Officials from the Financial Services Authority have expressed concern over the number of people with bad credit who are heading straight for the mortgage broker in order to find a mortgage rather than shopping around and looking at deals themselves. As many reports have indicated a huge number of lenders have withdrawn various mortgage deals over recent months, and this has affected groups such as sub-prime borrowers and first time borrowers in particular.

However, industry officials state that it is still important for consumers to shop around even if they are seeking a bad credit mortgage, as there is no guarantee that the broker will find you the most competitive deal for your needs and circumstances. FSA officials have said that in many cases those with bad credit are simply grateful to get any mortgage deal at all, and therefore do not bother to shop around for themselves, as many think that they will not stand a chance without a broker to help them.

The FSA also said that many bad credit mortgage customers are more interested in short term affordability than looking at affordability over the long term. Many were under the impression that the mortgage brokers would provide the best deals and reliable information regarding the risks of taking out the mortgage. Whilst the report also said that the main consideration for those with bad credit was to find the most affordable deal, it seems that many are not doing themselves any favours by failing to shop around.

Mortgage brokers can provide a valuable service for those with bad credit, as they have links and access to a wide range of lenders that deal with bad credit mortgages, enabling them to match the applicant’s details with the most suitable lender. However, each broker has access to a number of lenders but not all lenders, which means that consumers could still be missing out on a better deal elsewhere. This is why it is important for borrowers to do their own research into finding the best deal, even if they also get a broker on board.

However, bad credit consumers are warned that making multiple applications and receiving rejections from lenders could damage their credit further, so it is vital to check the eligibility criteria before making an application for a mortgage.

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How will I know what sort of mortgage to go for?

In order to determine what sort of mortgage to opt for you need to learn more about the different products on the market and match those to your needs and circumstances. For example, if you do not want the hassle of fluctuation repayments then a fixed rate mortgage may be the best choice for you. If you are still unsure after learning more about the different mortgage products available then it is well worth speaking to an independent financial adviser, who may be able to point you in the right direction and offer valuable support.

What is the best way to find a good deal on a mortgage?

Compare, compare, compare! Interest rates, terms, and repayment periods can vary widely from one lender to another, and in order to get the best mortgage for your needs you need to keep your eye on the mortgage market, compare different mortgages from a range of lenders, and avoid rushing into it. Also, when you are comparing mortgages make sure you look at the small print and find out if there are any hidden charges. Comparing mortgages these days is far easier because of the Internet.

How much will I be able to borrow?

The amount that you will be able to borrow will depend on a number of factors, and this includes your income, your existing debts and regular financial commitments, your financial and employment status, and also on the lender’s own criteria. Some lenders offer higher income multiples than others, and this means that you can borrow more although it also means that your repayments will be higher.

What sort of deposit will I need?

The traditional level of deposit needed is 5% of the property value, although first time buyers have often been able to get 100% mortgages with no deposit required. However, some lenders now ask for a minimum 10% deposit as a result of tighter lending conditions stemming from the credit crunch.

Can I get a mortgage if I have bad credit?

If you have bad credit you will find it far more difficult to find an affordable mortgage, and you will find that many of the deals on mortgages are not open to you because of your credit. However, there are lenders that do offer sub-prime mortgages. Do bear in mind that the interest rates charges on these mortgages will be significantly higher than the standard, and therefore repayments will be higher. You need to ensure that you can keep up with the repayments otherwise you could end up losing your home and further damaging your credit.

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