8 Ways to get approved for a mortgage with bad credit

It is a fact that it is not easy for a person with bad credit to get a loan. However this does not imply that it is impossible. You just need to find out and learn about the different ways to get approved for a mortgage with bad credit.

1. Check your credit file

As a general practice, all prospective home loan lenders you approach will closely examine your credit history before granting you a loan, so it’s important that you check your credit file before applying. You can always use a broker that will assist you by obtaining one for you and then explaining it to you. You are entitled to a free copy of your credit file every year; discuss all negative listings with a credit repair service so that you can confidently explain them to potential lenders.

2.Credit repair services may help you

Some credit repair specialists will remove the bad credit listings on your file which do not adhere to relevant laws. If it is removed it should make it easier to apply for a regular home loan without the increased fees and interest rates related to a bad credit home loan. However there are fees associated with these companies. So, before you engage one, you should speak to a broker as maybe they can help you obtain the mortgage you need with the bad credit listing still on your file and the pricing may be better than paying fees to a Credit repair company.

3. Get rid of debts

Lenders will take into account all your credit accounts while checking your application. So pay off as much debt as possible to improve the chances of a loan approval. As your lender will consider your total capacity at paying off loans before sanctioning a loan, too many pending loans and stagnant or maxed out credit cards might reflect negatively on your application. However it is best not to go shopping around for debt consolidation loans as these may create credit enquiries on your file which can affect your credit score with lenders. This comes back to your credit file and speaking with a mortgage broker.

4. Prioritise your debts

Understanding when you are struggling with meeting your commitments on time is important. Knowing which debts are more important to pay on time versus others is also very important. If you are refinancing and / or paying other debts with a refinance then the statements will be shown to the new lender. A new lender will look more kindly on those who are making repayments on their mortgage and having arrears on credits than those who are being late on the mortgage but managing the credit card or personal loan. Remember your mortgage payments must come first. Other debts should be kept in contact with if you are having trouble and make as many payments. Pay your mortgage before a credit card or personal loan.

5. Apply through a mortgage broker

Mortgage brokers deal with a number of lenders and can guide you in the right direction, even if your credit rating is a little low. An experienced and accredited mortgage broker should complete a credit check and a full interview with you. They will then use that knowledge combined with the product and lending policies they have available and hopefully help you obtain a suitable mortgage to meet your needs.

6. Turn to specialist lenders for your loan

Some Australian lenders specialise in bad credit home loans. They look at your credit file and consider your bad credit to be a result of a lifestyle change like divorce or illness. They take your income and other factors into consideration to grant you a loan even if you are bankrupt or if your file has negative listings. Knowing which lenders accept what problems, is the key.

7. Avoid making multiple loan applications

As your credit file mentions all your previous credit enquiries including previous loan applications, too many enquiries in a span of time poses a red flag to prospective lenders. So be careful who you approach for a home loan as too many applications dispelled may indicate money management problems.

8. Be honest and open about your bad credit listings

Make sure you explain your bad credit issues to your broker before applying. For a broker to meet your needs properly they need to understand your situation. If you are applying directly with a lender you are best to know what they accept and don’t accept before applying as this could result in a decline if you do not know their lending policy first.

Getting a mortgage can sometimes be difficult, but having a poor credit score or poor credit history will make it more daunting. Talk to experts at WhiteStar Finance to know how we can help and what your options might be. Call us on 1300 652 842 or email us at info@whitestar.com.au