Find Your Perfect Mortgage with Bad Credit | First Time Buyer Options

Worried that poor credit could be hindering your dream of owning your first home?
To assist you in comprehending how bad credit may affect you as a potential first-time homeowner, the skilled mortgage consultants at Montgomery Financial are prepared to address common inquiries regarding mortgages for first-time buyers with bad credit in the UK.

What is ‘bad credit’?

Poor credit typically denotes an individual with a track record of not repaying loans, missing bill payments, or accumulating significant debt. You might also have poor credit if you lack any loan repayment or billing history, such as if you’ve recently turned 18 or have recently moved to the UK. This is because lenders have no information to evaluate your payment reliability.
Since credit scoring is optional, most, although not all, individuals in the UK have a credit score. A lower credit score suggests you may have poor credit. You can check your credit score in the UK through online credit report services like Check My File, which provides access to both your Credit Report and Credit Score.

Why is it harder to get a mortgage with bad credit?

If you have never taken out a loan or used any form of credit arrangement before, you may not be aware of how having a poor credit score can affect your ability to secure a mortgage.
Bad credit often suggests that a person might be heavily in debt, pays their bills late (or not at all), or has difficulties repaying loans. As a result, mortgage lenders tend to view these individuals as higher risks.
In many instances, lenders will refrain from offering deals to those who appear unlikely to repay the loan in order to protect both the company and the individual.
Therefore, mortgage lenders will review your credit report to assess your financial history before making a mortgage offer.

Can I get a mortgage if my credit score is very poor?

Having trouble securing a mortgage as a first-time buyer with bad credit? It’s possible to get a mortgage even if your credit score isn’t great, as some lenders offer specific deals tailored for first-time buyers with poor credit.
However, if your credit history contains more significant issues such as CCJs (County Court Judgments) or IVAs (Individual Voluntary Arrangements), you are more likely to be declined for a mortgage.
If you do receive a mortgage offer despite a bad credit history, keep in mind that these deals may include higher interest rates or require a larger down payment.

What is the lowest credit score for a first-time home buyer?

Fortunately, there’s no specific credit score requirement to qualify for a mortgage as a first-time homebuyer. Typically, lenders are more concerned with your monthly earnings and expenses, the amount of your down payment, and your realistic ability to make monthly mortgage payments.

How to increase chances of getting a mortgage as a first-time buyer with bad credit

Eager to secure a first-time homebuyer mortgage despite having poor credit?
You’re not the only one, and luckily, there are numerous methods to boost your likelihood of mortgage approval.

These methods include:

Improving your credit score.

For those aiming to get a first-time buyer mortgage with a bad credit history, consulting a credit reference agency can be highly beneficial. They offer tailored advice based on your specific financial background, assisting you in enhancing your credit history to qualify for a more favourable mortgage agreement.

Reflect on the amount of your deposit.

In simple terms, the larger your deposit, the less you will need to borrow from a lender. This typically makes you appear to be a lower risk to lenders, potentially allowing you to obtain a more favourable mortgage offer than if you had a smaller deposit.

Consult with a dependable mortgage advisor.

Engaging with a lender through a mortgage advisor, such as Montgomery Financial, can enable you to access exclusive deals from certain lenders that may not be available directly to you.
In addition, we can assist you in accurately completing paperwork, thereby improving your chances of securing a mortgage.

Take into account the amount of your down payment.

Simply put, the larger your down payment, the less you will need to borrow from a lender. This can make you appear as a lower-risk borrower, potentially enabling you to secure a more favourable mortgage offer than if you had a smaller down payment.

Consult a reputable mortgage advisor.

Working with a mortgage advisor, such as Montgomery Financial, can give you access to special deals from certain lenders that you might not find on your own.

Additionally, we can assist you in accurately completing paperwork, thereby improving your chances of obtaining a mortgage.

Can I get a mortgage as a first time buyer if I have bad credit?

