The most commonly offered mortgage prodcuts are detailed below, however this is purely a brief description of the the products and is by no means an exhaustive breakdown, and should not intended to be used as financial advice or guidance, rather for basic information and understanding of terminology used.

Variable Rate mortgages follow market rates and therefore you monthly repayments can go up or down, depending on market activity. These kinds of mortgages generally have lower interest rates that fixed rate mortgages as they can be unpredictable. Many people choose to have a variable rate mortgage as it means they are not committing to one lender as you would have to do with a fixed rate. They are also less likely to come with early redemption or over-payment penalties. The downside to this kind of mortgage is that if interest rates rise, so will your monthly repayment so they are not suited to those on a budget as you have no fixed monthly expenditure you can work from.

Fixed Rate Mortgages are popular as they are simple and easy to understand and budget with. This makes them the perfect first time buyers mortgage, as well as ideal for anyone who wants to have a set expenditure budget in place. While fixed rate mortgages aren’t the cheapest on the market, they offer peace of mind and security for the period you choose to fix it for, which for many people is important. The downside to fixed rates is that you have to commit to one lender for a set period of time, and there may well be penalties associated with early repayments, overpayments and in some cases moving house, so these are areas to be sure you are clear on when you are looking at the products on offer.

Tracker Mortgages are another form of variable rate, however they follow the European Central Bank base rate as it changes. Variable rate mortgage lenders can choose not to mirror any changes in the base rate should they wish. Tracker mortgages are set at a percentage above the European Central Bank’s base rate, and this percentage will stay in place for the duration of the mortgage, so unlike variable rate mortgages you will know what your rate is as soon as an interest rise or drop is announced. Tracker mortgages allow you to make monthly overpayments lump sum payments without incurring any penalties. As with variable rates, this kind of mortgage does not work well for those that want a set monthly payment that will not change.

Because you will be applying for an adverse credit mortgage, you may find that the rates being offered to you are not as good as those advertised on the high street, and it may even be the case that one or more of the above mortgage products is not available to you because of your circumstances. Choosing a bad credit mortgage is something that should be done with care, and you don’t want to lock yourself into a high interest rate for a long period of time, as your regular mortgage repayments will go a long way to building a good credit rating allowing you to avail of better rates a couple of years down the line.

Finding out how you would be viewed by a potential lender is a good place to start when looking for this kind of adverse mortgage lending, so here are a few examples just to give you a rough idea. There are three basic levels of credit adversity that will be considered by lenders, of course the worse it is the fewer options you will have.

First off there is Light Adverse, a good example of which would be a young couple, both first time buyers who have saved a 5% deposit for their home. They need 4.2 times their income in order to obtain their mortgage however one of them had a default registered against them of around £1,000 in 2004 and had missed a couple of credit card payments over the last 12 months. Many high street Lenders would view this unfavourably, for instance Abbey National and C&G rejected their application, however First National were prepared to offer them their 95% LTV mortgage.

The next level is Medium Adverse, someone requiring a 90% LTV mortgage, however they have a CCJ and defaults of £3,000. Add to this two missed mortgage payments over the last year and one additional missed payment on a credit card in the last six months. Their current mortgage provider, C&G rejected their new mortgage application, however the same application was accepted by BM Solutions.

The final level is Heavy Adverse, and this is where you really have got in trouble with your credit and repayments. For instance, a self employed couple wanting to remortgage their home in order to pay off numerous unsecured credit amounts so they could have just one manageable repayement every month. They were in mortgage arrears already and had only recently been discharged from bankruptcy. It was possible for them to secure a remortgage through GMAC without having to provide evidence of income as they were self employed.

As you can see, even in what might seem the most dire financial circumstances it is possible to secure a mortgage, and while it may not be the best deal around at the time, when you are taking on a bad credit mortgage you already know that you are not going to get favourable terms.

