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Mortgage Advisor & Director
Having bad credit is an added complication if you are applying for a mortgage as a first-time buyer, but it doesn’t have to be a deal-breaker. In this guide you will learn how you can still be approved for finance and what we can do to help.
Are bad credit mortgages available to first-time buyers?
Yes. Being a first-time buyer does not exclude you from qualifying for a bad credit mortgage, nor will it put you at a disadvantage compared to someone who has owned a home before.
Finding the right lender here is key as some will turn you down outright if you have credit issues, and others are less well equipped to cater for the needs of first-time buyers.
Specialist bad credit mortgage providers are well placed to make a lending decision based on the specifics surrounding your credit problems, such as how old they are and why they occurred, and many of them offer products geared towards first-time buyers.
The best way to find one of these lenders is through a specialist broker, like us.
Find out what your options are
First-time buyers seeking a bad credit mortgage have several options available, including:
- Specialist mortgage brokers: There are brokers who specialise in bad credit mortgages and they have deep working relationships with the lenders you will need for your application. This means they can secure exclusive rates through them.
- Government schemes: As a first-time buyer, you will have the option to apply through a number of government schemes including Shared Ownership and the First Homes scheme. It can be easier to get approved through one of these initiatives, even if you have poor credit.
- Family support products: If you have a family member willing to support you, it can be easier for first-time buyers to get a bad credit mortgage with specialist products such as guarantor mortgages or joint borrower, sole proprietor agreements.
If you would like to discuss these options, make an enquiry to set up a free, no-obligation chat with a broker who specialises in bad credit mortgages for first-time buyers.
Eligibility criteria
The criteria for a bad credit mortgage is no different for first-time buyers compared to borrowers who have owned a property before. You’ll find it outlined below:
Your credit situation
Whether you are approved for a first-time buyer mortgage will depend on what type of bad credit you have, how long it has been on your files and why it occurred.
The older your adverse credit is, the better. While the most severe credit problems will start to disappear from your reports by 6-7 years, your mortgage prospects will begin to improve within 2-3 years of them being registered, especially if they were minor issues to begin with.
The table below breaks down each credit problem based on its severity:
|
Minor Credit Issues |
Severe Credit Issues |
Very Severe Credit Issues |
|
County court judgements or Individual voluntary arrangements |
||
|
Multiple credit problems |
Finally, you might find that lenders are more accommodating if you have a reasonable explanation for your credit issues - such as an unexpected life event like illness or a redundancy - than if they were simply the result of financial mismanagement.
Deposit requirements
You will likely need to put down extra deposit to get a first-time buyer mortgage with bad credit, unless the adverse credit in question was a minor issue such as a missed payment.
Deposit requirements can be anywhere from 15-20% as a bare minimum, but there are fallback options for first-time buyers who are unable to save up this much.
Firstly, low deposit mortgages are available through some government schemes including the Mortgage Guarantee Scheme and Shared Ownership, and borrowers don’t necessarily need to have clean credit to qualify for a mortgage through these initiatives.
Moreover, family support mortgages such as guarantor agreements can offset the risk posed by the applicant’s credit history and can help you get approved with less deposit of your own.
Other factors
The overall strength of your application is important if you have bad credit, so we recommend speaking to a mortgage broker immediately if any of the below are true:
- You will be aged 75 or over during the mortgage term
- The property you are buying has non-standard construction
- You are self-employed with less than two years’ accounts
These are risk factors that can make mortgage approval more difficult when combined with your bad credit. Speak to a broker to find out what your options are if these apply to you.
How to get a first-time buyer mortgage with bad credit
Follow the steps below to get a first-time buyer mortgage with bad credit:
Explore every option: The stringent criteria and higher deposit requirements for bad credit mortgages can be an obstacle for first-time buyers, but government schemes and family support products can help with this, so be sure to research them all.
Optimise your credit files: This is important if you have bad credit. Download your reports for free from Checkmyfile and review them for errors and outdated information. Requesting to have these things removed can strengthen your position.
Speak to a broker: We have brokers available who specialise in both bad credit and first time buyers, and they can help you get approved - speak to one of them here.
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Can you get a first-time buyer mortgage with no credit history?
Yes. Some first-time buyers have limited or no credit history for many different reasons. Some may have been living with parents while others might be relatively young with few prior credit commitments of their own. Whatever the reason, getting a mortgage is possible.
Firstly, there are ways you can build up some credit history quickly, and they include:
- Open a bank account (if you don’t have one already)
- Join the electoral register
- Pay household bills in your name
- Take out a mobile phone contract
- Take out a credit card (pay off the balance in full and on time each month)
Secondly, there are lenders who will consider your application based on minimal credit history if there is a reasonable explanation for why you don’t have much. For example, you may have recently returned to the UK from living abroad or have always lived with parents.
Get in touch to speak to a mortgage broker who specialises in these scenarios.
Why choose Teito for your mortgage needs?
You can compare first-time buyer mortgage rates for free on Teito and access support from a broker who specialises helping those with bad credit onto the property ladder.
Here are just some of the reasons people source their mortgage on Teito:
- It takes seconds to access first-time buyer rates from across the market
- Our brokers specialise in bad credit and can access exclusive deals
- We are 5-star rated on leading review websites
- It takes minutes to secure you an agreement in principle
Ready to compare first-time buyer mortgage deals and take advantage of a free, no-obligation chat with a broker who specialises in bad credit? Get started here.
FAQs
Your options will be limited under these circumstances. There is currently one lender offering 100% LTV mortgages but the deal they have available is for borrowers with clean credit.
It is possible to get a guarantor mortgage with no deposit in the traditional sense as the security the guarantor provides can serve as the security. These are available to borrowers with bad credit, but expect the circumstances around your credit issues to be scrutinised.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.