Poor credit history makes landing your dream property seem much more difficult. Securing a loan, establishing a reasonable payment schedule and rate of interest all become a little trickier when your credit history is in poor shape.
Bad credit doesn’t preclude you from buying a home, though. The process is slightly more complicated, but it’s far from impossible.
Compare house prices
First and foremost, you need to find a property that’s within and preferably below your budget. Mortgage rates can be less favourable for those with bad credit, so it’s more important than ever to scout out the property market. Fortunately, a range of property search tools like Linden Homes allows you to input your desired postcode and set minimum/maximum price limits.
From there, it’s as simple as scrolling through the properties on offer and finding those most suited to your budget. Property searches allow you to customise your search for the number of bedrooms, whether you want a garden, and many other variables. This type of deep filter comparison helps you to understand exactly what you want from your new home, what you can afford and where the best bargains lie.
See what help is available
Even with poor credit, there is help available, especially if you’re a first-time buyer. Help to buy loans are one option. These loans pay a certain percentage of your deposit (up to 40% in some cases) which reduces the financial burden quite dramatically. Help to buy might not be offered for those with an extremely poor credit rating, but if your history is somewhere in the middle, you could still secure a loan. These are government backed and often come with lengthy interest free periods, so there’s no harm in trying to secure one.
Elsewhere, certain developers offer incentives on new build properties. These can sometimes be quite impressive (some developers will cover your stamp duty), so it’s always worth considering a brand new property. Incentives like these aren’t usually enough to warrant you buying a certain home in isolation, but they can definitely help if you’ve already made a decision.
Compare and negotiate
As with house prices, comparison is your friend. There are plenty of loan comparison calculators available online. They’ll ask you to input how much you want to borrow along with your repayment time frame and then show you potential lenders. Individuals with bad credit should be prepared for higher interest rates and a generally smaller pool of lenders, but you increase your chances of finding a good rate by using a comparison site.
The process doesn’t end there, though. Once you’ve found a lender it’s time to haggle. You’ll be asked to provide bank statements to show that you’re a viable proposition, so keep your monthly spending under control, set a budget and try to end the month in surplus. If your bank account and financial transactions look stable, then you can try to negotiate a lower interest rate with the lender. Don’t be afraid to float examples from the comparison site. If you still aren’t satisfied, walk away. Bad credit isn’t a reason to jump at the first mortgage offer regardless of its value.