What Credit Score Do You Need to Buy A House for the First Time?
If you’re in the market looking for a home loan, then you should have an idea of your credit score. Your credit score can tell you whether you will be eligible for a loan and what interest rates you can expect to pay. Know the home loan requirements for first time home buyers in this article.
While lenders will look at your debt, your income, and your savings history, your credit score will also determine whether your loan application will get approved or not.
People who have a credit score above 700 usually don’t have a problem securing a home loan. On the other hand, people with credit scores below 600 can face some difficulty in obtaining a home loan. This does not mean that people with bad credit scores cannot secure home loans. Several non-conforming lenders offer bad credit home loans in Australia.
If you suffer from poor credit, you don’t need to despair. It is still possible for you to buy a house, but first, you need to learn more about credit scores. This will give you an idea about the minimum credit score to buy a house. Once you have an idea of your credit score, you can seek the help of mortgage brokers to help secure a home loan.
Requirements for a bad credit home loans
Checking your credit score should be your number one priority before applying for a mortgage. Remember that mortgages are large loans that typically have a loan term of 15 to 30 years. As well as the mortgage repayments, you’ll need to allow extra for insurance, taxes, and your home loan deposit.
If your credit score is low, you will have to deal with higher interest rates on your home loan. The terms and conditions of the mortgage will also vary from one lender to another. Mortgage brokers can help you understand what you will face when looking for a bad credit home loan.
How to get organised to apply for a home loan
When you apply for bad credit home loans, lenders will closely look at your credit score and your financial statements. To secure a loan, you need to show lenders that you are financially responsible despite having a bad credit score.
You must also submit all the home loan requirements needed. Before you approach lenders, get organised with your financial statements. Collect your tax returns for the past year, your bank statements, your payslips, and a list of your debts and assets including any investments.
What credit scores mean
There are two types of credit rating systems in Australia known as the Experian system and the Equifax system. Both systems indicate credit score as a number ranging between 1-1000 (Experian) or 1-1200 (Equifax).
The following table will give you an idea of what credit scores mean:
|Below average/very poor||0-549||0-509|
As you can see, if your credit score is below 625 (Experian) or 622 (Equifax), lenders will consider your credit score to be bad. The minimum credit score to secure a loan depends on the type of loan you’re looking to obtain. Fortunately, the real estate market in Australia is doing well, and lenders have relaxed the minimum credit score to buy a house.
What to do if you have bad credit
Even if your credit score is below the mark, you can still secure home financing. You have to put in little extra money for your initial home loan deposit, and you’ll need to do a little more work.
To increase your chances of obtaining bad credit home loans, you should consider offering a larger deposit amount. You can also consider finding a cosigner with a good credit score to co-apply for the home loan with you.
It is very important to approach the right lender when you’re looking for a home loan with bad credit. Approaching the wrong lender will mean having to deal with bad loan terms and very high-interest rates. In the worst-case scenario, your loan application will get rejected.
To ensure that you approach the right lender, seek the help of a mortgage broker. Mortgage brokers have access to a variety of lenders in the market, and they can help you find the best lender for your needs.
Traps to avoid
When you’re looking for bad credit home loans, there are certain traps you should avoid. Make sure not to go with the first home loan that comes your way and always compare your options for a better deal.
Also, when you’re applying for a loan, make sure not to overlook the features of the loan and make sure to check the comparison rates.
The choice to borrow as much as you can is extremely tempting. However, when you suffer from bad credit, this isn’t a good idea. Make sure to stay within your means and don’t borrow more than you can afford.
Apply for home financing today!
Even if you suffer from bad credit, you can still secure home financing. There is no strict minimum credit score to buy a house. Get the right lender and provide all home loan requirements and prove that you are financially responsible, you should be able to secure home financing.
And, to increase your chances of securing bad credit home loans, talk to our mortgage brokers at Loans for People with Bad Credit. We’re bad credit loans specialists, and we can help you find the right house mortgage for your needs.
Get in touch with us to talk to one of our expert house mortgage brokers today!
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