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Is it possible to get a contractor mortgage with bad credit?
If you're a contractor with a poor credit history, you might be wondering whether or not you'll be approved for a mortgage. While it is undoubtedly more complex, you'll be pleased to know it is possible to get a contractor mortgage, even with a bad credit score.
Your best chance of being approved is by working with a mortgage broker experienced in bad credit mortgages for contractors. Not only will they be able to recommend the right mortgage lender, but they'll also be able to help with your application - boosting your chances of approval.
If you apply for a mortgage with the wrong lender and get rejected, this will make getting approved even more difficult in the future. With an experienced mortgage broker by your side, you can avoid this scenario.
The good news is you've come to the right place! At Teito, we work with more than 90 mortgage providers, including specialist lenders who deal with adverse credit and contractor mortgages.
To start, start comparing deals now, and you could get a mortgage in principle in minutes.
What is a contractor mortgage?
A contractor mortgage is a mortgage based on your contract rate, rather than your accounts.
A contractor is an independent person who works for themselves under a contract, rather than working as an employee of another company. When it comes to getting a mortgage as a contractor, you may find you're not offered the same competitive rates as someone who is employed with a stable income.
With a history of poor credit, you may also find it more challenging to get approved for the mortgage you want.
Are there any bad credit lenders for the self-employed?
Yes! there are bad credit mortgage lenders who are willing to accept self-employed applications.
Most mortgage lenders, particularly high street lenders, are unwilling to lend to self-employed borrowers with a 'traditionally' poor credit history.
Mortgage lenders will be interested in the age and severity of your adverse credit.
For example, a late or missed payment is treated differently to an IVA or CCJ, with the latter being viewed as significantly more serious.
How much can I borrow as a contract with adverse credit?
You may find that you are not able to borrow as much with a contractor mortgage. This is because, in the eyes of the lender, you are seen as a higher risk.
Several factors will influence how much you can borrow as a contractor:
- The mortgage value
- Your deposit
- The term of the mortgage
- Other outstanding financial commitments
- Your credit history
- How many dependents you have
- How long you've been contracting for.
You are more likely to be approved with a higher deposit, meaning a lower Loan to Equity Value, and if you can show you have a high income this can also help.
Mortgage rates will be higher if you have a bad credit history, but they're still possible to obtain.
Is it harder to get a mortgage as a contractor?
Yes, for contract workers, getting your mortgage application is complicated by the fact that your income is likely to be non-standard.
For most lenders, you will need to prove a regular and steady cash flow - this can be from a contract job or several contract jobs.
The more stable the cash flow that is likely to continue, the better chance you have of being approved by a mortgage lender.
That being said, it is possible to get a mortgage as a contractor - even with a bad credit history! Your best chance is by getting professional mortgage advice from a specialist mortgage broker.
Tips for getting a bad credit mortgage deal as a contractor
There are a few steps you can take to help boost your chances of getting a mortgage with bad credit as a contractor.
1. Check your credit report
Your credit report is assessed carefully by lenders during the application process. We recommend that you review your credit file with the major credit reference agencies to check for any errors or signs of fraud.
If you do find any anomalies, you can apply to have them removed from your credit file.
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2. Build your credit score
The reason that lenders pay attention to your credit history is that they are trying to determine whether or not you are a reliable borrower.
If you have never borrowed before, the only way to boost your credit score is by applying for and taking out credit and making sure you make all payments on time and in full.
3. Work with an experienced mortgage broker!
As this is a relatively niche mortgage loan, your application is highly unlikely to be approved by a high street lender.
This means that specialist lenders are your best chance of obtaining a mortgage with bad credit. Our team of experienced mortgage brokers have helped many contractors to find their perfect mortgage - even with a bad credit score.
We work with more than 90 specialist lenders, some of which cater for contractor mortgages. Get started now and you could get a mortgage in principle in minutes.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
Last updated 21 February 2024