How to secure your first home with a bad credit mortgage
A bad credit mortgage can be a lifeline for those wishing to fulfil the Australian dream and purchase their first home.
Depending on the reasons behind a bad credit rating, securing finance for your home doesn't have to be impossible. Red Rock offers bad credit mortgages for those that don't fit the traditional lender's criteria.
What do I need to do to secure a bad credit mortgage?
1. Know your credit score
The first thing you should do in preparing for your bad credit mortgage is find and understand your credit report (we've outlined how to do this in a previous article). This is incredibly important, as your lender will have questions for you regarding your score.
If a poor credit score is the result of something that can be explained to your lender - lifestyle change, divorce, et cetera - as a temporary blip that caused your credit score to be compromised, they will take this into account.
If part of your poor credit score is caused by outstanding debts, you should pay them before applying for your mortgage. Anything that shows your lender you're a creditworthy and responsible individual is a positive, and settling old debts is the best thing you can do to prove this. Debts that are still unpaid 60 days after they are due are known as payment defaults. Payment defaults stay on your credit file for five years and don't get erased if you pay them, though it is still advisable to do so, as your report will reflect the fact that it has been paid.
2. Prove your income
The other thing a lender needs to see in order to approve you for a bad credit mortgage is evidence of your income. While you may have explained the reasons for your poor credit score, a lender wants to feel confident that you have the required income to cover your costs. When they can see that you are earning enough to meet your personal expenses as well as make payments on your mortgage, they will be more inclined to approve your application.
If you can put spare income towards settling current debts like credit cards or personal loans, this too will show your lender you are in a good position to take on a mortgage.
Red Rock Mortgages are committed to helping Australians that don't fit the traditional lender's bill get the chance to buy their first home. If you're interested in any one of our products, get in touch with the team today.