You’ve been turned down by the bank. For some reason, you may have a black mark against your credit record. Don’t despair, you still have options and not all is lost.
Be aware that banks have to be responsible. Their ideal client is someone who has disposable income and has the will to pay back the loan. Understandably, if your credit rating is anything less than shiny, then they will be somewhat shy to lend to you.
In fact, banks are bound by legislation (the “Responsible Lending Code”) that governs who the bank can lend to. That legislation prevents them from lending to parties that can’t afford to service the loan. See that as a positive, since the legislation may actually prevent you from getting into financial strife. At times though, the rule does prevent potentially worth customers from borrowing.
The good news is that there are still options open, and in fact, they may even help you to improve your credit score at the same time as paying off your mortgage.
Here are some things that you can do to qualify for a home loan with bad credit
- Be honest
Be honest with yourself as well as everyone involved. Tell the full story and you’ll find that there are people who are willing to help. If you try to hide some of the facts, you’ll find that most will run for the hills. Honesty is definitely the best policy.
- Speak to us
Lender are less skittish if we go into bat on your behalf. We’ve got the means to present your situation to the lender in ways that emphasise the positive and distract from the negative. We don’t only speak to one bank, but to a panel that includes non-bank lenders and finance companies. Since each lender has their own rules to an extent, there is a good chance that you will be accepted by one and not by others.
- Make improvements
We can help you to work on your financial image. If you show consistent improvement in your financial conduct over a period of time, then the bank will be less inclined to turn you away. After a while, we will be in a position to plead your case again, and this time with a better chance of a positive outcome.
- Clean up your credit
Credit is risk that is very visible to the banks. Start paying off any outstanding debts and ensure that your potential lender has marked them off as paid.
- Get a bigger deposit
That may take time, but simply, a bigger deposit means less lending means less risk to the bank and therefore a higher chance of getting the loan. It also means less risk for you and an easier journey paying off the mortgage.
- Borrow from a non-bank
Non-bank loans are not necessarily more expensive. We have access to a range of non-bank lenders and finance companies. These type of lenders can be a short-term solution, and once you’re on the housing ladder, you may have the option to refinance further down the track.
- Improve your score
Once you have a home loan, be sure to never miss a mortgage payment. This is critical. Even if you have to forgo some of those purchases on your “wanted” list, understand that missing a payment will undo all that good work, and you’ll soon find yourself back to where you started. On the other hand, if you keep up with each payment then you’ll soon start to build up your score, making it easier to borrow the next time. Start budgeting so that you’ll never have to miss a payment.