Financial challenges can make applying for a mortgage feel impossible – but with the guidance and support of Lightbulb Lending, we can make your homeownership goals a reality. Whether you are managing your finances through a Debt Management Plan, have an IVA, have no credit or even if you’ve filed for bankruptcy and wish to apply for a mortgage, you might feel that your options are limited. Lightbulb Lending are experts in helping clients with impaired credit secure a mortgage, no matter their financial history. Securing a mortgage when you have bad credit is perfectly achievable with help and guidance from Lightbulb Lending. We work with specialist lenders who understand that life events can impact your credit score. We’re here to make your dream home possible. So, can you apply for a mortgage with bad credit? This blog post has everything you need to know…
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Mortgages with Bad Credit Are Still Possible
Mortgages with a Debt Management Plan
What is a Debt Management Plan?
A debt management plan is a formal agreement with a singular body or charity, that will arrange with all your creditors to make payments based on what you can afford after prioritising essential expenses such as rent, utilities, and council tax. Although creditors might register defaults on your credit file while being on a DMP, this doesn’t mean that you can apply for and secure a mortgage.
What does a lender look for in applicants with a DMP?
Lenders assess applications with a DMP on a case-by-case basis and here at Lightbulb Lending, we understand the criteria that lenders use when assessing applications with a DMP. Some factors lenders consider when assessing applications with a DMP include:
- The consistency of payments – any missed payments can impact your mortgage application.
- Duration of the DMP – lenders prefer applicants who have been on a DMP for at least 12 months with the most recent default being at least 12 months old.
- Deposit size – a larger deposit can improve your chances of obtaining a mortgage.
- Reason for financial difficulty.
Mortgages with an IVA or Bankruptcy
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a legal agreement between you and your creditors to repay your debts at an affordable rate. While an IVA may limit your options, this doesn’t mean that you can’t secure a mortgage. Here are some key points to understand about IVAs:
- An IVA usually lasts for 5 years but can be settled earlier.
- If you are currently in an IVA or if it has been settled within the last 12 months, lenders will likely require a deposit of around 30%.
- The longer an IVA has been settled, the lower the deposit requirement becomes.
What is bankruptcy?
While bankruptcy can be stressful and challenging, you shouldn’t let it stop you from securing a mortgage. At Lightbulb Lending, we know which lenders are open to considering applications from individuals with a bankruptcy history. Here are some points to understand about bankruptcy:
- After being discharged from bankruptcy for a minimum of 9-12 months, you can start exploring mortgage options.
- As time since bankruptcy passes, the lower the deposit requirement becomes.
Mortgages with No Credit History
What is no credit history?
Applying for a mortgage with no credit history may be challenging, but it’s still possible. High-street lenders usually rely on credit scores to assess the risk of lending. If you have no credit history available, you may be viewed as a high-risk applicant as no data shows how well you manage financial repayments.
What causes no credit history?
Several factors show no credit on your credit file including:
- No credit cards or loans in the last 6 years.
- If you are living at home – as you may not have any utility bills in your name.
- If you are not on the electoral role.
These factors can lower your credit score, which may make it more difficult for your mortgage application to be accepted. We understand the criteria that lenders use when assessing applications, meaning that we are ideally positioned to help find the right lender for your circumstances.
Mortgages with Defaults or CCJs
What is a Default?
If you fail to meet the repayment terms of a credit agreement, you will incur a default. While a default may limit your options with high-street lenders, this doesn’t mean that you can’t secure or apply for a mortgage. Here are some key points to understand about a default on your credit file:
- A default will remain on your credit file for 6 years, whether they are paid or unpaid.
- You can still be issued with a CCJ within these 6 years which will remain for a further 6 years.
- The impact of a default on your mortgage application depends on various factors, including:
- The type of default (e.g. mortgage, unsecured loan, credit card)
- The amount owed
- How recent the default is
What is a CCJ?
If you fail to repay a debt, you will be issued a County Court Judgement (CCJ). A CCJ on your credit file can complicate your mortgage application process, but it doesn’t make securing a mortgage impossible. Here are some key points to understand about a CCJ on your credit file:
- A CCJ will remain on your credit file for 6 years unless the debt is repaid within 30 days.
- Some lenders may require a larger deposit if the CCJ is recent or remains unpaid.
- Some lenders may not require settlement at all.
- The impact of a CCJ on your mortgage application depends on various factors, including:
- The age of the CCJ
- The amount owed
- The reason the CCJ was issued
How can Lightbulb Lending help?
At Lightbulb Lending, we want to make your homeownership dreams possible, even if you have bad credit on your file. We work with a wide range of lenders, including those who do not rely on credit scoring and are more flexible in their lending criteria. Armed with years of experience, our services are backed by fast turnaround times, 5★ customer service and FREE no-obligation consultations and quotes. Contact us today to start your journey to homeownership.
