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Bad credit mortgage – A beginner’s guide
If you need a mortgage and have bad credit, the chances are you are a little unsure about where to go for the best advice, the information below should put you on the right path.
Mortgage’s in general can be a little confusing, add the term bad credit and things can seem really confusing - borrowers with bad credit, adverse credit or poor credit apply for what is publicly termed as a ‘bad credit’ or ‘adverse credit’ mortgage, we hope to shed some light on how they differ from a standard mortgage and show the best way to find the right deal for you.
Bad Credit Mortgage terminology
To start with the terminology used may differ depending on who you speak to, you may have heard them referred to as bad credit mortgages, adverse credit mortgages and poor credit mortgages but they may also be termed as impaired credit mortgages, sub prime mortgages and none conforming mortgages (a prime and conforming mortgage being that offered by a high street lender) – regardless of the term used to describe them, they all refer to the same thing which is a mortgage product which will allow a borrower with past or current credit problems apply for a mortgage or remortgage.
Apply for a bad credit mortgage
The actual process of applying for a bad credit mortgage if the borrower has bad credit is not too dissimilar to a normal high street mortgage application, the borrower applies for a decision in principal, if that gets approved an application form is submitted with supporting documents, the application is underwritten and a mortgage offer is produced which can then proceed to completion. The only difference the borrower may find is that the interest rate will more than likely be slightly higher - reflecting the additional risk to the lender and the additional work involved in getting the application to completion, the majority of additional work involved with adverse credit mortgage applications will rarely be seen by the borrower as this will be carried out by the mortgage broker and lender.
There are many lenders that specialise in bad credit and adverse credit mortgages – in the mortgage industry they are referred to as sub prime or none conforming lenders and tend only to deal with mortgage brokers, it is unlikely they will deal with the borrower directly which is why so many people wanting an adverse credit mortgage will have to use a mortgage broker, which is no bad thing when you consider a mortgage is usually the largest investment people will make in their lifetime and getting professional, sound advice is obviously important.
Do Specialist mortgage brokers tend to get the best results for bad credit mortgage applications?
Specialist mortgage brokers who deal solely in the sub prime or none conforming mortgage market do tend to get the best results as they deal in this area all the time, a number of brokers will say they deal in adverse credit from time to time and claim to be familiar with the market but from our experience speaking to clients, its better to use a broker who specialises in bad credit rather than one that dabbles, the reason being there are literally thousands of products available, many have only very slight differences and getting the correct or best deal is sometimes a matter of broker experience within the adverse credit mortgage market.
Bad Credit Mortgage - Is there anything I should do when applying?
If you want to apply for an adverse credit mortgage (or any mortgage for that matter) the one thing you should always do is be honest with your mortgage broker, whether you use a specialist broker or not – if you are not open and honest with them about your situation it is more than likely they will be unable to source you the best deal, if they know your exact needs, requirements, budget and any previous or current credit problems (such as defaults, CCJ’s, missed payments etc) then they can set about applying those into any deciding factors when recommending a mortgage for you.
What should I do next to get a bad credit mortgage?
If you are serious about applying for a mortgage and you have impaired credit your first port of call should be a mortgage broker, we would always suggest speaking to a specialist broker as they will undoubtedly have more experience in the sub prime mortgage market and should be able to offer a more complete service. Due to the constant changes within the mortgage market we would recommend speaking to a professional as soon as you are able.
