Bad Credit Joint Mortgage

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Bad Credit Joint Mortgage

Bad Credit Joint Mortgage

Lewis Shaw explains how a joint mortgage works if you have bad credit.

Can you get a joint mortgage if both or one applicant has bad credit?

Yes, you can get a joint mortgage if one of you has bad credit. The thing to remember here is that one person’s credit profile doesn’t balance out another’s – so if one person has bad credit and another person has excellent credit, the great credit doesn’t outweigh the bad. Lenders will always work to the poorest credit profile.

If, for example, you’ve got a 999 score with a credit reference agency, but the other person has a County Court Judgement (CCJ), the lenders will work at that lower level. But it’s still entirely possible to get a joint mortgage if either one of you had bad credit in the past.

What types of bad credit affect a joint mortgage application?

There’s a spectrum of credit issues. There are CCJs also knowns as County Court Judgements and IVAs, which are individual voluntary arrangements. There are defaults, where you have not paid a debt and the lender or credit provider has marked the account as in default.

Debt management plans are where you’ve come to an agreement with creditors about how you’re going to repay your debt. This means your debts tend to be in arrears or in default. You’ve also got bankruptcy, where you’ve been made bankrupt by the insolvency court.

If you’ve failed to keep up repayments on a mortgage, you may have had your home repossessed, and perhaps you now want to apply for a new mortgage. Unsecured arrears are when you’re not up to date with your payments on any debts whereas secured arrears means you’re not up to date with your mortgage.

Finally, there are missed or late payments, where you’ve failed to make payments in the past and have hopefully now caught up. So, there are many different types of bad credit that can affect a joint mortgage application.

Certain types of bad credit don’t really make much of a difference. A missed payment here or there isn’t going to have a huge impact, although it’s still not ideal, while bankruptcy, repossession and IVAs can make it quite tricky unless it was a long time ago – you’re often going to need a bigger deposit than if you didn’t have bad credit.

It’s about understanding where you are on that bad credit spectrum and then finding the appropriate lender to obtain the right mortgage, making sure that it’s suitable and affordable.

Are there specific lenders who deal with joint mortgages with bad credit?

Yes, there are specific lenders who will approve a joint mortgage where one or both of you have had bad credit in the past. We call them specialist lenders, or adverse lenders and their entire business model tends to be helping people with bad credit histories.

Bad credit or adverse credit lenders aren’t available on the high street, and they normally have slightly higher deposit requirements (usually starting at a minimum of 10% deposit; however, 15% deposit or more is the norm) than mainstream lenders. They have their own detailed lending rules and policies, and they exist to help people who have had bad credit in the past get a joint mortgage.

The type of bad credit will determine which mortgage lender is most suitable. As we mentioned earlier, bad credit is a spectrum—from a missed payment to bankruptcy. Where you sit on that spectrum will influence which lender we approach for your joint mortgage and how much deposit you’ll need. It’s also important to know that the longer ago you had bad credit, the more likely you are to get approved for a joint mortgage.

Does being married make a difference when applying for a joint mortgage with bad credit?

Being married can make a difference when you’re applying for a joint mortgage, especially if you’ve had bad credit in the past. Credit reference agencies such as Experian, Equifax and Transunion tend to make links between people, called financial associations, that have lived together where someone has had bad credit in the past.

If you’ve been married and living together for some time, the chances are there’ll be a financial association between you and the person you live with on your credit report. Even if one person in the marriage doesn’t have bad credit, we may need to declare it to the mortgage lender because of the financial association. Bad credit mortgage lenders will see the information, so it’s best to be open and honest with them from the start.

Also, be aware that if you’re married, if only one person wants to get the mortgage, because their income is high enough to buy the home on their own and they don’t have any bad credit, many mortgage lenders will say it must be a joint mortgage.

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Can I still get a joint mortgage if I’ve had previous bankruptcy or foreclosure?

You can still get a joint mortgage if you’ve had a previous bankruptcy, but you need to be ‘discharged’ from that bankruptcy. You’d normally need to wait at least 12 months since the bankruptcy had been discharged, which is generally the minimum period when someone has been made bankrupt before it’s counted as discharged. You will usually need a higher deposit amount than normal.

The more years pass since you were bankrupt, the more bad-credit mortgage lenders are available. There are only a handful of lenders for people who have been made bankrupt and discharged for a year. However, the longer ago the bankruptcy, the more lenders come into play, and the deposit requirements start to reduce. After six years, most lenders will offer you a mortgage, even if you’ve been bankrupt in the past; not every single lender, but many may consider you.

What happens if I’ve been declined for a mortgage with bad credit previously?

