Henry VII was born at Pembroke Castle, Wales on 28 January 1457 to Margaret Beaufort, Countess of Richmond. His father, Edmund Tudor, 1st Earl of Richmond, died three months before his birth.

Henry's paternal grandfather, Owen Tudor, originally from the Tudors of Penmynydd, Isle of Anglesey in Wales, had been a page in the court of Henry V. He rose to become one of the "Squires to the Body to the King" after military service at the Battle of Agincourt. Owen is said to have secretly married the widow of Henry V, Catherine of Valois. One of their sons was Edmund Tudor, father of Henry VII. Edmund was created Earl of Richmond in 1452, and "formally declared legitimate by Parliament".

Henry's main claim to the English throne derived from his mother through the House of Beaufort. Henry's mother, Lady Margaret Beaufort, was a great-granddaughter of John of Gaunt, Duke of Lancaster, fourth son of Edward III, and his third wife Katherine Swynford. Katherine was Gaunt's mistress for about 25 years. When they married in 1396 they already had four children, including Henry's great-grandfather John Beaufort. Thus, Henry's claim was somewhat tenuous; it was from a woman, and by illegitimate descent. In theory, the Portuguese and Castilian royal families had a better claim as descendants of Catherine of Lancaster, the daughter of John of Gaunt and his second wife Constance of Castile.

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