Bad Credit Mortgage Case Studies
If you are looking for a mortgage but have a bad credit history, then you are going to have to take a slightly different approach to the borrowing process. While many mainstream mortgage brokers will not lend to anyone with a bad credit history, there are specialised brokers who deal specifically with bad credit mortgage applications who will be able to help you.
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.
