Bad Credit Home Loans for First Home Buyers

By Angela Monroe - April 13, 2018

If you suffer from poor credit, obtaining a home loan for your first home can be somewhat difficult. However, many lenders in Australia offer bad credit home loans for first home buyers. By approaching the right lender and presenting the right loan application, you should be able to obtain a home loan.

When you’re buying a home for the first time, there are several factors you need to consider. Buying your first home is a major investment, and you need to make a thoughtful, well-informed decision as this purchase could really change your future.

Don’t despair if you have defaults or poor credit history, there are non-conforming lenders who provide loans that aren’t offered by major banks to help people in your situation own their first home.

Seeking the help of a mortgage broker can help you understand the alternative home loan application process and what you can do to position yourself for a home loan approval.

Here are some of the things you should consider when you’re buying a home for the first time:

Understand your credit history

Before you approach any lender for a home loan on bad credit, you must understand your credit history first. There’s no point in blindly applying for a loan – your application will only end up being rejected.

This is because lenders will take a good look at your credit history before offering you a home loan. In case your credit history indicates defaults or too many outstanding dues, they may not approve your loan. By taking steps to pay any defaults and ensure future financial obligations are consistently honoured. With three months showing consistent savings and no missed payments on bills, you’ll be in a stronger position for a home loan pre-approval.

Make sure to review your credit history in detail before you prepare your loan application. Reviewing your credit history will also give you an idea where you stand and what loans you are eligible for.

Save for your first home deposit

Most lenders offering bad credit home loans will require that you provide a deposit.

Generally, you’ll be able to borrow up to 80 to 95 per cent of the value of the home. This means that your deposit value will range between 5 and 20 per cent of your home value.

There is a catch in providing a deposit under 20 per cent, and that’s what you’ll be required by the lender to pay Lender’s Mortgage Insurance (LMI).

The loan pre-approval process

Once you have saved enough for your first home deposit and home buying costs, you need to apply for a loan pre-approval process.

The loan pre-approval is usually valid for three months. However, you can get this extended if you don’t find the right property to purchase within this time frame.

How to increase your chances of getting a bad credit home loan

There are many things you can do to increase the chances of your bad credit home loan being approved. These include:

1. Consolidate or refinance your debts

By consolidating or refinancing your outstanding debts, you can reduce your total debt and position yourself to take on the responsibility of a mortgage.

2. Apply with a co-signer

By applying for a home loan with a co-signer who owns a property outright or has a good credit history, the chances of your loan application getting approved increases significantly.

3. Budget your expenses

Budgeting your expenses will allow you to save money for your first home deposit and first home buying costs. Also, it will make home loan repayments easier for you because you get used to setting aside a dedicated sum each week for your new home.

4. Find the right loan product

Plenty of lenders offer bad credit home loans for first home buyers. You should compare loan products, interest rates and loan structures before applying for a loan, and using a mortgage broker can make these calculations easier and ensure you’re only comparing loans that you would qualify for.

5. Seek the help of professional finance consultants

Professional finance consultants are familiar with what lenders look for in a loan application. Professional consultants can also connect you to the right lender for your particular situation, and increase the likelihood that you’ll secure a home loan pre-approval.

The First Home Buyers Grant

Buying your first home is one of the biggest investment decisions of your life. In some states, you might be eligible for a First Home Buyers Grant, depending on the type and location of the property that you purchase. A good mortgage broker will help you to secure this grant and advise you on what you need to do to receive the lump sum.

Applying for a bad credit first home loan

Loans for People with Bad Credit can help ensure that your home loan application gets approved. Our expert consultants can help you right from the first decision to buy a home, through saving a deposit or arranging a co-signer, to the final purchase and settlement. We’re bad credit loan specialists, and we can help you find the right loan product for your needs.

Get in touch with us to talk to one of our professional consultants today!

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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