Applying for joint mortgages is the way that most people afford to buy their dream home. However, if both of you have a bad credit history, this can make the process much harder. It's not uncommon for mortgage lenders to reject applications from borrowers with bad credit, so your options could be limited.

There are still ways that you can increase your chance of getting an accepted mortgage request. In this guide, we look at how bad credit history can affect your chances of getting a mortgage and what you can do to mitigate some of these problems.

Can You Get a Mortgage with Bad Credit?

Yes, it's still possible to get a mortgage even if you have a bad credit history. Your options will be limited, and you might find that you have to use a specialist lender. This is because regular mortgage providers view you as a higher risk borrower and they’ll be less likely to want to lend you money because people with bad credit are more likely to fail to make their monthly payments.

Understanding Your Credit History

When you're considering a joint mortgage with poor credit, the first step is to look at your credit information. This will help you know some of the information that lenders will be able to find out about your financial situation and your past.

You can find your credit score by looking through multiple different companies online, such as Experian, Equifax and TransUnion. These websites show your credit score, usually represented as a number, with a maximum that their scale goes up to. Different credit rating agencies have different scales, so if you look at multiple agencies, you’ll get different scores. However, most credit rating agencies also give different numbers a term such as "fair" or "poor" to help you understand these figures.

Consider any issues that are flagged on your credit history, for example, any recent hard credit checks or more serious issues.

Using a Specialist Lender

If you file a joint mortgage application where you both have bad credit, you might find that a lot of lenders refuse your application. This means you’ll need to go via a specialist lender. A specialist lender is a good way for people to get a mortgage when they might not otherwise be able to, but there are some downsides, too. Most notably, you’ll likely find that the terms of your mortgage will be less favourable compared to standard mortgages.

How to Find a Specialist Lender

If you’re looking at using a specialist lender for borrowers with bad credit, a mortgage broker like John Charcol is a great help.

We have access to more lenders, including ones who don't deal with clients directly. We can also help you find better deals in terms of interest rates, deposit requirements, and other lending criteria. Using a broker could make the difference between getting accepted or rejected for a mortgage.

Problems When Applying for a Mortgage with Bad Credit

Starting a joint mortgage application where you both have bad credit, can mean that you have less favourable terms compared to getting a standard mortgage. This can affect various aspects of getting a mortgage, including:

Lending Criteria

Lenders may have additional criteria for applicants to meet before they’ll consider people for bad credit mortgages. This could include additional financial information or longer financial records, especially information pertaining to their negative credit incidents or debts.

Affordability

Affordability is how much a bank or lender determines you’ll be able to pay back, which is calculated based on your income. Having a high loan and a small income is considered a risk. Many lenders will class you as having lower affordability if you have bad credit, as they don't want to increase the risk that you cannot make your monthly payments.

Interest Rates

For bad credit mortgages, as with other types of specialist mortgages, interest rates can be higher. Again, this is linked to the risk that the lender must take on when offering a loan, especially if the LTV (loan-to-value) is high.

Deposit Requirements

While most standard mortgages will have a minimum of 5% deposit, this will be higher for bad credit cases. If you’re looking for a bad credit joint mortgage, you could expect a minimum of a 10% deposit, though this varies between different lenders, and some will have much higher minimum requirements, even up to 25%.

Specialist Mortgages

Bad credit mortgages are considered a specialist mortgage type and are therefore considered higher risk. With this in mind, most lenders are unwilling to take on cases with additional risks for a specialist mortgage. This means that you may struggle to find bad credit mortgages for shared ownership properties, non-standard construction properties, or flats in certain conditions.

What Types of Bad Credit Make It Harder to Get a Mortgage?

Different credit issues will impact your credit history differently, and you’ll also find that lenders have varied requirements of what they will or won't accept. This means that it can be hard to know exactly how an issue will affect your ability to get a mortgage. Some of the most common issues are:

