Your Guide to Getting a First-Time Buyer Mortgage with Bad Credit
What Does Being a First-Time Buyer Actually Mean?
If you’ve never owned a property before, congratulations—you’re officially a first-time buyer. Even if you’ve inherited a property in the past, you wouldn’t count as a first-time buyer. If you’re buying with someone else, both of you need to be property newbies to qualify.
Being a first-time buyer can open doors to certain perks, like potential stamp duty relief and mortgage deals designed to help you get on the ladder. But if your credit score isn’t perfect, things can feel trickier—though it’s definitely not game over.
How Much Deposit Do You Really Need?
To get a first-time buyer mortgage, you’ll need a deposit of at least 5% of the property’s value. That said, the more you can put down, the better your options. Lenders love bigger deposits because it means less risk for them—and better rates for you.
For example, if you’re eyeing up a £200,000 property:
- A 5% deposit would be £10,000.
- A 10% deposit would be £20,000.
- A 20% deposit would be £40,000.
If you’ve got bad credit, a higher deposit can seriously boost your chances. Some specialist lenders might ask for 10% or even 15% if your credit history is more complicated.
What’s Loan to Value (LTV) and Why Does It Matter?
Loan to Value (LTV) is basically the percentage of the property’s value that you’re borrowing. The lower your LTV, the better the mortgage rates you’ll be offered.
Say you’re buying a £200,000 home, put down a £20,000 deposit, and borrow £180,000. Your LTV would be 90%.
Here’s the quick maths: LTV=MortgageAmountPropertyValue×100LTV = \frac{Mortgage Amount}{Property Value} \times 100
In this case: LTV=180,000200,000×100=90%LTV = \frac{180,000}{200,000} \times 100 = 90\%
If you’ve had credit issues, lenders will feel more comfortable if your LTV is 80% or less—so a bigger deposit can really work in your favour.
Should You Go for a Fixed or Variable Rate?
Choosing between a fixed-rate or variable-rate mortgage depends on what works best for your situation. Here’s the lowdown:
What’s a Fixed-Rate Mortgage?
A fixed-rate mortgage means your interest rate stays the same for a set period—usually 2, 5, or 10 years. It’s great for budgeting because your monthly payments won’t change.
Pros:
- Predictable monthly payments
- Protection from interest rate rises
Cons:
- Less flexibility for overpayments
- Early repayment charges if you leave the deal early
What’s a Variable-Rate Mortgage?
With a variable-rate mortgage, your interest rate can go up or down, depending on the lender’s standard variable rate (SVR) or the Bank of England base rate.
Pros:
- More flexibility
- Often no early repayment charges
Cons:
- Monthly payments can increase
- Less certainty for budgeting
How Does Bad Credit Affect Your Mortgage Options?
Your credit score plays a huge role in mortgage approvals. It tells lenders how risky (or safe) it is to lend to you. Things like missed payments, defaults, or County Court Judgments (CCJs) can drag your score down.
Want to boost your chances? Here’s how:
- Check your credit report for errors—and fix them.
- Pay down existing debts.
- Always pay bills on time.
- Avoid multiple credit applications in a short period.
Do First-Time Buyers Have to Pay Stamp Duty?
Good news—if you’re a first-time buyer, you might not have to pay stamp duty at all. There’s usually relief on properties up to a certain value, making the whole process a little more affordable.
What Are the Steps to Getting Your First Mortgage?
Here’s what the journey looks like from saving to getting the keys:
- Save Your Deposit:
- Aim for at least 5-10%. The bigger, the better.
- Get a Mortgage in Principle (MIP):
- This gives you an idea of how much you could borrow.
- House Hunting:
- Browse property sites and visit estate agents.
- Make an Offer:
- Found “the one”? Time to make an offer.
- Apply for a Mortgage:
- We’ll help you find the best deal.
- Property Valuation and Survey:
- The lender checks the property’s value and condition.
- Get Your Mortgage Offer:
- Once everything checks out, the lender makes it official.
- Legal Work:
- A solicitor handles the legal side of things.
- Exchange Contracts:
- This is when it becomes legally binding.
- Completion Day:
- You get the keys—congratulations!
Can You Get a Mortgage with Bad Credit?
Absolutely. It might take a bit more work, but it’s definitely doable. Specialist lenders offer mortgages specifically for people with poor credit.
Here’s how to improve your odds:
- Save a Bigger Deposit: 10-20% shows lenders you’re serious.
- Work with a Mortgage Broker (like us!): We know the lenders who can help.
- Show Stable Income: Regular income reassures lenders.
- Tidy Up Your Credit: Pay off debts and avoid new ones.
What Government Schemes Can Help First-Time Buyers?
There are a few schemes designed to make life easier for first-time buyers—even if you’ve got bad credit:
- Shared Ownership:
- Buy part of the property and rent the rest.
- First Homes Scheme:
- New builds sold at a discount.
- Lifetime ISA (LISA):
- Save up to £4,000 a year and get a 25% government bonus.
How Can Mortgage Bridge Help You?
That’s where we come in. At Mortgage Bridge, we specialise in helping first-time buyers—especially if your credit isn’t spotless. We’ve got access to specialist lenders you won’t find on the high street.
Here’s what we can do:
- Find the right lender for your situation
- Help with all the paperwork (because, let’s face it, it’s a lot)
- Support you from start to finish
Whether you’re just thinking about buying or ready to apply, we’ve got your back.
Can You Really Buy Your First Home with Bad Credit?
Yes, you can! It might feel like a mountain to climb, but with the right advice and a solid plan, it’s totally doable.
If you’re ready to take the first step—or just want to chat about your options—get in touch with us at Mortgage Bridge. We’re here to make the process as stress-free as possible.