Mortgage broker explains how people with bad credit scores can buy a home
People with low credit scores are often dismissed by high street lenders, but that doesn't have to be the end of it, according to one expert
Would-be home buyers with poor credit scores frequently believe their prospects of homeownership are virtually non-existent, as they face repeated rejections from mainstream lenders, with one refusal following another.
However, one specialist who focuses on arranging mortgages for those with 'adverse' credit insists that a low credit rating needn't destroy your aspirations of property ownership - and that an entire sector of lenders exists who are prepared to help.
Emma Jones, managing director at nationwide mortgage broker and adverse credit specialists Whenthebanksaysno.co.uk, said: "The problem is that when people think of mortgages, they still tend to think of high street banks. It's how we've been conditioned. So they apply for a mortgage with a well-known bank and get rejected, try another, get rejected again and then, more often than not, give up."
Emma explained that a broad spectrum of specialist lenders now exists, specifically designed to serve those turned away by household names on the high street: "Many applicants are really surprised when we tell them that just because a few high street banks have said no doesn't mean other specialist lenders will - and that these lenders have been set up specifically to lend to people with weaker credit scores."
Emma said those with poor credit histories, such as missed payments and more severe debt problems like County Court Judgements (CCJs), should anticipate paying higher rates than borrowers with strong credit scores.
She continued: "Yes, if you approach any lender with a poor credit score you'll almost certainly be paying a higher interest rate than if you are a 'prime' borrower taking out a mortgage through a high street bank. But if the payments are affordable and they mean you're able to get onto the property ladder, it's something to be considered, especially if the repayments are still cheaper than the equivalent money you'd be paying in rent."
Emma noted that borrowing through a specialist lender offered the additional advantage of improving one's credit rating.
She continued: "Many people with poor credit scores will take out a mortgage through a specialist lender, generally at higher rates. But after a couple of years of making their mortgage repayments, they're seen as much more reliable by 'prime' lenders, as they have that all-important track record.
"Many of the people we arrange mortgages for end up taking their next mortgage out with a high street lender. The specialist lender effectively acted as a 'bridge' to better rates available through mainstream lenders."
Emma also advised that those with poor credit ratings should endeavour to save for a larger deposit where possible: "The bigger deposit you put down, the less risk you represent to the lender and, in many cases, the cheaper the mortgage rate you'll be able to secure.
"But even if you can't get a bigger deposit together, don't give up. There are plenty of lenders out there who will take a good look at you rather than give you a straight 'no'."
