Unfortunately, the last few years have been a real struggle financially for many people around the world. In fact, certain countries experienced a housing crash and severe economic difficulties during 2008, which basically caused a worldwide recession. Unfortunately, ever since 2008 most lenders have become far more strict in their lending policies and will typically not offer most forms of lending to someone with a history of bad credit. With that beings said, it is still possible to obtain a mortgage if you have a bad credit rating, but there are certain factors you should be aware of.
Whenever you apply for a mortgage your lender will typically want to check over certain details about you. This will usually involve checking your credit report, your residential history, your employment history and any other debts you currently have. They will also be particularly interested in what cash you currently have available, in terms of paying a deposit towards your new home and also if you have sufficient funds to pay a mortgage loan for an extended period of time if you no longer had income coming in.
If you are able to provide a larger deposit, typically 25% or more, you will be considered far less of a risk by a lender. Most lenders will appreciate that you are basically “sharing” the burden of the loan and property price with them and will be far more lenient in terms of their lending policy. A lender will also want to see you recent payment history on your other debts. You may have a bad credit rating due to financial difficulties you experienced a number of years ago. However, if a lender can see that your repayment history has been very good over the past year or two, once again they are likely to be a lot more lenient when it comes to lending you money.
Firstly, you should be aware that you can’t improve your credit score overnight and this will take a little time. However, if you find that you are currently unable to obtain a mortgage because of your credit rating, this may not be the case a few months down the line. The first thing you should do is to order a copy of your credit report, which can be obtained from a number of providers. You should scan through for any mistakes, as it is estimated that over 80% of all credit reports contain some type of error. In fact, you may find that a certain error is the reason why you have a bad credit rating and therefore you should have this removed as soon as possible. You will also want to make sure that you make your debt repayments on time and in full, as this will be reflected in your credit report for lenders to see.
A subprime lender is simply a lender who works with those who have a poor credit rating. However, it is important that you are a little wary and make sure you are dealing with a legitimate firm. Many subprime lenders are simply out to give hope to potential customers, but will then charge them the most outrageous interest rates which will simply see their credit rating get even worse. With that being said, there are still many subprime lenders who do a great job and can help you obtain a mortgage even with bad credit.
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