Nobody likes how having a bad credit history affects their life. But it’s a different story when you want to get a home loan. In that situation, mortgage brokers in Sydney are likely to become your all-time favourite people. In such cases, entrusting your money troubles to them is a wise decision. Still, you probably wonder how they manage to do the impossible.
How Does Bad Credit Affect Your Chances with Mortgage Application?
When people say someone has a “bad” or “poor” financial record, that means they have missed payments on loans and other defaults. This could be late payments, being overleveraged or having too much debt relative to income, etc. Basically, these are the behaviours that indicate higher risks associated with lending to these people. Given that any such behaviour is present on your profile, from the bank’s or another lender’s perspective, this is a red flag.
It does not mean, though, that all hope is gone. Mortgage brokers in Sydney can still find more empathic lenders or those who are okay with issuing their home loans to people with lacklustre financial records. This is one of the cases in which a mortgage broker can easily save the day. But how do they do it?
How Can Mortgage Brokers Assist with Your Bad Credit?
Understanding Your Financial Situation: Mortgage brokers always start by understanding your financial position. They analyse your income, your debt and your credit history so that they can know where you are coming from. This process is essential because it identifies which lenders might be ready to work with you despite the fact that you have bad credit. Besides this, the process will act as the first step in discovering the right home loan for you.
Availability of More Lenders: The major perk of working with a broker is they have broad connections in the industry. Think about it this way, if you walk into a bank with your poor credit score, the bank might reject your loan application outright. On the contrary, brokers have relationships with non-bank loans or other niche institutions other than banks. As a result, they might get someone who would be willing to compromise.
Personalised Loan Selection: Mortgage brokers always search for the right loan, not just any loan. They will look for decent home loans for you that are tailored correctly to your financial position. This benefit presents you in a better position than any other person dealing with the lender without a broker. You may get a fantastic deal that might not be available under other circumstances.
Better Terms of the Loan: A bad credit doesn’t mean you cannot get better terms of the loan. In fact, brokers can also negotiate with lenders for lower interest rates and better repayment periods. In addition, they are important because even minimal interest charges end up saving thousands of dollars each month.
Simplified Application: Applying for a mortgage is difficult at the best of times and when you have poor credit, it can be even worse but brokers can simplify your application. They can assist you with filling forms, providing all required documents and making your application as strong as possible. This type of advice is invaluable when you are uncertain what the creditors might look for.
Common Challenges with Bad Credit Mortgages
Even though a broker can assist you, it is necessary to be mindful of the challenges you may come across when applying for a home loan with poor credit:
Higher Interest Rates: Once you’re approved, you might still be charged higher interest rates as another way to compensate for the risk.
Larger Deposits Required: Depending on your risk level, the deposit for a home loan can be up to 20% and higher to cushion lenders with some guarantee.
Limited Loan Options: Borrowers who have poor credit might find themselves having fewer options in terms of lenders and loan products than others will.
However, even with these difficulties, brokers can still help steer through them and work out a deal that suits your needs. It is important to be ready and know what awaits you.
How Do You Raise Your Chances of Approval?
Here’s what you can do:
- Raise your credit score
- Save for a larger deposit
- Reduce your debt
- Get pre-approval
Raise your score by paying off your debts (this can improve your deb-to-income ratio) and making efforts to pay on time. Also, avoid inquiring more about additional credit. Next, saving up enough money for a downpayment can make you more appealing. If you need assistance with pre-approval, get help from a mortgage broker in Sydney. Doing so shows lenders you are serious and can secure financing.
Things That You Can Expect From a Mortgage Broker
These professionals will look in-depth into your financial status to get a sense of where you stand as they start working on getting the best terms for your loan. They will also guide you through your options clearly and assist with the application process. They will inform you of loan terms, the costs and all risks related.
It is also worth remembering that brokers are working on commission, and their livelihoods rely on finding you a loan suitable to your requirements. As reputable brokers, they will always steer you away from deals with huge fees which are not in your best interests and help guide you to the mortgage that is right for your budget as well as long-term financial goals.
AFMS Group: Your Partner in Securing a Mortgage with Bad Credit
Life does not always go as planned. We understand that, and if you unfortunately have a poor credit rating, AFMS Group is here to help. We have a team of mortgage brokers in Sydney, we have helped clients secure mortgages that others may have missed. We will take the time to understand your situation before matching you with a more flexible lender and delivering a seamless credit solution to you. Contact us now to learn more.
