Buying your first home is exciting, but if you have bad credit, you might be worried about your chances of getting a mortgage especially with a Shared Ownership scheme. The good news? It’s still possible! It might take a little extra work, but with the right approach (and some expert help), you can make your homeownership dreams a reality.
What is Shared Ownership?
Shared Ownership (also called ‘part rent, part buy’) is a government-backed scheme that helps people get on the property ladder by purchasing a portion of a home and renting the rest. Typically, you can buy between 25% and 75% of the property and pay a reduced rent on the remaining share. Later, if your financial situation improves, you can buy more of the property over time a process known as staircasing.
Shared Ownership homes are usually new builds or properties available through specific housing association resale programs. They are always leasehold, meaning there may be additional costs like ground rent and service charges.
Can You Get a Shared Ownership Mortgage with Bad Credit?
Yes! Having bad credit doesn’t mean you can’t get a mortgage, but it does mean you’ll need to be strategic about how you apply. Your eligibility will depend on:
- The type of bad credit issue (missed payments, defaults, CCJs, etc.)
- How long ago the issue occurred
- The amount of debt involved
- How well you’ve managed your finances since
Most high-street banks might be hesitant to approve a mortgage for someone with a bad credit history. However, specialist lenders are more flexible and consider your individual circumstances rather than just your credit score. Clever Mortgages understands bad credit mortgages can help match you with the right lender.
How Does Bad Credit Affect Your Mortgage Options?
If you have a poor credit history, you may face some challenges, such as:
- Higher interest rates – Lenders may charge more to offset the risk.
- Larger deposit requirements – You might need a bigger deposit (sometimes 10-15% instead of 5%).
- Fewer lender options – Not all banks offer Shared Ownership mortgages to people with bad credit.
This is where Clever Mortgages can make a huge difference! They have access to specialist lenders who are more willing to work with first-time buyers in tricky financial situations.
What Credit Issues Can Affect Your Mortgage Application?
Different credit issues impact mortgage applications in different ways. Here’s a breakdown of what lenders will look at:
Late Payments
Missed a bill? It happens! Occasional late payments might not be a big deal, but frequent ones could make lenders hesitant.
Defaults
If you’ve failed to pay a debt and it was recorded as a default, lenders will look at how long ago it happened and whether it’s been settled.
County Court Judgments (CCJs)
CCJs occur when a creditor takes legal action over unpaid debts. Some lenders will still consider your application, especially if the CCJ was a long time ago or has been repaid.
Debt Management Plans (DMPs)
If you’ve been on a structured repayment plan, lenders will want to see how well you’ve managed it.
Individual Voluntary Arrangements (IVAs) & Bankruptcy
These are more serious credit issues, but they don’t mean you can never get a mortgage. If you’ve rebuilt your finances since, some specialist lenders may still accept you.
How to Improve Your Chances of Getting a Shared Ownership Mortgage
If you have bad credit, there are steps you can take to boost your mortgage application:
✅ Check Your Credit Report – Knowing where you stand helps you understand what lenders will see. Use a service like Checkmyfile to get a full overview.
✅ Fix Any Errors – Sometimes credit reports have mistakes. If you spot anything incorrect, contact the credit agency to get it fixed.
✅ Register to Vote – Being on the electoral roll can improve your credit score.
✅ Keep Up with Payments – Show lenders you’re managing your finances well by paying bills on time.
✅ Save for a Bigger Deposit – The more you can put down, the better your chances of approval.
✅ Work with a Mortgage Broker – They can match you with lenders who specialize in bad credit mortgages, making the process much smoother.
How Do You Apply for a Shared Ownership Mortgage?
Once you’ve registered for the Shared Ownership scheme and found a home, your housing association will carry out a financial assessment to determine how much you can buy. You’ll then need to apply for a mortgage with a lender who supports Shared Ownership.
Documents You’ll Need:
- Proof of identity (passport or driving license)
- Proof of address (utility bill, council tax statement, etc.)
- Employment details and proof of income
- Payslips or tax returns (if self-employed)
- Proof of your deposit
- A credit report
Many lenders don’t offer Shared Ownership mortgages, so using Clever Mortgages can help ensure you apply to the right ones.
Final Thoughts: Don’t Let Bad Credit Hold You Back!
Buying a home through Shared Ownership is a fantastic way for first-time buyers to get onto the property ladder, even if you have a less-than-perfect credit history. While bad credit can make the process more challenging, it’s not an insurmountable obstacle.
By checking your credit, improving your finances, and working with the right mortgage broker, you can increase your chances of securing a Shared Ownership mortgage. Remember, bad credit doesn’t last forever, and taking the right steps now can put you on the path to homeownership!
If you’re unsure where to start, get in touch with Clever Mortgages who can help you explore your options and find the best lender for your situation.
