allows.

That way your partner and their financial records will not be taken into consideration during the application process.

If you are applying solely it is worth noting that depending on your income, you may not be eligible for a mortgage on your own.

How can I save for a deposit for a bad credit mortgage?

First things first, it is never too early to start saving for your deposit. In fact, the sooner the better.

We have compiled a list of helpful tips that can increase your chances of obtaining a bad credit mortgage by saving for a deposit.

  1. Get an idea of the amount of deposit you will need. This will give you the goal to work towards first and foremost.
  1. Organise your finances. A great starting point when trying to save some money is taking a look at your overall current financial position in the form of a personal budget. Make note of all your monthly outgoings and set that against your income. From here you can see where you need to make cutbacks, whether it be from unnecessary spending or just simply switching utility providers to make an extra saving. You will quickly learn just how much you can afford to save towards your deposit each month.
  1. Be realistic. Make sure that you allow enough money to cover the basic cost of living e.g. food, water, heating etc before you start to make cutbacks. The length of time it takes you to save will be dependent on how much you can afford to set aside. Be realistic about this figure and don’t be tempted to cut corners on the basics.
  1. Open a savings account. Once you start saving money, you will need somewhere to store it safely. A savings account is the best option. Money can easily be transferred between current accounts and savings accounts in the form of standing orders. Depending on the type of savings account you go for, you can gain interest on the money deposited into your account. Shop around for the best interest deal so you can capitalise on your savings. There are many saving accounts available on the market, but you want to ensure you get the most out of your money so shop around using price comparison sites before settling on one.
  1. Consider a help to buy ISA. The UK government will help you by topping up your savings to put towards a deposit on a house. It can certainly give you a push up the ladder, but you need to be absolutely clear on the terms and conditions of the account before you apply.

Our experts are on hand to help you with any questions you might have surrounding deposits and bad credit mortgages. Contact one of our expert advisors today to learn more.

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