Bad credit home loans Australia: How to get a home loan

Bad credit home loans Australia: How to get a home loan

Problems of getting a home loan with a bad credit

It can be undoubtedly said that getting a home loan with bad credit in Australia is not an easy task, rather an uphill battle if you have a poor track record of bad credit. This is due to banks and lenders adopting a stringent rule to prevent loans from being fraudulent. Banks are always carefully checking the borrowers’ credit history before approving their loan application. It can be said that getting a home loan with bad credit will not be an easy task, but it is also not impossible. You must not get discouraged and understand that it is a process that everyone must go through and remember patience is a virtue. BadcreditAustralia will help you to make the best out of your situation.

Aussie’s Executive Chairman and founder John Symond addressed ‘bad credit history’ as the main barrier or you can say, main problem of getting home loan. According to him, the late payment of your phone bills or rent can cause significant problems when applying for a loan. He strongly emphasizes the fact that having a solid track record over the last 18 months is the best way to prove yourself to the lenders as a reliable borrower. Therefore, the strong recommendation here regarding home loans bad credit is that you will have to be diligent paying your rent, credit card bills and phone bills by the due date, if not before, otherwise your credit will not improve causing creditors to not grant your loan application. This is considered as one of the major problems of getting home loans for bad credit.

In fact, getting a home loan relies not only on the good credit history but also on one’s personal income. Lack of continuous income can deter you from being eligible to apply for any loan.Aside from a constant flow of income, one must be aware that banks will have access to all files pertaining to your credit, such as previous bankruptcies, defaulted credit cards, and reposed vehicles. If home loan lenders find fault against any of these financial records, they will be compelled to reject your home loan request.

 

 How to get a home loan with bad credit

Are you residing in Australia and wondering ‘how can I get home loan with a bad credit’? No more worries!
Because this blog is written for those who are fixated with the thought of getting home loans for people with bad credit! Although getting a home loan with a bad credit history can be very difficult, but it is not impossible, as there are some effective steps that can be taken to increase your chances of being approved.

how to get a home loan with bad credit

We help you to get a home loan with a bad credit

Get a copy of your credit file

Ensure your familiarity with your credit history. At the time of approving your loan application, every home loan lender will have a close look at your credit history. So if you have one copy of your credit file with you, you can easily and confidently discuss the negative marks on your credit file. It is also a good idea to keep a copy just in case there are disputes between your credit history you posses and that the bank possess.

Disclose your bad credit listing honestly

You can’t hide anything to lenders! Before proceeding to apply for loan, you must tell your lender honestly about each of your bad credit issues. If needed, you might have to hold a face-to-face meeting with your lender to provide you the right opportunity to explain everything about your credit history. This will help your lender get more valuable information to go on in terms of making a decision about whether to approve you or deny you a loan.

Since they will ask about explanation regarding every single entry, you ought to be thorough in the details you will provide. If you somehow try to hide any issue or something else, you will certainly going to decrease or worsen your credit rating and this will significantly make the lender more suspicious. As a result, lenders might decline your application because of your dishonesty. So you need to be fully honest or transparent enough about your circumstances.

 Apply with a lender who never uses credit scoring

“Most lenders use a computer-based system called credit scoring to assess your home loan application,’’ says Kim Wight, a Personal Mortgage Adviser with Smartline.

“This means that the data collected in your application is given a rating or score and if the computer scores you as a bad risk, the application is declined before a real person has a chance to look at the application or hear your story as to why you have had credit problems in the past. In other words, ‘computer says no’,”

She further explains that “By applying with a lender who does not use credit scoring, your application – and the reason for your past credit problems – will be assessed by a real person, who can evaluate your personal situation past and present and use this information to make their decision on your application; it can be a case of, ‘human says yes’.” This gives them an eye into you personally and a more subjective view on the home loan applicant which can significantly higher your chances of being approved.

Avoid mortgage insurance

When applying for a home loan with bad credit, there are two approvals that have to be found out if you borrow higher than 80% of the value of the property. One of those approvals is from the lender, and the other one is from the mortgage insurer. In case you default on the loan, the mortgage insurer will be there to protect the lender.

“By having funds to cover 20% deposit, and other costs such as stamp duty and legal fees, you avoid having your application be assessed by the mortgage insurer, and you have a greater chance of the loan being approved,” Wight says.

Demonstrate how you’ve improved your financial situation

“If you have had problems in the past, you need to show that you are now back on track by ensuring all current financial commitments are being paid on time,” Wight says.

“This includes not only your loans and credit cards but your rent and utilities as well. Evidence of regular savings will also strengthen your application.” It is never a bad idea to have a reserved amount of money saved for times just in case. When running your credit, lenders will be able to see that you are not only making the all your payments on-time but also keen enough to start saving. This extra money is not only helpful in case something unexpected happens, but it could also be used for a higher down payment when purchasing a home, thus also increasing your chances for approval.

Bad credit home loan

Your financial situation is critical for getting a home loan

Apply for home loan to a specialist lender

The mainstream lenders might be unable to assist you based on the level of severity of your bad credit history, but there are lots of specialist lenders available in the market place who set their products price depending on the element of risk.

“The interest rate is usually higher,” Wight admits, “but people usually only stay in these products long enough for their credit situation to improve, and then they refinance to a lower rate.” At first glance, this could seem like a rather unpleasant route to getting a home loan with bad credit, but it is actually the safest. This is a way for the banks to cover their investment and also provide you with the loan you are requesting. After a couple of years continually making your mortgage payments on time, you may be eligible to refinance and lower your interest rate.

The following video shows you one option to get your dream home with a rather bad credit score using a special lender:

Look for professional advice regarding your credit report

Seek a professional advice if you are in trouble. According to Wight, “There are a number of specialist credit repair agencies that may be able to assist you with cleaning up your credit report. It is advisable to speak with them or a solicitor to investigate if it is possible for adverse entries on your report to be removed.”

Furthermore, if you do have a poor credit history or previously have had any problem with your credit rating and looking for the best chance of getting a home loan in Australia, it would be a great idea to take help of an expert Aussie Broker. They usually know every details and conditions on actually how the different lenders assess a home loan borrower and his/her loan application, and can guide you to give you knowledge about which of them are best to apply to.

Even if you make contract with an Aussie Broker to help you, he can be on your side and can shop around panel of lenders for you to seek out the right loan from the right lender based on your individual situation, which can help you save days of time and effort. The brokers will be there for you as one central point for your questions and will assist or support you throughout the whole process of getting home loan, even they can thoroughly help you fill in your loan application paperwork and any kind of government grant applications.

A better credit reposts also helps you to get a car loan approved easier and helps you to apply for personal loans.

 Shop around but only in principle

It’s crucial that you don’t apply with lots of lenders since you shop around for getting a home loan with bad credit, as each time you make an application, it is going to be recorded against your credit report. This is also the case if you open credit cards, buy a new car, or any such situation that causes your credit score to be ran.

“If lender after lender is declining your application, this will further impact your credit report,” Wight says.

She further added “At the outset, a mortgage broker can assess which lender is most likely to approve your loan application and what interest rate and charges may be applicable. It is important that you tell your broker the complete and honest story of why you have experienced credit problems so they can address the problems with the credit department of the lender.

About the author

Jonathan Heart

Hello, I'm Jonathan Heart. I'm an accountant by day and a financial enthusiasts / investor by night who invests primarily in Australian real estate and blue chip shares. I live in Sydney and I thoroughly enjoy spending my spare time reading and writing about all things related to finance in Australia.

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