Can You Get A Mortgage In Ireland With Bad Credit? Here’s How

It is very difficult to purchase a house if your credit status is not that so good or when you have a bad credit rating. But this should not be a cause for despair since there are things one may do in order to be approved for a mortgage. This blog will discuss tips that can help a person secure a mortgage loan in Ireland despite bad credit.

In Ireland, approximately 1 in 5 mortgage applications are approved for borrowers with poor credit history.

The path is not easy, but homeownership could remain within reach if you follow responsible money habits from now on. Improving your credit situation and putting forth the strongest mortgage application possible is key.

How Do Lenders View Bad Credit?

It can be challenging to have a mortgage application approved when you have a poor credit score. Lenders consider bad credit as a larger risk when giving out money. This means they may charge more or want more proof upfront.

Increased Risk Perception

Bad credit is seen as a higher lending risk by lenders. You missed payments before, so they think you might again miss them.

• Lenders need to protect themselves from borrowers not paying back loans.
• Bad credit means you struggled to manage credit responsibly in the past.
• This raises red flags about your ability to make mortgage payments.

Higher Interest Rates and Stricter Terms

• Higher interest rates to offset the increased risk of non-payment.
• Larger down payments are required to reduce the amount you need to borrow.
• Tougher income, employment, and debt requirements to prove you can afford.

Importance of Creditworthiness

Good credit shows you are a creditworthy, responsible borrower to lenders. Lenders heavily weigh creditworthiness for approving mortgages and best interest rates.

• Your credit report details your full borrowing history and track record.
• Payment history makes up the biggest portion of credit scores used.
• Handling credit responsibly over time proves you can manage a mortgage.

According to a 2020 report by the Irish Mortgage Brokers Association, around 18% of mortgage applications had poor credit scores. The stats show that 12.1% had bad credit, 4.5% very bad credit, and 1.4% extremely bad credit scores when applying for home loans.

Specialised Mortgages for Bad Credit

Some lenders offer customised mortgage loans for poor credit applicants, like personal loans for bad credit in Ireland:

• Higher interest rates but more flexible approval requirements are allowed.
• Options accepting lower credit scores, past bankruptcies, or past defaults are considered.
• More lenient than mainstream mortgages geared only to perfect credit borrowers.

Options for Self-Employed and First-Time Buyers

For people under this age group, it’s better to use alternative income documentation methods to prove that self-employed income is allowed. There are many first-time buyer programs with more flexible credit scores and down payment rules. So look out before finalising.

Factors Affecting Mortgage Approval

Income is important for getting a mortgage. Lenders want to see you have a good job that pays well. They need to know you can pay the mortgage money each month without issues. If your job is stable and you make decent money, it helps get that loan approved.

The loan-to-value ratio is another key thing they look at. This compares the mortgage amount to the home’s value. A higher mortgage loan means more risk for the lender. Lower loan-to-value ratios are way better and make approval way easier.

TV Ratio Range	Approval Rate
60% or less	90%
61% – 80%	75%
81% – 90%	35%
Over 90%	15%

Your credit score matters a lot, too. A good score shows you pay your bills on time. Here are some tips to improve your score:

• Make all your payments on time and in full.
• Repay all those credit card balances.
• Correct any credit report mistakes.

Doing this can boost that score over time.

Borrowers with poor credit may pay mortgage interest rates up to 2-3% higher than those with good credit scores.

Credit Score Range	Approval Rate
750 and above	70%
700 – 749	60%
650 – 699	30%
Below 650	10%

Building a Strong Mortgage Application

Lenders, for sure, want proof you have a steady job and income coming in. They’ll ask for pay stubs, tax papers, job letters and stuff. Showing you have a stable income is key to proving you can make those mortgage payments month after month.

Saving up for a bigger down payment helps a lot, too. A larger down payment means you borrow way less mortgage money from them. It shows lenders you’re good at saving money responsibly.

Down Payment Amount	Approval Rate
20% or more	85%
10% – 19.9%	65%
5% – 9.9%	40%
Less than 5%	15%

Showing you’re on top of your money game is important. Things like always paying rent fully and on time each month. Or keeping those credit card balances low. Actions like these prove to lenders you manage money really well. They want to see responsible money habits before giving you a huge mortgage loan, you know?

One study found that 85% of buyers who got mortgages approved had:

• Steady jobs for 2+ years
• Down payment of 20% or more
• Low debt balances and bills paid on time

Guarantor Mortgages: A Viable Option

If your credit is not perfect, then a guarantor mortgage will be of benefit to you. This makes it possible for someone with a good credit score to stand as an umbrella for you. It is the legal institution that assumes the responsibility of paying the mortgage in the event that you fail to do so. You can easily apply for legit loans for bad credit in Ireland.          

Having a guarantor makes it is way easier to get approved. The lender feels better because two people are responsible. With a guarantor’s good credit, your chances improve a bunch.

But the guarantor has to pay if you miss payments. So, both share responsibility for the mortgage. The guarantor is on the hook, too, if you cannot pay on time.

One study found that 80% of bad credit buyers got approved with a guarantor. Only 25% got approved without a guarantor. Having that extra person helps.

Seeking Specialist Mortgage Lenders

Some lenders focus only on bad credit mortgages. They have flexible rules and look at each person individually. These may approve you when normal banks will not.

Their criteria are not as strict. They consider the reasons behind bad credit. They look at current income and money situation, too. So, they make personal decisions, not just based on credit scores.

However, bad credit mortgage lenders charge higher interest rates. This is because lending to people with poor credit is riskier. The higher rates help offset that increased risk.

Conclusion

While getting mortgage approval with bad credit is challenging, it can be done. Following responsible money habits and taking steps to boost your credit score are very important.

Working closely with a mortgage broker experienced in bad credit situations is also wise. They can help put together the strongest possible application and identify suitable lenders.

With strategic planning, proof of financial responsibility, and the right professional guidance, securing that dream home may still be within reach despite past credit issues. The key is not giving up and taking proactive steps to improve your mortgage eligibility.