Do you have bad credit or no credit? Even with bad credit, you can still have dreams, and if you dream of owning your own home, it can be a challenge to get a home loan, especially one with a reasonable interest rate. That doesn’t mean though that you necessarily want or need to wait for a year or two to buy a home. Here are 5 tips which can help you to get a home loan now, instead of waiting until you are able to repair your credit score.
1. Apply with lenders who manually process applications
A lot of lenders use a computer to check and assess your credit score and qualify you for a home loan (or not). Some lenders however still use a manual process to assess your application. If a computer checks your credit and determines that your score is low, your application will usually be declined automatically, even if a real person might have passed it. If a real person reviews your application when it is submitted, however, you have a much better chance of getting an approval. A human being can analyze and understand your financial situation, and may be able to see that you are now financially stable and a viable investment, despite your past circumstances.
2. Provide proof that your situation has improved.
Another good idea is to compile payment receipts that you provide as proof that your situation has improved. You can show these to a human being evaluating your case, and they can see that you have been making all your payments on time each month. You also should provide proof of your employment so that the lender sees that you have job security and a regular, reliable income.
3. Go through a mortgage broker
There are companies which specialize in helping Australians find home loans they may be eligible for. Some mortgage brokers even provide specialty services, like helping people with bad credit or no credit to find a loan. These brokers have access to a lot more information than you do, and may have business connections with lenders which they can tap for assistance. Having a professional there to make your case is always helpful when you are at a disadvantage.
Another good thing about going through a mortgage broker is that it prevents you from submitting your loan application repeatedly to lenders who are unlikely to approve you in the first place. Each time you apply for a loan and you get declined, it impacts your credit report negatively. So you can actually make things worse if you keep applying and getting rejected. A mortgage broker will only send your application to lenders who are likely to give you serious consideration, which helps to protect your credit rating while you work on rebuilding it.
On that note, it’s also a good idea to seek professional advice on your credit report. Sometimes you can actually find errors in your report. If you identify errors, you can have them corrected right away. A credit expert also can help you repair your credit rating by setting you on the right path to correct it as fast as possible.
4. Consider a lender who specializes in situations like yours
There are lenders in Australia who specialize in sub-prime loans. These lenders are more likely to assist you than lenders who avoid bad credit loans by default. Why are they willing to take the risk? There are a couple of reasons. Firstly, most of these lenders know they can get away with charging you a higher interest rate. Secondly, they recognize that not every person with bad credit is actually an insecure investment. They may spot a prime opportunity in disguise—and that opportunity could be you. Financing at a high interest rate is expensive, but you may be able to refinance again later at a lower rate after your credit rating goes up.
5. Seek help from community organizations
Check into community organizations which provide help for people who have bad credit and other situations which make it hard to get by. The Good Shepherd Youth and Family Service has been around for 150 years, and has 400 locations throughout Australia. This organization provides low-interest loans in partnership with the National Australia Bank (NAB). While they do not provide home loans, they may still be able to help you out. You might be able to use a loan for collateral for a credit card, which can help you in turn to boost your credit rating. This may assist you in qualifying for a home loan. They also may have advice for you as far as your search for a lender goes. They may even be able to put you in touch with lenders or mortgage brokers who can help you out further.
It is frustrating to want to get on with your life and move into a new home when you are turned down by lender after lender, all because of your credit score. If you have a reliable income, however, and you have been demonstrating your financial viability by paying your bills on time, you may represent a good investment to a lender who is willing to take you on. Not all sub-prime customers are really sub-prime opportunities, and all you are doing is trying to find a lender who can see that.
Get in touch with mortgage brokers, and look for lenders who use a manual approval process for loan applications. Come prepared with paperwork that proves you are on your way back up, and don’t be afraid to ask for advice from community organizations and credit counselors. There are home loans available for people in your situation, and if you don’t give up, you should be able to find one. And if you can’t? There is nothing ultimately wrong with waiting for a year for your credit score to recover. By then you will also probably have more money to use for a down payment, which could help you to secure a better interest rate.