If you’ve previously been declined for a mortgage with bad credit, it doesn’t mean you can’t get a mortgage now. It could be that you applied to the wrong lender. It could be that your bad credit has become less of a problem because, over time, the impact on your credit profile lessens.

If you’ve been declined once, you won’t always be declined. The best thing to do is speak to a mortgage broker like us. Let’s assess your situation and take it from there.

What if I’m a First Time Buyer and have bad credit? Will this affect me getting a joint mortgage?

Bad credit can affect anyone trying to get a mortgage. But if you’re a First Time Buyer with bad credit and you’re looking to get a joint mortgage, we may need to look at specialist lenders to get that mortgage approved.

If you’re a First Time Buyer, often the deposit you have available isn’t huge because it can be difficult to save up. So, if your credit isn’t perfect you’ll probably need at least 10% as a deposit. However, you should know that many lenders will ask for 15% deposit and it can be upwards of 20% deposit in some circumstances.

So even if you’re a first time buyer with bad credit trying to get a joint mortgage you will have options. However, it will usually mean you have to pay a slightly higher interest rate than without bad credit. But you can potentially still get a joint mortgage.

Will we need a larger deposit for a joint mortgage with bad credit?

Yes, if you’re getting a joint mortgage with bad credit, you will typically need a larger deposit than if you didn’t have bad credit. The deposit requirements vary from lender to lender and depend on the type of bad credit you’ve had, when the bad credit happened and if it’s been paid back.

Most lenders will ask for at least 10% as a deposit if you have bad credit, but it can go up to 25%. It will depend on whether the bad credit happened recently or years ago. Was it significant bad credit, like a bankruptcy or repossession, or was it just a missed payment?

All these variables will determine exactly how much deposit you need for a joint mortgage with bad credit and which lenders are the most suitable for us to approach.

What is the minimum credit score required for a joint mortgage with bad credit?

There is no minimum credit score required for a joint mortgage with bad credit. What matters is the type of bad credit you’ve had, how much deposit you’ve got, when that bad credit was and how much you’re looking to borrow.

Many specialist lenders for bad credit mortgages don’t necessarily use credit scores. They credit search, which means they’re looking at your credit conduct and the types of bad credit you’ve had, but they’re not necessarily looking for a minimum score.

Don’t be put off looking to buy a home just because your credit score is quite low. It doesn’t make much difference – it’s more about the type of bad credit, when it was, how much deposit you have, and whether you have the income to support that mortgage.

Can we use a guarantor for a joint mortgage if we have bad credit?

You can use a guarantor for a joint mortgage if you have bad credit, but this doesn’t mean you’ll get a better mortgage rate. The lender will still work with the worst credit profile that’s going onto the mortgage application.

If you’ve had bad credit, but your guarantor has perfect credit and has done for 20 years, that doesn’t necessarily improve your chances of a better rate.

Guarantors for a joint mortgage can be useful if you need to increase the borrowing—i.e., you can’t borrow enough on your own income. But it’s not going to change the type of lender we approach because they will always work from the worst credit profile.

How long do I have to wait after improving my credit score before applying for a joint mortgage?

There’s no minimum time to wait to improve your credit score before you apply for a mortgage unless you’ve had a previous bankruptcy or potentially a repossession.

Generally, it’s good to wait until the bad credit is at least 12 months old, but that’s more about the type of bad credit rather than your credit score. Don’t worry about the score. Bad credit mortgage lenders focus on what has happened in your credit history—whether it’s a CCJ, a default, a bankruptcy, missed or late payments, a debt management plan, an IVA, a repossession or anything else. It’s about when that happened, when it was repaid, and have shown that you’re now better at managing your money.

Next, have you saved up or been gifted the amount of deposit required? Have you got the income to support that mortgage? The credit score is not as important as you think and it’ll improve over time. There is generally no minimum credit scoring, so don’t let that put you off buying a home.

How can a mortgage broker help here? Have you got anything else you’d like to add?

When it comes to getting a joint mortgage with bad credit, there are different hurdles to overcome.

The first is that many specialist mortgage lenders for mortgages with bad credit don’t appear on the high street. As brokers, we have access to lenders that you can’t access directly as a customer, so we have a much better chance of getting you a mortgage than you trying to do it yourself.

The second thing is that we can put a plan in place for you. We’ll give you advice around how much deposit you need and how to move on from that lender in the future. Just because you have bad credit now, you’re not going to have it forever. Credit profiles refresh every six years.

Hopefully, when your bad credit is no longer an issue in a few years, we can help you get a remortgage and move you back to the high street for better rates. It’s not just about the initial mortgage. It’s that holistic plan – that can get forgotten about, but it’s really important.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.