The REAL reason most banks don’t do bad credit home loans

Most banks will only give you a home loan if you’re low-risk. Better yet, no risk.

Why? Because that makes the paperwork easy.

The simple fact is they rely on high volume, straightforward work. So they cater to the easy borrower… Fill out an easy form, tick all the same boxes as usual, rubber stamp the application, and move on to the next customer.

But bad credit home loans are different. The paperwork is tricky, the accounting is tricky and the legals are tricky. They take time to set up and a lot of thought, because every situation is different. It’s all too hard for most banks.

It’s not that they’re incapable of doing it, it’s that they don’t want to. It just doesn’t fit their business model. So much so that they still won’t give you a home loan even if your credit problem was only trivial, you didn’t know about it, and you resolved it as soon as you found out about it. Because even then, they’d have to complete some difficult, time-consuming paperwork.

In their eyes, once the sums say you’re a risk, you’re always a risk. Unfair (and nonsensical) as it is, once they’ve turned you down, they generally won’t touch you again.

But some banks WILL still lend to you

There are a handful of reputable banks in Australia that do offer bad credit home loans. But they’re very few and far between, and, more importantly, their paperwork is anything but easy. It’s a completely different proposition to applying through a bank like CBA or Westpac. They expect you to fill in a LOT more forms, get all the facts and figures right the first time, jump through a crazy number of hoops, and do hours and hours of legwork.
And while it’s good news that you have options, the even better news is that you don’t have to do any of the work yourself.

We can do it all for you.

We know which banks to apply with, and we can make it happen

Bad credit home finance is our specialty. We’ve been doing it since 2003, and in that time, we’ve helped thousands of people into their dream homes – despite their less than perfect credit histories.

The secret? Well, it’s not really a secret at all. All we do is take the time to learn exactly what’s causing your credit problems before we start your application. It’s different for everyone. We go through, in great detail, what’s been happening in your financial life – your assets, your liabilities, your income – then we talk about what you’re trying to do, and what responses you’ve received from your previous applications. We then draw on the experience of thousands of previous applications, for clients in all sorts of situations, to decide if we need to rectify the problem and, if so, how.

Then, and only then, do we choose the most appropriate lender from our specialist network, and complete and submit your application. And when we do, we go through a credit manager we actually know, personally. We’ve been doing this for nearly 15 years, so we know who’s who, we’ve built relationships, and we can even negotiate exceptions to their standard requirements, here and there.

As a result, our clients hardly ever get declined.

Why not do it yourself?

It’s natural that you’d ask why you shouldn’t just do it all yourself. After all, who knows your financial situation better than you? But knowing your financial situation is only part of the solution. You also have to know which banks offer bad credit home loans, and how those offerings are different. Because they are different…

Outside of a few minor differences like rates and fees, they all look very similar on the surface. But once you’ve completed the paperwork for all of them (many times!), and you’ve gotten to know the decision-makers at all of them, you learn that they’re really worlds apart. They may all call themselves bad credit home loan banks, but each one has its own specialty, and – like the big banks – they steer clear of anything outside of their comfort zone, simply because they’re not set up to handle it confidently, safely and, above all, efficiently enough to make a decent profit.

In other words, each bad credit home loan bank has only one way to solve a problem. One product, and one very strict set of rules. And if you don’t fit neatly into their equations, they simply say no. Then you’re back to square one, and you’ve wasted weeks, or even months, of valuable time.

We, on the other hand, have multiple ways to solve a problem. We have access to all the solutions, and we know – without wasting your time on countless applications – which ones are most likely to bear fruit.

Plus, unlike the (usually junior) loan officer at the bank who gets paid no matter what, we don’t get paid unless you get a loan. So we’re far more motivated to see that it happens. The loan officer, on the other hand, is more interested in minimising the bank’s risk. They may even look for reasons to say no.

Indeed, you can be rejected simply because you said or showed the wrong thing. (And when you have a bad credit history, there can be many wrong things to say or show. It’s a minefield!)

