Finding Mortgage Offers for First-Time Buyers With Bad Credit
The tricky part when looking for a mortgage for bad credit first-time buyer applicants is that it's almost impossible to know which lenders have a flexible policy and which will reject your application outright.
Applying to unsuitable lenders can cause no end of problems. If they run hard credit searches, these appear on your credit file and further exacerbate the situation.
There are lots of things you can do to make the mortgage for bad credit first-time buyer application process easier:
- Check your credit report. If you know you've had a CCJ or late payments, it helps to get in front of it and work out exactly what's on your credit file. You can query any errors and ensure all the information is correct.
- Improve your credit rating. Simple steps like registering on the electoral roll immediately boost your credit score toward a mortgage for bad credit first-time buyer application. You can also pay off smaller debts and close unused credit card accounts.
- Save up as large a deposit as you can. The higher the deposit, the lower the lender's risk, and the more likely they will accept your application even if you have issues with your credit file.
The best way to ensure you're getting the top mortgage offers available on any mortgage for bad credit first-time buyer is to work with a whole-of-market independent broker, like the experienced team at Revolution.
We can advise on all aspects of your mortgage for bad credit first-time buyer circumstances, including things like:
- Which lenders will accept your available deposit level.
- Where you'll find better rates for first-time buyers.
- Those mortgage providers with flexible bad credit policies.
- How you can get support from a government first-time buyer scheme.
Give us a call or email the team at [email protected] if you'd like to run through any of these factors.
What is the Average Mortgage Rate on a Mortgage for Bad Credit First-Time Buyer?
Mortgage rates vary considerably on a mortgage for bad credit first-time buyer, so it's tough to give an average rate.
This element also depends on the type of mortgage for bad credit first-time buyer you take out:
- A fixed-rate mortgage for bad credit first-time buyer offers a static interest charge for the first two, three or five years. You can get fixed deals for up to 10 years, but they’re less common. When the agreement ends, it's usually advisable to remortgage, as you'll revert onto the lender's Standard Variable Rate, which is generally much higher.
- Tracker mortgages charge interest based on the Bank of England base rate, so your mortgage payments will go up and down each time the base rate changes.
- Discounted variable mortgages usually base the charge on their SVR but capped or discounted for a fixed period. Your mortgage payments will go up and down, but they'll have a maximum.
You might also consider a guarantor mortgage if you're struggling to find a home loan as a first-time buyer with bad credit or have been turned down for another mortgage for bad credit first-time buyer.
Guarantors act as a security blanket and make a formal agreement to take over responsibility for the loan if you don't keep up with the repayments on a mortgage for bad credit first-time buyer.
Another mortgage for bad credit first-time buyer option is an offset mortgage, whereby your mortgage account is linked to your savings or current account. If you have savings, you only pay interest on the difference between what you own and owe to reduce your monthly outgoings.
Are There 95 Percent Mortgages for First-Time Buyers With Low Credit Scores?
A 5% deposit is usually the absolute minimum mortgage deposit you'll need - and if you can offer more, it'll put you in a much better position to find reasonable rates as a mortgage for bad credit first-time buyer applicant.
However, you are eligible for several schemes as a first-time buyer that might make it easier to secure a mortgage for bad credit first-time buyer even if you can only offer a 5% deposit.
Help to Buy offers an equity loan of 20% of the property price, provided you've got a 5% deposit to contribute.
That means you can offer the lender a 25% deposit, making your application much less risky and a better prospect for acceptance.
There are also options from Shared Ownership to mortgage guarantee schemes, so it is possible to get a first-time buyer a bad credit mortgage, or a specialist mortgage for bad credit first-time buyer provided you've got the right help in working out which initiative is best for you.
What Arrangement Fees Will I Pay on 95 Percent Mortgages for First-Time Buyers?
It would be best if you also considered the fees chargeable for setting up your first-time buyer mortgage along with interest rates if you need a mortgage for bad credit first-time buyer with a 5% deposit.
Any extra work required to evaluate your credit report or look further into your financial stability before offering a mortgage for bad credit first-time buyer can make it more expensive. A lender may levy additional fees or be reluctant to waive arrangement costs if they've had to work harder to approve the application.
Fees associated with a 95% mortgage for bad credit first-time buyer applicants include:
- Mortgage fees - arrangement costs or application charges
- Property fees - searches on the title deeds and valuations
- Conveyancing fees - the legal costs to have a solicitor or conveyancer draw up the paperwork and register your purchase with the appropriate bodies
- Stamp duty - although you won't usually have to pay this if you're a first-time buyer depending on how much the property costs
Other expenses linked with a mortgage for bad credit first-time buyer include insurance since a mortgage lender will often require proof of buildings insurance cover before finalising the mortgage offer.
Can I Get the Average Mortgage Rate for First-Time Buyers if I Have Bad Credit?
Any mortgage applicant with bad credit isn't likely to find that their mortgage rates are as reasonable as a person with a clean credit record, and a mortgage for bad credit first-time buyer applicants is inevitably a little more expensive.
However, that doesn't mean you should accept high charges and unviable interest rates to move forward with your preferred mortgage for bad credit first-time buyers.
As we've explored, a larger deposit will improve the rates you're offered. This option is one of the most common ways to drive down your mortgage costs and offset the risk associated with a bad credit history.
You can borrow towards the deposit for your first home from family members. Therefore, if you're struggling to save enough to buy a home, you can top-up your savings in this way.
It's well worth checking the options with the Revolution team, as there are several acceptable ways to boost your deposit value, although not all lenders will accept all deposit sources.
There may also be tax implications with gifted deposits, so give us a call if you're considering this option to achieve a mortgage for bad credit first-time buyer, and we'll explain the pros and cons.
Help Finding a Mortgage for Bad Credit First-Time Buyer Applicants
Revolution Brokers is always on hand to help if you need to find a first-time buyer mortgage lender but are worried about your eligibility due to bad credit issues.
You can visit our handy calculators as a first step to get a rough idea about how much you could borrow based on your annual income. However, please note that calculators use approximations and averages, so they'll never provide a fully detailed answer.
It's vital you can afford the repayments on a mortgage for bad credit first-time buyer, particularly if you've run into credit problems in the past.
Therefore, it may be that we recommend looking at ways to reduce your mortgage costs, such as:
- Applying to a lender with lower interest charges.
- Extending the loan term, say to 30 years.
- Using a mortgage support scheme to reduce your expenses.
Not all mortgage lenders will offer a mortgage for bad credit first-time buyer applicants, so don't worry if one bank has turned you down. Likely, they cannot lend to any applicant with a specific credit issue, so it's usually possible to find an alternative lender who will be happy to proceed.
Many niche lenders offer broker-exclusives, so there's a good chance that there is a mortgage out there with much better rates than you'll find in an online rates table.
Please contact the team at 0330 304 3040 or email us at [email protected] for more information about any of the products or mortgages discussed in this content.
Our friendly teams will have a chat to understand your requirements and make tailored recommendations to help you secure the mortgage for bad credit first-time buyer applicants you need.