FAQs
Can I get a mortgage with a Debt Management Plan?
Yes, it is possible to get a mortgage with a DMP, especially if you have been making consistent payments for at least 12 months.
Will my DMP affect my credit score?
Yes, a DMP can affect your credit score as creditors may register defaults when you enter into the plan. However, managing your DMP well can improve your financial standing over time.
How much deposit will I need?
The deposit required may vary depending on how long you have been on the DMP and your credit history. Generally, a larger deposit, such as 15%, may be required initially.
Can I apply for a mortgage immediately after starting a DMP?
We recommend waiting at least 12 months after starting a DMP before applying for a mortgage. This allows time to build a positive payment history.
What if I have missed payments on my DMP?
Missed payments can negatively affect your mortgage application. Lenders prefer applicants who have made consistent payments.
What happens if my DMP ends before applying for a mortgage?
If your DMP has ended and you have settled your debts, your application may be more favourably viewed by lenders, especially if some time has passed since the DMP ended.
How long should I wait after settling my DMP to apply for a mortgage?
Some lenders may prefer you to wait 12 months after settling your DMP, while others may be willing to consider your application sooner.
Can I get a mortgage if I’m still in an IVA?
Yes, although it may be more challenging to get a mortgage if you are in an IVA, it is possible. A higher deposit will likely be required and only certain lenders will consider your application.
How long after an IVA do I need to wait before applying for a mortgage?
The longer the IVA has been settled, the better. Typically, after 12 months, the deposit requirement may decrease, and more lenders may be willing to consider your application.
Can I get a mortgage after bankruptcy?
Yes, you can apply for a mortgage after being discharged from bankruptcy for at least 9-12 months. The longer the discharge period, the more favourable the terms may become.
How much deposit will I need if I have a history of bankruptcy?
The deposit required will vary depending on how long it has been since your bankruptcy was discharged. Typically, a larger deposit is required initially, but this may decrease over time.
How can I improve my chances of getting a mortgage after an IVA or bankruptcy?
Improving your financial situation, maintaining a steady income, and saving for a larger deposit can all help. We can provide tailored advice based on your circumstances – contact us today.
Will my interest rate be higher if I have an IVA or bankruptcy?
Your interest rate may be higher due to the perceived risk, but we will work to find the most competitive rates available for your situation.
Can I get a mortgage with no credit history?
Yes, it is entirely possible to get a mortgage with no credit history. We work with lenders who may offer a mortgage to individuals with no credit history.
What deposit will I need if I have no credit?
Typically, a minimum deposit of 10% is required, but a larger deposit may improve your chances of approval.
How long does the mortgage application process take?
The process can take several weeks, depending on the complexity of your application and the lender’s requirements.
Can I get a mortgage if I am not on the electoral roll?
While it may be more challenging, it is still possible. We can help identify lenders who are more flexible with their criteria.
Can I get a mortgage with a default on my credit file?
Yes, it is possible to get a mortgage with a default. You can rely on Lightbulb Lending to identify the lenders most likely to approve your mortgage application, despite these challenges.
Will a CCJ prevent me from getting a mortgage?
No, having a CCJ does not automatically prevent you from getting a mortgage. We can help find a lender who is willing to work with you based on your unique circumstances.
How long do defaults and CCJs stay on my credit file?
Defaults and CCJs remain on your credit file for six years, although a CCJ can be removed if paid within 30 days of the judgement.
Do I need a larger deposit if I have defaults or a CCJ?
Not necessarily, deposit amounts will depend on the severity and age of the default or CCJ. Some lenders may require a larger deposit, but we can help find the best option for you.
Can I get a mortgage if I have multiple defaults or CCJs?
Yes, we have experience in securing mortgages for clients with multiple defaults or CCJs. The key is finding the right lender, so please don’t hesitate to contact us today.
Will my interest rate be higher if I have a default or CCJ?
Interest rates may be higher if you have a default or CCJ, but we focus on finding you the most competitive rates available based on your circumstances.
How soon after a CCJ can I apply for a mortgage?
You can apply for a mortgage at any time, but the older the CCJ, the better your chances. Some lenders may require it to be settled first.
What should I do if my mortgage application is rejected?
The most important thing is not to be discouraged. We will work with you to explore other lenders who may be more suited to your financial situation.
Why choose us?
| Mortgage Experts We have years of expertise in mortgage solutions for clients with impaired credit, including DMPs, IVAs and more. | FREE Consultations We never want to add to your money worries, so we offer FREE consultations and obligation-free quotes. | Personalised Service We work to understand your circumstances, ensuring we match you with the right lender. |
Take the First Step To Your Dream Home Today
We believe that everyone deserves a chance to own their dream home. So if you’re worried about securing a mortgage due to bad credit, contact Lightbulb Lending today.
