If you have had a history of bad credit, you might be feeling a little uncertain about applying for a home loan. Particularly given how strict the banks can be. The good news is that with a lender, rather than the bank, you could still be eligible. Here’s how it works.
What is bad credit?
Bad credit stems from missed payments, whether through bills or loans, including:
How To Get Approved With Bad Credit
It might sound as though you have no chance, but it IS possible to get a home loan with bad credit. How? Follow these simple steps:
Apply with a non-bank non-credit scoring lender
Many lending companies use a system that’s called credit scoring – and this helps them to assess your application for a home loan. They put all your data into the system, and you get a credit score rating – and often, if you have too much debt or bad credit, you’ll be labelled as a bad risk. Most lenders will cut the ties then. A non-credit scoring lender will look further than your past, and they won’t rely on a computer system. They instead talk to you and will focus on your current financial situation to make a judgement call.
Skip Mortgage Insurance
Once you have been approved by a lender, you still have to be approved by mortgage insurance. How can you avoid this? Have your 20% deposit, stamp duty and legal fees ready to go. This will save you the process of approval by a Lenders Mortgage Insurer.
Show That You’re Better With Your Money
If you’ve experienced financial hardship in the past that has created bad credit, you need to show that your current situation is better. Prove that you’re now paying all your rent and bills on time, show that you don’t have any debt and your credit cards are all paid off.
Wait For Your Records To Clear
If you have time to spare to buy a home, you can wait until your bad credit ratings have been removed from your credit file. For example, a court writ or default generally affects your credit rating for five years. If you can, apply for a loan after that time, and you’ll avoid any unnecessary knockbacks.
The best advice we can give is to talk to one of our experienced lenders. Our dedicated bad credit mortgage brokers can assess your current situation and let you know the best options available. Click the apply button below to start the process.