Put simply, the deeper you dig, the more complex it gets, and the more likely you are to trip over a hidden gotcha. Usually this results in another rejection and more wasted time. But if you’re ‘lucky’ enough to actually be given a loan, chances are it won’t be the right one.

So, yes, if you have the time, patience and financial proficiency to get to know all the bad credit home loan banks, their products and their rules, then by all means, you should definitely do it yourself. Otherwise, it makes a lot more sense to get help from the people who know it already.

Why not use a normal mortgage broker?

Most mortgage brokers deal only with the big banks. And most of their clients are just time-poor people, who merely want someone to shop around for them and fill in the paperwork. They don’t have credit problems.

So, like the banks themselves, brokers build their businesses on quick, simple, turn-key loan applications. They’re not interested in bad credit home loans, and have little to no experience dealing with them. They can’t identify the cause of your problem, and even if they could, they don’t know all the lenders who can help, much less which one to choose for your particular situation. (In fact, most brokers will just present you with a list of lenders and say pick one!)

Put bluntly, if you go with a run-of-the-mill mortgage broker, you’ll probably just get turned down again or wind up with a home loan that’s completely wrong.

As a dedicated mortgage broker specialising in home loans for individuals with bad credit, we understand the unique challenges and concerns faced by those looking to secure financing for their dream home despite past financial setbacks. Navigating the landscape of bad credit home loans requires an in-depth understanding of the market, specialist lenders, and tailored strategies to enhance your eligibility.

Understanding Your Credit Position

The journey to securing a bad credit home loan starts with a comprehensive review of your credit history, including your credit file, credit report, and credit rating. Instances of credit defaults, late or missed payments, mortgage arrears, and other credit issues form part of this assessment. It’s crucial to understand that while these elements may pose challenges, they don’t necessarily preclude you from obtaining a home loan.

The Role of Specialist Lenders and Bad Credit Mortgage Brokers

Specialist lenders and bad credit mortgage brokers play a pivotal role in bridging the gap between bad credit borrowers and the possibility of home ownership. Unlike mainstream lenders, which often have stringent eligibility criteria, specialist lenders and non-bank lenders take a more nuanced approach to loan applications. They assess your financial situation, loan balance, and ability to make repayments, considering your current financial position rather than just your past credit problems.

Loan Options for Bad Credit Borrowers

Bad credit home loans come in various forms, including non-conforming loans designed to accommodate those with a poor credit history. These loans might carry higher interest rates or require additional security, but they offer a pathway to home ownership and financial stability. Understanding the loan amount, interest payable, monthly repayments, and any associated risk fees or administration fees is key to selecting the right loan option for your situation.

Improving Your Loan Eligibility

Improving your eligibility for a bad credit home loan involves several strategies:

• Clearing outstanding debts and minimising unpaid defaults.
• Consistently making payments on other loans and utility bills to demonstrate financial responsibility.
• Saving a larger deposit to reduce the loan to value ratio, potentially lowering the interest rate and monthly repayments.
• Seeking professional advice from a bad credit home loan broker to navigate the application process and present your financial history in the best light.

Choosing the Right Mortgage Broker

Selecting a mortgage broker experienced in bad credit home loans can significantly impact the success of your loan application. A knowledgeable broker will offer access to many lenders, from non-bank lenders to bad credit mortgage lenders, and provide invaluable guidance on loan options that suit your financial situation. They can also assist with the intricacies of loan applications, eligibility criteria, comparison rates, and navigating the terms of potential loans, ensuring you receive the most favourable terms possible.

Final Thoughts

Securing a home loan with bad credit is undoubtedly challenging, but with the right approach and support, it’s achievable. By understanding your credit position, exploring loan options with specialist lenders, and improving your financial stability, you can enhance your eligibility for a bad credit home loan. Remember, each situation is unique, and what might have been a barrier to one lender could be manageable for another. With professional advice and a clear strategy, the dream of home ownership remains within reach, even for those with a less-than-perfect credit history.