  • Missed Payments - a single missed payment may not have a large impact on your ability to get a mortgage, especially if it’s been resolved a long time ago. However, a more recent missed payment or repeated missed/late payments can cause issues
  • Defaults - if the default has been settled for a significant length of time it may not affect your mortgage, but some lenders have stricter guidelines and might reject your application
  • CCJs (County Court Judgements) - CCJs are mainly an issue if they have not yet been settled, though some lenders will reject applications from people with CCJs that have only been settled recently
  • IVA (Individual Voluntary Arrangement) - IVA will likely need to be paid off for the applicant to be successful. The more time since the IVA was settled, the better your chances of getting a mortgage application approved. There are some lenders who tend to refuse any application from anyone who has previously had an IVA, which makes it more difficult to get a mortgage after this
  • Bankruptcy - most lenders will not accept an application from someone who has declared bankruptcy, though some will consider it if the bankruptcy was discharged a long time ago — usually years
  • Repossession - a house repossession is a major issue to most lenders, especially if it happened recently. However, if the repossession occurred years prior, some lenders would consider lending to people who have previously faced repossession
  • No Credit History - having no credit history can also be a concern for lenders. While there are no explicit negatives on your credit report, lenders have no proof that you will successfully pay off your debts. Do what you can to boost your credit history if you’re thinking about buying a house. Start building a credit report by considering taking out a credit card or loan or other payment plan and making your payments promptly
  • Too Many Hard Credit Checks - having too many credit checks in a short timeframe can make lenders concerned that you’re taking on more credit than you will be able to pay back. This can often be explained, especially if the hard credit checks are not for anything as major as other mortgages, but some lenders will reject your application if you’ve recently taken out too many lines of credit
Rental Income

How to Make a Bad Credit Mortgage Application More Likely to Be Accepted

While getting a mortgage with bad credit can be difficult, there are some ways to try to improve your chances:

  • Offer a Larger Deposit - most lenders see a larger deposit as a sign that you can save up money, and that you’re serious about wanting to purchase the house and make your payments. This also lowers a lender's risk because you’re borrowing less money from them. A deposit amount of around 25% is usually seen as a much lower risk to lenders compared to a 5% deposit
  • Improve Your Affordability - increasing your affordability to create a good margin between your income and your monthly payments, increases your chances of being accepted for a mortgage. Increase your income or lower your outgoings, before applying for a mortgage

No Credit Check Mortgages

It's possible to get a mortgage with a lender that doesn’t assign you a credit score, but they will still credit check you by reviewing your credit history.

They’ll examine your finances on a case-by-case basis to determine whether they’ll consider lending. They’ll likely ask questions about any issues in the past and learn about what circumstances led to any adverse credit events. These are usually considered specialist mortgages so expect fees, rates and deposit requirements to be higher.

Applying For a Mortgage with Only One Borrower

Applying for a mortgage with 2 or more bad credit applicants will be hard. If one applicant has sufficiently better credit, consider a joint mortgage application. However, it's rare for a good credit rating to significantly boost the overall credit rating of a joint application, so you could still find that your approval rate is limited by the lowest credit score on the application.

If one applicant has much better credit, consider a single borrower mortgage. This means that only the person with the better credit score will apply. There are some risks to this approach. Affordability will only be calculated based on the income of the person applying, which can limit how much you're able to borrow. Also this means that only the borrower would be on the title deeds for the property.

Waiting Until Credit Score Has Improved

If you're unable to get a joint mortgage with bad credit or just one applicant, delaying your house purchase until your credit score and credit history have improved is a good idea. It can make it easier to find more lending options, though it also means that you’ll be unable to buy a house potentially for a long time. Some minor problems might take months to fix, while some larger credit history issues could still have an impact further down the line.

Ways to Improve Credit Rating

How you improve your credit history will depend on what the problems are. For simple issues such as debt, paying down your loans or other lines of credit will improve your score. Even if you have bad credit, consider bad credit remortgaging for debt consolidation in order to help this process.

For more major issues such as CCJs and IVAs, you'll need to settle these as soon as possible. You’ll also need to wait so that you can show lenders that there are no further issues and that your money habits have improved.

Bankruptcies or home repossessions are considered major issues. The further in the past they are, the more likely you are to get accepted for a mortgage.

How to Obtain a Joint Mortgage with Bad Credit - Roundup

Getting a joint mortgage when both applicants have bad credit history can be challenging. You'll be considered a higher risk investment by lenders, and this will limit your options. Lenders often have less favourable requirements for this type of mortgages, such as higher interest rates and deposit requirements, and sometimes require thorough financial background checks. It will also be harder to get a specialist mortgage.

If you need a specialist mortgage for borrowers with bad credit, get help from a mortgage broker. Brokers have access to specialist lenders who don't deal with clients directly and can often help you get better rates compared to what you find on your own. At John Charcol, we have brokers with experience finding mortgages for joint borrowers with poor credit. We make sure that you have a range of options to choose from and help guide you through the process of applying. Get in touch today on 0330 433 2927to see how we can help.

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