If you have a poor credit rating and are looking for a home loan, you have limited options, but that doesn’t mean that it will be impossible to get a loan, it just means that you will need to shop around a bit more.
Most of the big, well-known lenders only want to loan to people with good credit ratings. They compete on the interest rate front, and this means that they need to be confident that the loans will get paid back, because the process of repossessing a property is a long and expensive one.
Mortgage lenders will look at how long people have been employed, how much credit they have, the payment history, and other things to try to figure out whether someone can actually pay back the credit that they have taken out. If you have a poor history of paying back your consumer debt, they’re going to be less likely to allow you to borrow, and as such they will want to charge higher interest rates.
Bad credit won’t completely disqualify you from taking out a mortgage, but don’t expect to get the best home loan available. You will need to put down a bigger deposit than someone who has a good credit rating, and you will need to be able to demonstrate that the repayment amounts are an acceptable percentage of your income. It’s hard to get a self-certified mortgage even with a good credit rating these days, but with a poor credit rating you will need to be able to provide proof of your income, so that they know that you have a reasonable chance of paying back the loan.
If you have been bankrupt recently, then you’re probably going to find it hard to get a loan, but remember that mortgages are secured on the property, and this means that there will likely be some lenders that will entertain the idea, because they know that they have something that they can get back if you default.
You might find that getting a guarantor will help you, but this person would be someone who would have to take on financial responsibility if you failed to come through on your obligations, and that’s a lot to ask of someone, unless they are a close family member and they are confident that you are better at handling your financial obligations now than you once were.
Often, the best option is to try to repair your credit rating. Look for ways to save money. Pay off outstanding debts. Clear court judgements, and try not to miss any more payments in the near future. Pay off your credit cards. Do everything that you can to clean up your finances. It takes years for bad credit marks to drop off your profile, but some lenders pay more attention to your recent history than your current issues, and this means that you can often repair your credit rating enough to get a better mortgage in just a couple of years.
