How to apply for a mortgage with bad credit

A bad credit history is not a death sentence. There are several effective ways to improve it before contacting the bank. We look at them in the article and advise on how else you can increase your chances of getting a mortgage.

Will the bank approve a mortgage with bad credit history?

There is no definite answer to this question – it all depends on the bank and the specific situation, but you should not despair. Even if you have a bad credit history, there is still a chance to get a mortgage, and there are reasonable reasons for this. Here they are:

  • A mortgage is a secured loan. It is secured by real estate, which the client buys using bank funds. If something goes wrong, the apartment will go to the bank, and this is a liquid asset.
  • Some banks do not place restrictions on issuing mortgages for clients with a bad credit history, but issue loans only under certain conditions. For example, they increase the amount of the down payment, increase the interest rate, or are required to take out insurance.
  • For clients with a proven high income and permanent employment, the chances of getting a mortgage even with a bad credit history are high. The bank is more interested in the client’s present, rather than his past. If today you have a stable job and regular income, there is no need to fear rejection.
  • Each bank analyzes the borrower’s profile in its own way, which is why one financial institution can refuse a loan and another can approve it. If you are rejected, this does not mean that it is all because of your bad credit history; there may be different reasons, and the bank has the right not to report them.

What ruins your credit history?

Fortunately, there are a few such factors. Here’s what negatively affects your financial background:

  • Right now you have outstanding loans to banks or microfinance organizations.
  • You have declined a mortgage in the past. They took out a loan for housing and did not fulfill the conditions. In this case, the new mortgage request may not be approved.
  • They took out other types of loans and did not make payments as scheduled. A delay of at least 5 days is considered a gross violation.
  • In your history, there are appeals to banks and refusals to issue loans – and numerous ones.
  • There is a court decision on forced repayment of debt to credit institutions.

If you don’t recognize yourself at any point, congratulations! The story, apparently, is in order and the article about how to get a mortgage with bad credit is not for you.

Let’s assume that you have paid off the debts that you have right now. What to do with everything else? If you have a bad credit history, you have little chance of getting a mortgage.

Analyze your borrower profile yourself

It is clear that bank managers will do this more professionally. Besides, they won’t tell you about all the subtleties. The internal documents of any financial institution spell out clear criteria for who gets which loan or mortgage, for what period, and what amount is safe to issue.

Some borrowers recklessly attribute to themselves the status of a person with a bad credit history. There is no single approved portrait of an unreliable borrower. This is all due to the different levels of risk policies adopted by banks.

Now that you have reliable information about your credit history, request an income certificate from your employer. It shows your income for the past year. When issuing mortgages, banks give preference to people over 21 years of age who have been working in one place for at least six months and have a stable income.

Your portrait will be complemented by the absence of bailiffs in the database. It is called the Enforcement Proceedings Data Bank.

How to change your credit history information

Information in the bureau may be updated. The only question is how long it will take.

There are several ways to increase banks’ confidence in you as a potential borrower.

  • Take out a consumer loan and repay the loan strictly according to schedule. Don’t try to pay off the loan in full as quickly as possible. The goal is to demonstrate to the bank your exceptional punctuality.
  • Open a credit card. Most banks issue credit cards. You can often arrange the service online. It’s not scary that the limit of available funds will be very small. It is much more important to show that you pay off your debt on time.
  • Refinance a loan or do a restructuring. This method is suitable if you have an open loan, the obligations on that you cannot cope with. Try contacting other banks. They may offer a program that will reduce the monthly payment and increase the loan term.
  • Bank deposit. When you are preparing to buy an apartment with a mortgage, you may already have money saved up for the down payment. A good amount of cash savings can be deposited in the bank.

If the amount is equal to 30% of the cost of housing or higher, banks become more loyal. If there are no savings, then perhaps you have something to sell. For example, a grandmother’s apartment in the suburbs.

Other ways to get a mortgage with bad credit

Suppose you have something completely seditious in your “history”. For example, a past mortgage loan. Will they never give you a loan for an apartment again?

There is still a chance of getting a mortgage with a bad credit history. Especially if you have a solid salary and a round sum saved for a down payment.

A co-borrower or guarantor can also “sign up” for the loan with you. Finally, you can mortgage your existing property. Then the likelihood that the mortgage will be approved will increase. But your interest rate will be slightly higher.

What if you’ve never taken out a loan? In this case, when analyzing your solvency, the bank will rely on other factors. For example, the amount of monthly earnings, the amount of the down payment, and age. But that’s a completely different story.


By the way, a lack of credit history is not always a plus in the eyes of the bank. If you simply don’t contact banks for 7 years and there are no records left about you, this is also not entirely correct. Perhaps you simply do not have the means to use financial products and take out loans. Therefore, to maintain and improve the quality of your credit history, it is better to leave a positive financial trail. For example, use it – it can be repaid without interest, which will not affect the budget in any way, but will add to your history with records of settlements of obligations without delays.

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