Buying a new home is an exciting adventure. Whether you plan to live in it, or rent it out as an investment, just getting your foot in the door of the property market is a huge achievement. Of course, it isn’t an easy one and generally requires the help of a lender to help you reach it. But what if you have bad credit?
One of the first things most lenders will check is your credit score, which means if you have a low score, it can dash your chances of being able to take out a mortgage. This doesn’t mean you don’t have options, thankfully there are solutions out there for those wanting to take out a bad credit home loan.
What Is Bad Credit?
Everyone has a credit score. This score is determined by the listings on your credit report. If you have a number of negative listings, then this will be reflected with a low credit score. On the other hand, if you have a good borrowing history, you will have a high credit score. Of course, we can’t always control our credit score.
Things happen that are beyond our control, leaving us in debt we can’t pay off. For example, you could find yourself in an accident or with unexpected hospital bills after falling ill. The debt can add up and simply missing repayments is enough to result in a negative listing on your report. Some of the other factors that contribute include:
- Defaulting on a loan
- Court orders
- Credit history: the longer your history the better
- Types of credit: the more variety you have, the higher your score
- Credit utilisation ratio: this refers to how much of your available credit you are using. If you are using more than 80%, it suggests you are already overextended
While the best option is to work on improving your credit score and building it back up over time, we don’t always have this luxury. Whether a house you love has suddenly come onto the market, or you are looking to find a place and move out as soon as possible, you may be in need of a bad credit home loan.
Can I Get a Bad Credit Home Loan?
It is possible to get a bad credit home loan. Most banks will turn you away with bad credit and won’t take a second look at your file or your circumstances. If you are looking for a mortgage with bad credit, then your best option is to turn away from traditional lenders. Instead, look at non-bank alternative lenders, who are more likely to look past your poor credit history to offer you a mortgage. You will need to do some number crunching to see if you can make it work:
- Borrowing less than 80%: if you are looking to borrow less than 80% of the property value, then you should easily be able to find a lender to help you. Even with a bad credit history.
- Borrowing up to 90%: if you are looking to borrow that little bit more up to 90%, then you will need to shop around and look at the terms and conditions of different lenders. Often, you will be able to take out this amount of the property value even with larger defaults, court writs and more.
- Borrowing up to 95%: if you want to borrow up to 95% of the property value then you will need to only have minor defaults up to $500 to be accepted by most lenders.
How To Get A Mortgage With Bad Credit?
To get a bad credit home loan, you will need to do your research on different lenders. Most non-bank lenders will assess your application on a case-by-case basis. They will take the time to listen to your circumstances and how you found yourself in a position of bad credit. The lender may ask for proof that you can afford to make the repayments, so it helps to have payslips and bank statements ready. Some other things that can help you out include:
- Saving for a bigger deposit: the more money you can contribute, the less you need to borrow. This will help your chances.
- Get a guarantor: having a friend or family member act as a guarantor on your loan also improves your chances. This does, however, tie you both together financially, so you do need to be careful and make sure you can meet the repayments.
- Sort your finances: you always have the opportunity to sort out your finances first before looking into a loan.
Get The Help You Need
NSW Mortgage Corp believes that all Australians should be able to access affordable finance when they need it. We will help you obtain a bad credit home loan. Our caring and highly trained loan specialists work alongside bad credit applicants every day to find financial solutions. We are here to find the most suitable solution for your circumstances. Get in touch with us today to discuss your unique financial needs.
