Before a person can own a home, they have to pay for it either from their own pocket or by getting a mortgage. For most people, the latter option is the most practical because they might not have the money. While most mortgage applications have a high acceptance rate, lenders sometimes reject applicants because of their bad credit.
Luckily, hope isn’t entirely lost because of one thing: bad credit mortgages. Bad credit mortgages are different from typical mortgages because they offer unusually higher interest rates. Like any other mortgage, you’ll need a broker to secure one that’s within your means.
This article will shed some light on bad credit mortgage brokers and why they’re essential. Read on below to learn more.
Why You Need a Bad Credit Loan
In general, bad credit mortgages are for short to medium-term only, not a long-term solution like a second mortgage. The idea behind it is you can maintain your quality of life without having to lose your home. The great thing about bad credit mortgages is that they have loan terms of up to 25 to 30 years, giving you enough time to make full repayment. Additionally, the timeframe also gives you breathing room to settle debts and credit issues.
How to Get Approved for Bad Credit Mortgage
You’re qualified for a bad credit mortgage if your credit file has the following:
- Bankruptcy - If you have filed for bankruptcy, you’re eligible for a bad credit mortgage. However, you’ll need to speak with a broker since terms and conditions may vary among borrowers.
- Judgments or court writs - You can borrow up to 90 per cent of a property’s value if you have these documents through a non-conforming lender.
- Largely paid defaults - You can borrow up to 90 per cent of a property’s value with a specialist lender's help, as long as you have a good reason backed by documentation as evidence.
- Moderately paid defaults - If your paid defaults are up to $3,000, you have several options: borrow up to 80 per cent of a property’s value through a prime lender, 90 per cent through a specialist lender, or a full 100 per cent through a security guarantee from your parents.
- More than one small paid default - If your paid defaults are less than $1,000 from financial institutions and less than $500 for non-financial institutions, you can borrow up to 85 to 90 per cent of a property’s value.
- Small paid default - if you have a small default for $500 or less and it was paid for more than 6 months ago, you can borrow up to 90 to 95 per cent loan-to-value ratio (LVR). However, you must provide sufficient reasons to create a strong case.
- Unpaid defaults - If you have any outstanding defaults, you can only borrow up to 90 per cent of a property’s value through a non-conforming lender because many lenders require you to pay the defaults before a loan is approved.
Why Borrowers Work with Bad Credit Brokers
If you have bad credit and you still want to own a house, a bad credit mortgage broker will help you. They will take a look at your credit history and find specialist lenders who can overlook your bad credit and help you secure a loan.
When you hire a bad credit mortgage broker, you will reap the following benefits:
- They have proper knowledge of how bad credit loans work and can advise you on your best course of action.
- They will make sure you don’t incur any more debts that will reflect on your credit report.
- They know lenders who can accommodate borrowers who have specific needs.
- They can help you get your financial affairs in order, which allows you to be eligible for a home loan.
Conclusion
Having bad credit is a daunting thought because it can prevent you from having a home, which is a necessity. However, hope isn’t entirely lost because bad credit mortgage brokers can help you. Just follow what they tell you to do because they know the ins and outs of loans for those with bad credit.
We believe every person, regardless of credit status, must have access to a good home, so we make sure that our programs are well within most people’s means, and our brokers work with them to account for their every need. If you’re looking for bad credit home loans in Sydney, contact us today to learn more!
