Getting a Home Loan with a Bad Credit Score? Yes It’s Possible!

Can I Still Get A Home Loan If My Credit Rating Is Bad

Getting a home loan is itself a difficult thing to do, depending on certain circumstances. However, getting a home loan with a bad credit rating is probably the most difficult thing you’ll have to get through when trying to settle yourself in a new house.

Still, this is not something impossible to do. There are various ways through which you can get a home loan even if you have a bad credit rating. Before getting into the action, so to speak, we’ll talk a bit about credit and what determines its rating.

Anyone who considers buying a new home via a loan must understand every other thing that comes with doing so. Knowing only the ways through which you can get a home loan with a bad credit rating is not recommended.

What Is a Credit Rating?

When talking to a lender, they will assess your position as a borrower – this is done with the help of your credit rating. Depending on your overall credit rating, the lender will put you in one of the following three categories, thus changing the way they view your application:

Credit Rating of 1 or 2 – you are viewed as a great borrower.

Credit Rating of 3 – you will have your loan assessed normally.

Credit Rating of 4 or 5 – this credit rating makes it very likely for your loan to be declined.

The above is an example based on CBA. Other banks (NAB, BankWest, and ANZ, for example) have a different credit rating into their loan assessment system. This also means that, while certain lenders will decline your loan, others may have no problem with giving you a loan with your credit rating as they look at things from a different angle and different rating approach.

What Is Bad Credit?

If you’ve defaulted on a credit card, bill, or mortgage payment in the past – or the payment of any kind of debt – then this information may be on your credit file. These entrances in your credit file are basically black marks that may make a lender deny your qualification for a home loan.

Bad Credit History – bankruptcy, defaults, court writs, judgements, or one too many credit enquiries can stop you from qualifying for a loan.

Unpaid Bills or Tax – tax bills or council rates are seen as outstanding bills and make for bad credit history.

Over Committed – too many debts for your income or total assets that value lower than total liabilities can have you labeled as beyond help or insolvent.

Lender Credit History – any issues or problems that you might have had with your current lender may influence the way they assess your application.

Mortgage Arrears – in short, missed payments on your home loan. Lenders will usually become more cautious if you’ve had multiple missed payments in the last six months. On the other hand, banks will most likely not refinance your loan if you’ve missed a single payment!

Getting a Home Loan with a Bad Credit Rating – Is it Possible ?

Obviously, it is possible for you to get a home loan with a bad credit score or bad credit rating. Banks and most of the traditional lenders will most likely avoid your application, no matter the reasons you might have for them not to.

On the other hand, by using certain approaches for your application, second tier lenders out there can help you find the best possible lender for you.

What To Do If You Have A Bad Credit Rating & Want A Home Loan

Contact our office and we’ll generate a complimentary credit report and look into the issues of your credit, we’ll see if we can work with it or if we need to work with a credit repair agency to assist.

We’ll first look into prime lenders and see if lenders will consider your credit. These are usually major banks.

If prime isn’t the way to go, we will look into non-traditional lenders, or even specialist lenders, that will consider your home loan application.

Finally, your home loan options will be compared, and you will be presented with several options for your home loan.

We’ll also make sure that you benefit from purchasing or refinancing – we will not present you with a loan offer that you don’t need or can’t afford.

Key Things Lenders Consider When You Apply with a Bad Credit Rating

There are a couple of things that lenders consider when you apply for a home loan with a bad credit rating. These are used to calculate your overall credit rating and see if they are comfortable with giving you a loan.

For example, a loan for buying a home comes with negligible risk, while one used for debt consolidation comes with a rather high risk for the lender. Moreover, if you’ve lived for more than two years in the same address, the risk is very low – on the other hand, 6 months or less of living in the same location come with a high risk for the lender.

The time you’ve been in your current job, the manner of your employment, the number of loans you have applied for, missed payments on current debts, the value of the loan, savings, as well as your net asset position are some of the things that lenders will consider when reviewing your application.

Bad Credit Home Loans Types

There are several types of bad credit home loans. You should investigate all of these before getting a home loan so that you have a clear view of your possibilities.

Paid and Unpaid Default Home Loan

These types of loans are usually offered to borrowers that come with defaults on their credit file. Lenders will look at two types of default lenders, namely, unpaid and paid defaults. These lenders usually have a cap on the size of the default.

Discharged Bankrupt Home Loan

Borrowers that were bankrupt and have now been discharged can qualify for a bad credit home loan. We have lenders that will give you a home loan right after you become discharged bankrupt.

Tax Debt Home Loan

If you have a large debt with the Australian Taxation Office, you can be offered a bad credit home loan. Usually, the Australian Taxation Office debt is added or refinanced  with your mortgage, thus leaving you clear from any debt incurred by it.

Debt Consolidation Home Loan

You can also be eligible for a bad credit home loan if you have several unmanageable small debts. Australians are known to have multiple forms of unsecured debt rolled into their mortgage – the result is a simple monthly payment.

The Bottom Line

Therefore, getting a home loan with a bad credit rating is not something that should be seen as impossible. Nowadays, you have quite a lot of options that you can choose from and apply for a home loan.

Still, it is strongly recommended that you do your best to avoid having a bad credit rating. If you ever have any questions or need information about home loans and your credit rating, don’t hesitate to contact our office for refinancing home loan help.

Our staff, with years of experience, will make sure to help and guide you through the process of finding the appropriate lender for your needs. Just reach out to us – we’re always happy to help you! Contact us on on 02 9121 6247 or submit your scenario online.

Share on email
Share on facebook
Share on whatsapp
Share on linkedin
Leave a reply

Your email address will not be published. Required fields are marked *

Access our free e-guides

Whether you’re a first home buyer looking at entering the market or an existing home owner looking at ways to save money on your home loan, we have you covered. We’ve put hundreds of hours of research into these guides to ensure you end up ahead, and it’s completely on the house.

So, why use Highline Lending for your home loan?

We meet for a consultation, obtain your supporting documents and proceed to structure and package your application for approval knowing exactly what the banks want to see. We also monitor your home loan post approval ensuring you’re home loan suits you and your financial position

We get paid a commission from our lenders as a result of introducing your business to them. Subsequently, our service is at no cost to you. Our commission does not affect your interest rate whatsoever, if anything, we’re in a position to get you a lower interest rate than the general public due to our relationships with our banks

With our many years experience in the industry, we’ve been exposed to both easy and complex loan scenarios. Each loan we process gets presented to over sixty financial institutions, ensuring we have explored all options possible and are able to provide a solution