A Guide to Bad Credit Home Loans in Australia

By Angela Monroe - April 13, 2018

Financing a home when you have a bad credit history may be difficult, but it’s certainly not impossible. If you approach the right lender for your situation, you may be able to obtain a bad credit home loan.

However, simply approaching the right lender and applying for a home loan won’t work with bad credit. Your loan application must show lenders that you are financially responsible and that you have the repayment capacity. Only then will your home loan application be approved.

If you’re not sure whether you’ll meet the lender requirements for a bad credit home loan in Australia, then you should seek the help of professional financial consultants. Professionals, such as Loans for People with Bad Credit will help you prepare your home loan application. We’ll also help you arrange for the necessary paperwork you need and connect you to the right lender for your financial situation.

Here are some tips to help you obtain financing for a home when you suffer from a bad credit score. Follow these tips to improve the chances of your home loan application getting approved.

1. Clear your defaults

Before you approach a lender for a home loan, you must clear all your defaults. This is because most lenders won’t view your loan application favourably with unpaid defaults if you suffer from bad credit. In such cases, even a bad credit specialist may not be able to help you obtain a loan.

However, once your credit report is free from unpaid defaults, you’ll be in a better position to obtain a home loan. Make sure to clear all your defaults as soon as you can and well before applying for a home loan. This includes clearing your credit card bills, utility bills, telco bills and all other outstanding defaults.

2. Present clean bank statements

When you apply for bad credit home loans, lenders will ask you to provide your bank statements for the last three months. Make sure that you present clean bank statements without any overdraws. Even the smallest overdraw will give lenders the idea that you’re not financially responsible.

Before you apply for a home loan on bad credit, ensure that your bank statements over the last three months are clean. Keep an eye on your debits and make sure that you always have enough in your account for outgoings. Even an overdraw as small as $50 can harm your chances when you suffer from bad credit history.

3. Save a deposit

Most lenders in Australia won’t consider your bad credit home loan application if you cannot offer a deposit. You’ll need to save a 5-20% deposit on the cost of your new home.

This gives you a better Loan-to-Value Ratio (LVR). This means that you own more of the home secured by the mortgage, and reduces the risk for the lender, increasing your likelihood of approval.

A higher LVR means that you’ve provided a smaller deposit, but it could also mean higher interest or refusal of a home loan. Talk to a mortgage broker to determine the size of the deposit you will need to save to be approved for a home loan.

Here’s how LVR works:

If you’re purchasing a home with someone else for $300,000, a 5% deposit (95 per cent LVR) on the cost is $7,500 each. By saving only $625 per month, you’ll be able to save for the deposit in a year.

The best way to save for a deposit is by budgeting your expenses. Reduce your costs and try to save some amount of money every month for the deposit.

4. Apply with a guarantor

One of the best ways to obtain a bad credit home loan in Australia is by applying with a guarantor. This guarantor needs to be a family member who owns a property outright. Lenders will view the guarantor’s property as security against the home loan. In most cases, lenders will approve your home loan if you can find a suitable guarantor.

However, if you are unable to make your home loan repayments, lenders may seize the guarantor’s property. To reduce the risk to the guarantor, you should make repayments on time for 1-1.5 years and then refinance the home loan. Upon refinancing, the guarantor’s name will be removed from your home loan.

5. Accessing the right loan features

Before you approach a lender for a bad credit home loan, you must look to access the right loan features. This includes considering the loan amount, the LVR and the interest rates. It is also important to consider the fees associated with a home loan before approaching a lender.

Do understand that there may be many lenders willing to offer you a home loan on bad credit. You must know which loan features to look for before you approach lenders.

6. First Home Owner Grant

All states across Australia offer a certain grant to first time homeowners. For instance, first home owners in NSW can obtain a grant of $15,000 from the government to buy or build a home.

Check with the revenue office of your state to find out more about the grants offered by your state. You can even seek the help of professional finance consultants to help you in obtaining this grant.

Can I get a home loan with bad credit?

The short answer is yes. It may be more difficult to obtain than a standard home loan, but it’s definitely not impossible.

To increase the chances of obtaining a bad credit home loan, make sure to seek the help of professional finance consultants such as Loans for People with Bad Credit. Our consultants will assess your financial condition, connect you to the right lender and help you obtain a home loan. In certain cases, we may even be able to help you obtain a no deposit home loan.

Apply for a bad credit home loan today!

When you have bad credit, nothing can be guaranteed. But, this doesn’t mean that you should not apply for a home loan. With the help of professional consultants, you’ll increase your chances to a good extent. Even if you’ve gone bankrupt in the past or had a Part IX agreement, professional consultants can help you obtain a loan.

Loans for People with Bad Credit is your best choice for bad credit home loans. We’re finance specialists for people with bad credit. We’ve helped many people obtain bad credit home loans and we can do the same for you as well.

Contact us to talk to one of our expert consultants today!To get a home loan, you must show lenders that you have the repayment capacity and that you’re financially responsible even though your credit history is poor.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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