Last Updated on 3rd October 2020
A Right to Buy mortgage can be a great way of purchasing your first home. That being said, if you have bad credit it’s likely you’ll run into problems. Applying for a Right to Buy mortgage with bad credit requires careful planning beforehand.
The majority of high-street lenders require applicants to have a good credit score. As a result, if you rush into applying for a Right to Buy mortgage with bad credit, you risk being declined. Furthermore, if you are declined, your credit score could take a further knock. As a result, this can delay any future chances of securing a mortgage.
On a positive note, it’s possible to get a Right to Buy mortgage with bad credit. Having the correct approach and advice can drastically improve your chances of getting your mortgage approved.
We’ll cover everything you need to know in this guide. Our advisors can also help you if you wish to make a start on your mortgage application.
How to apply for a Right to Buy mortgage with bad credit
If you qualify for the Right to Buy scheme but are worried about your credit, the first thing you should do is download a copy of your credit report. This will give you an idea of the type of credit issues you have and will usually show the last six years.
It’s important to check the accuracy of anything on your credit file. If you do find anything that’s inaccurate, then do contact the credit company. Inaccuracies on a credit file can be very problematic, so it’s a good idea to bring everything up to date and as accurate as possible.
Once you’ve done this, make an enquiry with an advisor who can then go through your personal circumstances in more detail. Our advisors can also take a look at your credit file to see what lenders you may be eligible for.
If you are eligible for a mortgage deal you’re happy with, our advisors will prepare your paperwork before submitting your application. Bear in mind, our advisors will try and find you the best possible deal you’re able to qualify for.
If you don’t quite yet qualify for a Right to Buy mortgage because of having poor credit, we’ll advise you on what to do next. For instance, we’ll provide you with tips on repairing your credit for a mortgage in the future. This also may not take as long as you think and it’s better than being declined, which will just delay you further.
You can make quick adjustments to your credit file by doing a few simple checks. For instance, make sure you’re on the electoral register and close down any unused credit cards you have. Furthermore, make sure you don’t actively apply for credit shortly before applying for a mortgage.
Does the type of credit issue I have matter?
Bad credit can vary quite considerably as each person’s credit file will be different. As a result, the type of credit problems you’ve encountered will impact your mortgage in very different ways.
Severe credit problems such as having been declared bankrupt or having an IVA will make it more difficult to get a Right to Buy mortgage. On the other hand, having missed a payment a while ago is likely to have less impact on your mortgage.
That doesn’t mean to say that severe credit issues will make getting a Right to Buy mortgage impossible. What this means is, your application will be based on the credit problems you’ve encountered.
Whether you have a CCJ or have a history of defaults, our advisors will assess your credit history and search for lenders that you’re eligible for. For instance, you may only qualify with specialist lenders depending on your credit history. If that is the case, it’s likely the mortgage rates on offer will be higher than normal.
The main positive here is that repaying a mortgage on time is a great way to improve your credit score. Once you’ve repaired your credit file, you should be able to remortgage to a better deal.
It’s also important to know that a credit check will only make up part of your mortgage assessment. For instance, having a large amount of outstanding debt and multiple credit applications can make mortgage approval very difficult. Lenders will also check your affordability level by assessing your income and expenditure. This will give lenders an idea of the amount you’re able to borrow.
Can I apply for a Right to Buy mortgage with recent credit issues?
Having had recent credit problems will make getting a Right to Buy mortgage even more difficult. This is because your credit history will normally show the last six years of your financial conduct.
For instance, credit issues that happened over six years ago are likely to have little relevance on getting a mortgage now. This is especially true if you go to a well-suited lender. On the other hand, having recently had a property repossessed will make it very difficult to get a mortgage.
If you’ve managed to get on top of your credit problems, it can show lenders that you’ve taken some financial control. An advisor can also highlight this if underwriters are unsure of whether to approve you.
Will I need a deposit for Right to Buy if I have bad credit?
One of the main advantages of using the Right to Buy scheme is that you won’t always need a deposit. This is because some lenders will accept your Right to Buy discount as part or all of your mortgage deposit.
That being said, if you have bad credit then it can become challenging to do this. Often enough, having bad credit may mean that you’re required to use a slightly higher deposit than an applicant with clean credit.
It’s common for lenders to request higher deposits to minimise their risk in lending to applicants with bad credit. As a result, your Right to Buy discount may not be enough. Furthermore, if a lender is happy for you to use your discount for a deposit, the rates on offer may be higher than usual.
Each case is different, so until we’ve spoken to you, we’re unable to provide you with any tailored advice. We may be able to find you a Right to Buy mortgage with a great interest rate. Furthermore, it could be possible to use your discount to cover your full deposit. Until we’ve spoken to you, it’s difficult to calculate what you’ll be eligible for.