The problem however is not the demand but supply of lending from the banks. As more and more financial institutions are becoming unsound,  others are hoarding their bailout money for the possible worse times ahead. The so called bailout is bailing out the banks but not the businesses and borrowers who really need it. On a more positive note, there jobless figures showed a decrease of .1% from June to July, nothing to get excited about but at least it’s a move in the right direction.  The new administration’s housing affordability program is helping but people are complaining that their applications, extensive and detail paperwork, are getting lost in the system. Loan modifications are are slow to materialize and in the event that they do so, people are still going to have to pay up later rather than sooner.

The State of California looks particularly bad as unemployment beats the national average, but due to it’s diverse economy and notorious up and down housing market some expect it to lead the recovery. Some agents are seeing people step back into the housing market as prices seem to have hit bottom, and there appears to be a pick up in San Francisco and Orange County.

The glut off people with good credit means that in order for the economy to make progress it will be necessary or people with bad credit to be given mortgages. It’s the only way to get cash circulating and breathe life into the comatose property market. The banks have no right to look down on people with bad credit records when they themselves have blemishes on their record. Lets hope they don’t take a ‘holier than thou’ approach – if they do they could extend this recession even further, thus cutting off their nose to spite their faces. Perhaps President Obama will look out for the people on the ground and push banks to release their hoard of cash sooner rather than later, so maybe an increase in spending by Christmas may set the US on the road to economic recovery. It seems too far to rech to expect to see home flippers, the heart of the last housing bubble, returning any time soon unless people with bad credit can get a mortgage to purchase their handiwork.

It is important to keep on top of financial commitments, as not doing so can lead to penalites, debt collection agencies becoming involved and worst case scenario being taken to court or forced to go bankrupt. However, many people struggle to manage their finances effectively and find themselves in the situation where their credit report tells potential lenders that they are a high-risk which in many cases is reason enough for credit applications to be declined.  It is in these situations that people find themselves turning to specialist lenders who can offer loans, credit cards and mortgages to people deemed as high-risk.

If you find you have been rejected for credit, it is worth getting a copy of your credit report to get an idea why – it is not uncommon to find errors on your report that will go against you, all you need to do is call the credit agency and explain the error to them and ask them to correct it. If you have been rejected for credit don’t just keep applying in the hope that an application will be accepted as each application requires a search on your credit record, and each search leaves a footprint showing what it searched for and why. Multiple searches in a short space of time will only drive your credit rating down, which if you have been rejected already is the last thing you need. Check you credit report and if it is showing you as a high-risk debtor then you will need to approach a specialist company to help you get a bad credit mortgage. These companies balance the risk they are taking by asking for higher deposits and charging higher interest rates than most high street banks, and of course the loan is effectively secured on the property so there will always be some form of recompense should you default on your payments.

Ideally you should already have a copy of your credit report, so you can make sure that everything on there is correct, and also so you know what potential lenders will be seeing. Understanding credit reports is farily simple so you should be able to get some idea of how low your rating is.  Finding a company that deals with poor credit lending is the next step. This is where things can get a bit tricky as there a many companies offering credit to people with poor payment histories, or bad credit ratings, even to people who have been bankrupt. Making sure you choose the company that is right for your needs is very important, as going with the wrong company could well end up costing you more than necessary with arrangement fees and interest payments.

It may well be to your benefit to approach a mortgage broker who specialises in high risk lending. You will of course have to pay them a fee, but the advise and specialist knowledge that they can give you can save you a lot of money in the long run. They will have a good knowledge of the types of mortgages on offer, and will be able to advise you based on your credit situation. While a lot of the time with regular mortgages it is cheaper to go direct to the lender, the nature of bad credit mortgages means that brokers are often the route to the best deals.

If you are not comfortable in going through a broker then you will need to do your own research into companies offering mortgages to people with low credit ratings, which can be done quite easily online, then approach them individually, explaining your circumstances and going through details such as your income, current debts, employment status etc. in order to get accurate quotes you can compare. It can be a lengthy process, but it is one that is worth carrying out properly to make sure you get the best deal available to you.

