Can you get a Home Loan with Bad Credit?
Getting a home loan with bad credit can be difficult even if your situation has improved since then, as lenders will review your credit history while assessing your home loan application.
We understand that your situation may not be viewed favourably by most lenders, and know how to help you find the right lenders who can be more understanding of your situation.
Find out if you can get a home loan with a Bad Credit history
What is Bad Credit?
What is a bad credit score?
Why is a bad credit score a problem when applying for a home loan?
Can I get a home loan even if I have Bad Credit?
Regardless of whether you have bad credit or good credit, you may still want to apply for a home loan. However, you should understand that even though it is possible to get a bad credit home loan, you may find it harder to qualify for a normal mortgage.
Firstly, you will need to contact a mortgage expert and discuss your situation. If the expert is convinced of your ability to repay the loan, they will ask for your credit card statements, tax returns, and more documents. If your situation has improved, and falls within certain criteria, then the mortgage broker may help you find a lender who can qualify you for a home loan even though you have bad credit.
What is the lowest credit score to qualify for a mortgage on a house?
Generally you need a credit score range of 500 to 600, and a clean credit history in order to qualify for a regular mortgage. However, if you’re falling behind on your credit score (around 400 to 500), then you may need to look for a specialist lender, or a lender who can help borrowers with bad credit.
At this point if you are not sure about which you want to try for, then it may be more convenient for you to consult a mortgage broker and get an expert’s perspective.
How much can I borrow from a Bad Credit home loan?
For a traditional mortgage, your lender will require to save up to at least 5 to 10% of the property value. If you have bad credit, then you may be required to have saved up at least 20 to 25% of the property value. The higher deposit is because borrowers with bad credit are assumed to be high-risk borrowers, and being able to save up a larger deposit also shows the lender that you have improved your financial habits and situation.
How does Bad Credit affect your home loan rates?
When you apply for a home loan, your lender will check your credit score to verify your savings, income, and spending habits. They may look into other factors before making a judgment, however your credit score will be the primary indicator of where you stand financially.
For traditional home loans, mortgage rates can be lowered down for individuals with an excellent credit score, i.e. >700. On the other hand, individuals with a credit score lower than 500 may find that lenders may not give them a home loan, or will ask them to pay a higher interest rate.
Why won’t first tier and second tier lenders accept an application with a default?
First-tier and second-tier lenders have better rates, and overall services, however, they are also more strictly regulated and have less room to be flexible. This means that they have to be stricter with the loans they give out, and unfortunately borrowers with bad credit are usually deemed unreliable.
Tier 3 lenders are usually unregulated and are private lenders which means that they set their own rules and requirements. These lenders can be more flexible with documentation, credit history, and more, and can be ideal if you have been turned down by the major lenders. Having said that, Tier 3 lenders tend to charge higher interest rates than other lenders, however, it can be worth the extra cost as long as you invest wisely.
Can I get a more detailed assessment?
Get a no-obligation, personalized assessment from one of our expert mortgage brokers at ZERO COST.