It can be tough finding a home loan when your credit history is not quite right. Some of the best known national lenders have a computerised credit scoring system that treats borrowers as numbers. If the numbers do not add up you receive a decline.
Our Mortgage Specialists have access to a number of second tier and less well know lenders who will assess each home loan application in person and on its merits. They will consider reasons and circumstances that may have created your prior credit problems.
We do not make empty promises. Not every loan applicant is able to qualify for a mortgage. However if your circumstances have changed since the time when your credit history was damaged, we have access to lenders who are willing to consider your application.
What is Bad Credit?
Bad Credit refers to something in your past that has left a bad mark on your credit report. It can include someone who is currently bankrupt, or discharged from bankruptcy. Anyone still in bankruptcy will not qualify for a home loan. Borrowing for a home is possible after you are discharged.
The following events listed on your credit report can give you bad credit:
- Bankruptcy or a Debt Agreement (even after discharge);
- Paid/Unpaid defaults;
- Mortgage Arrears (these will appear on your mortgage statements)
If you are unsure as to whether you have bad credit we suggest that you obtain a free copy of your own credit report from VEDA Advantage www.mycreditfile.com.au
There is a range of criteria that is used by lenders in assessing a mortgage application. While this criteria does vary between lenders, at the minimum you will need to :
- Have a deposit (amount needed will depend on lender and extent of your bad credit);
- Repay all bad credit (by the time loan settles);
- Be working or Self-Employed (pensioners must have additional source of income);
- Have sufficient income to service the proposed loan;
- Have sufficient funds to cover costs of purchase;
- Be discharged from Bankruptcy or Debt Agreement;
Improving Chance of Approval
In assessing your mortgage application lenders will take the following into consideration:
- The age of your paid defaults, the older the defaults the better are your chances.
- The nature amount and type of the credit defaults of judgments. Small Telco defaults will have less of an impact than large credit contract defaults;
- Amount you wish to borrow as a proportion of property value. This is also know as your loan LVR. The less you need to borrow (lower lvr) the better are your chances of approval.
- Borrowers with stable employment history and full financials stand a better chance of approval than borrowers who have recently changed fields of employment or have moved from PAYG to a Self Employed status for example. Low doc home loan borrowers with bad credit history need to have a much larger deposit to compensate the lender for increased risk.