The situation when it comes to lending for bad credit mortgages is slightly different, as there is security for the lender in the form of the property the loan is being taken out for. However, the criteria for borrowing will still be different than those for a regular mortgage. The lender will want more information on you, your financial background and current financial status than a regular mortgage lender may required. You will need to be able to proved you are in stable employment, have a regular income and also have cash available for a down payment. You can also expect your credit history to be gone through with more scrutiny than normal. It is in the lenders interest to make sure you are credit-worthy, and while you made be high-risk due to past bad credit, it is still possible to get a mortgage.

The type of product you may be offered will differ from standard high-street bank products. This is because the lender is exposing themselves to more risk as far as they are concerned. It is common to find that large deposits are required when taking out a bad credit mortgage, and interest rates may well be higher than average which again reflects the perceived risk the lender is taking.

Reading the full details of the package you are being offered is essential, as you don’t want to tie yourself into a bad credit mortgage deal for longer than you have to. After a year or two of regular mortgage payments, you should be able to re-mortgage with a regular bank or building society and get much better rates. Look out for things such as exit fees, early repayment penalties and long term fixed rate deals. While these may seem like they are going to get you the best deal possible at the time, in the long-term you could end up paying higher rates for much longer than is necessary, so bear in mind that by getting a mortgage you are giving yourself the opportunity to re-build your credit history, payment history and bring up your credit rating which means standard credit will be available to you in a year to 18 months. A lot of companies that offer bad credit mortgages rely on people tying themselves in for the long-term on unfavourable rate deals without thinking about the future.

Firstly, why do you have bad credit? It may be that you just found yourself in difficulty for a while and made a few mistakes, if this is the case it won’t take long to repair your credit rating and get yourself back in the favoured lending bracket. Perhaps you are just bad at managing your money, in which case you should look to get some help with managing your finances. Taking out a mortgage isn’t going to make your financial situation any easier, in fact it is more likely to make it harder as you will have another debt and repayment to manage. Piling debt on debt isn’t the way forward.

The next thing to look at is why you are applying for a bad credit mortgage. If it is to consolidate other debts, then this may not be the best path to take. The very fact that you already have bad credit means that you have managed your debts poorly in the past, so using your home as security on a larger amount, even though it will have packaged all your debts into one, means you are now risking the roof over your head should you fall behind with payments. In this kind of situation you are much better off contacting your creditors and coming to some kind of payment agreements with them, making sure they are affordable and manageable, but will also go a good way to clearing the debts.

Then consider, if you are looking to buy a property, is do you really have to buy right there and then. The terms offered on bad credit mortgages are a lot less favourable than those of a regular mortgage and will require you to have a much larger down payment. You may find you will be a lot better off staying where you are, or renting somewhere affordable while working hard on repairing your credit rating and giving yourself a good payment history, both of which are looked on favourably by lenders. Even just 6 months of good payments can bring your credit rating up, and will give any potential lender the confidence that you are able to maintain regular monthly payments.

The lender will want to look over your credit report, your employment history, your income, and the amount of debt you are carrying. Lenders will also look closely at available cash. This is the one area where things can go in your favour, as the more cash you have and are able to put down as a deposit, the more likely a lender is to lend the balance to you, even if you have a bad credit history. This is for the simple reason that you will have made a significant investment in the property and are therefore much less likely to default on your loan. However, your payment history is also very important at this stage too. Even if you do have a significant amount of money to use as a down payment, if your payment history shows you don’t keep up with regular payments, and that you have a record of defaulting on payments of loans then this is going to ring alarm bells for any lender. It is easy to build up a good payment history, you just have to be disciplined.

If you are unable to get regular credit due to having a poor credit rating and payment history, then it is worth looking into taking out a credit card designed for people such as yourself. The do exist, but they will have very high interest rates and low credit limits, a reflection of the risk the lender is taking issuing the card.  Use this to build a good payment history by making a couple of purchases a month on it and paying off the balance in full every month – never overspend, only make purchases that you actually have the money for, the idea of this credit card is to improve your credit rating so you can get a mortgage, not get you into more debt and cause more damage to your credit rating! This simple process can give you the payment history you need to prove to a potential lender that you are capable of making regular payments, and are ready to commit to being a more responsible creditor in the future.