Owning your own home and investing in property might seem out of reach if you have bad credit, but you should know that it isn’t impossible. If your current financial situation is stable, there are plenty of things you can do to improve your chances of getting approved for finance.
Getting approved for a home loan will require you to show that your current financial situation is better than your history that led to you having bad credit. This will make your application more attractive and less risky to lenders.
Here are just a few of the things you can do to improve your chances of getting approval for your home loan.
Save up a larger deposit
This can be extremely helpful for getting your loan approved. Saving up for a deposit that’s larger than 5% will demonstrate to lenders that you are financially responsible since it takes effort and discipline to do so.
Having a larger deposit will also make the loan less risky for the lender since it reduces the amount of finance they need to provide. This is also a good way of reducing the overall cost of your mortgage since you will likely have to pay a lower interest rate and you can avoid having to pay Lenders Mortgage Insurance.
It may not always be possible for everyone to take more time and save up for a larger deposit, but it can be worth it if you do.
Demonstrate the strength of your finances
Even if you have a checkered past when it comes to your credit, showing lenders that your financial position is currently strong is a good way of improving your chances of getting approval. There are a number of ways to show this, including:
• Having stable and consistent employment income.
• Honouring your financial commitments by always paying rent and car loan payments on time.
• 3 months of problem free banking with no overdrawn accounts or defaults.
• Consistent savings deposits and paying down debts.
Doing these things will help to demonstrate that you are no longer in the same financial situation that caused you to have bad credit. These are all good financial practices for anyone, not just people with bad credit. Budgeting for your expenses, savings, and credit repayments will help you build your wealth in the long term.
Speak to a finance broker
A good finance broker can be an invaluable asset when you are trying to get a bad credit home loan. Applying for a home loan with a lot of different lenders in a short period of time can actually hurt your chances of getting approved for finance. A large number of applications for credit with different lenders can make your application look suspicious.
Applying for finance through a finance broker will not appear as multiple credit applications on your credit history since the broker will approach lenders on your behalf. They will also be able to advocate for the strengths of your application to the lender. This means that the lender will see how stable your current financial situation is and not just your bad credit history.
Speaking to a finance broker can give your application the boost it needs to get approved. Your bad credit doesn’t need to stop you from getting approved for a home loan.