Absolutely, you can still secure a mortgage as a first-time buyer even if your credit is less than perfect. However, it tends to be more challenging compared to someone with a stronger credit profile. Lenders often view you as a higher risk, and some might outright decline your application if you have a poor credit record.
Addressing credit issues head-on is crucial. The initial step in doing so is to obtain an accurate, up-to-date, and comprehensive review of your credit history and score.
Even if conventional banks or major lenders have rejected your mortgage application, there are specialized lenders who may be willing to work with you. To connect with these lenders, you’ll typically need the assistance of a mortgage broker. A specialist broker, like us, can assess your situation and identify the best possible options tailored for you.

I’m a first time buyer with a bankruptcy, can I get a mortgage?

Yes, it’s possible to secure a mortgage as a first-time buyer after declaring bankruptcy, but the process can be more challenging. Major banks generally decline mortgage applications from individuals with a bankruptcy history. Nevertheless, there are specialised lenders willing to consider such applications, so you do have alternatives.
To navigate this, you should collaborate with a specialized mortgage broker who comprehends your specific circumstances and has strong connections with niche lenders. These specialised lenders typically do not deal directly with borrowers and offer their mortgage products exclusively through these brokers.

I’m a first time buyer with a CCJ, can I get a mortgage?

Absolutely, you can obtain a mortgage as a first-time buyer even if you have a County Court Judgment (CCJ). However, you will need a specialized mortgage broker who can guide you through your options and connect you with an appropriate lender.
Typically, as long as your CCJ is resolved — meaning it has been paid off in full — lenders are generally willing to offer you a mortgage. There are even some lending institutions that might consider you if the CCJ is only partially repaid.
Your approval will largely depend on several factors: the age of the CCJ, the total number of CCJs on your credit report, the amount of the CCJ, whether it has been settled, the size of your down payment, and the presence of any other adverse credit issues.

I’m a first time buyer with defaults, can I get a mortgage?

Yes, it’s possible to obtain a mortgage as a first-time buyer even if you have defaults, although the process may be more intricate compared to someone with a spotless credit history. There are specialized lenders open to providing you with a loan, provided that you meet their particular requirements.
Moreover, various lenders assess different types of defaults in distinct ways. For instance, a default on your mobile phone contract is generally viewed as less severe than a default on a secured loan.
If you have other additional credit issues, your mortgage application process may become even more convoluted. It’s crucial to review your credit history to understand what it entails before applying for a mortgage. Consulting with a specialized mortgage broker can also be beneficial, as they can offer guidance on your available options.

I’m a first time buyer with an IVA, can I get a mortgage?

Of course, obtaining a mortgage as a first-time buyer with an IVA is possible, although it is generally more challenging. Most traditional lenders are wary of IVAs, as they suggest you have faced financial difficulties in the past. Consequently, securing a mortgage becomes harder because many conventional lenders may not be willing to approve your application.
Fortunately, there are specialist lenders who cater specifically to individuals with an IVA. These lenders focus on your current financial situation and ability to make payments, rather than outright rejecting your application based on your IVA history.
As a first-time purchaser with an IVA on your credit record, it is advisable to consult with a specialist mortgage broker who is experienced in handling cases involving bad credit. They will be familiar with the lenders open to considering your application and can guide you towards the most competitive mortgage rates available.

I’m a first time buyer with payday loans, can I get a mortgage?

You are eligible for a first-time buyer mortgage after taking a payday loan, but it may impact how many lenders are willing to consider you, especially if you have other blemishes on your credit report.
Lenders typically view payday loans unfavourably because they suggest past financial difficulties, which could indicate potential problems in keeping up with mortgage payments.
However, being turned down by some mainstream lenders doesn’t mean all will reject you. Some specialist lenders are more inclined to evaluate your unique circumstances rather than dismiss you outright. They often consider the time elapsed since your last payday loan; if it was taken out recently, they may be less likely to approve you, but if it was several years ago, this could be beneficial for you.

How much will I need to save to buy my first home?

When purchasing your first home, you’ll be required to provide some initial funds, called a deposit, which contributes toward the total price of the property. This deposit can range in size but is usually between 5-20% of the home’s value. For instance, if you find a house priced at £200,000, you would need to save at least £10,000 for the deposit.
Different lenders have varying deposit requirements. If you have a poor credit history, you might be required to put down a larger deposit to mitigate the risk you represent. However, this is not always the case, and you will likely need a mortgage broker to help you navigate and secure the best deal.