Introduction:
A common concern among self-employed individuals and business owners looking to enter the property market is whether a less-than-perfect credit history can scupper their chances of obtaining a mortgage. In this blog post, we’ll explore the options and strategies that can help you secure a mortgage, even with a poor credit history.
Understanding Credit Implications:
Credit history plays a crucial role in mortgage applications as it indicates to lenders your reliability in managing and repaying debt. For self-employed individuals and business owners who already face scrutiny over variable income streams, a poor credit history can be an additional hurdle.
Strategies to Enhance Mortgage Approval Chances:
- Full Disclosure: Be upfront about your credit history with lenders or a mortgage advisor. This transparency allows them to advise on the best course of action.
- Evidence of Financial Stability: Recent bank statements and business accounts that show stability and profitability can potentially counterbalance past credit issues.
- Larger Deposit: Offering a larger deposit can sometimes offset the risk a lender takes on a self-employed individual with a poor credit history.
- Specialist Lenders: Some lenders specialise in mortgages for those with poor credit and may be more amenable to self-employed and business owner applicants.
- Credit Report Review: Before applying, review your credit reports for any errors or outdated information that could be affecting your score.
- Improving Credit Score: Take steps to improve your credit score where possible, such as paying down existing debt and avoiding new credit applications.
Case Study: Securing a First-Time Mortgage Against the Odds
At RNR Mortgages, we’re proud to assist self-employed individuals and business owners in navigating complex financial waters to secure their first property. Let’s take a closer look at a particular case study that highlights our expertise.
Client Profile:
Our client was the sole shareholder of their business and had managed to accumulate a robust 20% deposit. However, their ambition to own a home was hindered by their credit file, which contained a couple of blemishes: a default of £689 and a small CCJ. These issues posed significant obstacles since most high street lenders are hesitate to take on clients with a less-than-stellar credit history.
Our Approach:
Understanding the client’s unique financial situation, including their current ownership status and the availability of a substantial deposit, we embarked on a search for a lender. This search wasn’t just about finding a mortgage provider but finding one that would acknowledge the client’s full financial profile, including taking salary and net profits for the mortgage obtainable and looking beyond the credit score.
We contacted the business development managers of certain lenders, leveraging relationships and finding a lender that could accommodate our client’s circumstances.
The Outcome:
Our persistence paid off when we secured mortgage lending with a broker-exclusive lender known for its more holistic approach to mortgage applications. This lender was willing to consider the totality of the client’s financial situation, including the ability to use net profits and salary in the assessment and considering the credit file issues as historical blips rather than patterns.
The application was a success, culminating in our client purchasing their first property, a testament to the fact that credit issues don’t necessarily preclude the dreams of owning your home.
Conclusion:
While a poor credit history is a challenge, it’s not an impossible one. With the right approach and the support of knowledgeable professionals, many self-employed individuals and business owners find their path to mortgage approval. At RNR Mortgages, we have the expertise to navigate these complexities, offering guidance tailored to your unique circumstances.
If securing a mortgage isn’t feasible at the moment, let’s not see this as the end of the road. Together, we can develop a strategic plan with clear milestones, whether that’s six months, a year, 18 months, or two years down the line. Our goal is to turn the ‘not now’ into an actionable timeline, leading you to the moment when you can confidently take the keys to your new home.