Home Loans For People With Bad Credit
Buying your own home is the Australian dream, and you shouldn’t let a bad credit history get in your way, although it is hard to find a 'bad credit home loan', there are some things you can do to improve your position and apply for a regular home loan, instead of looking for these rare 'bad credit home loans'.
It is easy to end up with a blemish or two on your credit report. Even a couple of late payments on your phone or electricity account can lean to a default being listed on your report.
A poor credit history doesn’t necessarily mean that you can’t take out a home loan, but it will certainly have an impact on the type of loan you can access.
In today’s guide we will take a look at what you should do if you have a poor credit history, but still wish to borrow money to purchase a home,.
Obtain a Copy of Your Report
If you even suspect that you may have any blemishes on your credit report, the first thing you should do is obtain a copy of the report.
The bank or lender is going to request a report once you apply anyway, so it’s best to get a look at the report yourself first so that you can prepare for the application process.
Clean Up Your Report
If your report does show any poor history, the first thing you want to do is to try and have those defaults removed or downgraded.
Having a default removed from your credit report is not necessarily easy, however there are credit repair companies out there who can do the work for you.
It may cost you a few hundred dollars to pay someone to attempt to clean up your credit report, but the long term savings will be worthwhile if your cleaner credit report leads to a better interest rate on your mortgage.
Document Your Defaults
There may be some defaults and other blemishes that simply cannot be removed from your credit report for various reasons.
These will likely have an effect on your home loan application, so before applying you need to put pen to paper and write detailed explanations for each default.
Obviously you want to explain each default in a way that makes you look as good as possible, but keep in mind that it is an offence to provide false information on a loan application.
Use a Mortgage Broker
Unfortunately the banks are very unlikely to approve a loan application when you have defaults on your credit report, so the best option in this case is to use a mortgage broker.
The mortgage broker will do their best to get you into a standard home loan product with a competitive rate, but in some cases you will need to consider a ‘non-conforming’ loan.
Non-conforming loans are designed for people who do not meet the bank’s standard lending criteria, and in most cases they feature higher interest rates than bank loans.
Choosing a Loan
If you are left with no option other than a non-conforming loan it is important to choose your product very carefully.
The interest rates on these loans can vary greatly, as can the fees and charges. In the past these loans often featured high exit fees, however all newly issued loans have no exit fees in line with the changes made by the government.
The best option is to use a mortgage broker who specialises in non-conforming loans, as they will know which loan is going to meet your needs whilst providing the most competitive rates and fees.
Or if you think you will be approved for a regular home loan, find your perfect home loan on our Home Loan Comparison Page.