Having a history of bad debt can make it harder to get home loan approval, but it doesn’t necessarily make it impossible. As the old adage goes, “Where there is a will, there’s a way.” This means that if you have the determination and the conviction to change what has happened in the past, and you are seeking to become more responsible financially, then home loan approval just may be possible. Let’s look at some options that you can use to possibly get home loan approval if you have a bad credit history.
Your Options if You Have a Bad Credit History
- Non-Conforming or Specialist Lender
Not all lenders specialise in standard home loans, some deal solely in applications from individuals who do not meet conventional lending criteria. These lenders are referred to as non-conforming lenders and many will consider your circumstances, rather than just your credit history.
- Paying a Higher Interest Rate
Depending on the type of bad credit history you have, some conventional lenders may consider your application. But, you need to be aware that you may need to agree to paying a much higher interest rate than what is currently available.
- Paying More of a Deposit
Traditional lenders, such as banks and credit unions may consider you as less of a risk, if you have a larger deposit. Rather than having a 20% deposit aim to save more.
- Reduce Your Debt
If you have any other loans or credit cards, pay these out and reduce your existing debt. This will make you a more favourable home loan candidate for a lender.
- Give Explanations for Your Bad Credit History
Divorce, major illness or medical problems are often considered as extenuating circumstances, meaning they are not everyday occurrences. While this does not excuse you from not meeting your financial obligations, it can make the issue more understandable. Therefore, some lenders will consider these circumstances and may decide that you are less of a risk.
- Consider a Home Start Application
Home Start is a Government lending scheme that helps low income earners, individuals with low deposits and those who have a bad credit history to get finance. Home Start is an excellent way to get your foot in the door and to develop a good payment history. Visit http://www.homestart.com.au to find out more.
- Find a Guarantor
If you have a friend or family member who has a good rating and is willing to co-sign your loan, then you may qualify for a traditional mortgage. Of course, this person needs to be aware that if you default on the home loan that as guarantor they’ll then be responsible for the repayments.
Do you have a bad credit history and want to know how you can change this? If so, then contact eChoice .
Written by eChoice