Can You Get a Home Loan with Bad Credit?

Alex Sperling
Yes, No, Maybe

i 3 Table Of Content

Feb 28, 2023

Bad Credit Home Loans for Self Employed And People With Unconventional Lending Circumstances

Bad Credit Home Loans

For self employed and other individuals with a poor credit history, finding a home loan can feel like an impossible task. Thankfully, there is still hope in the form of bad credit home loans, often referred to as non conforming home loans.

These loans are designed to assist those self employed people and others with unique situations who cannot secure other types of financing due to their unique circumstances.

Although the interest rate of these loans may be higher than other conventional bank loans, for self employed individuals with bad credit, it provides them an avenue to purchase the home they desire without experiencing frustration or feeling as if their dreams are out of reach.

Bad Credit Doesn’t Mean You Won’t Be Approved for A Home Loan

Yes, No, Maybe

If you have bad credit or a poor credit score, you may still qualify for a home loan.

Depending on what kind of history you have, you may still qualify for prime lenders or if you don’t fit the lending criteria of a traditional lender you may qualify for a home loan with non conforming lender.

There are many options out there to help you get the loan that is right for you, even if you have bad credit.

It really depends on the shape of your credit file, your individual credit score, and your repayment history.

Perhaps you only have a few late or missed payments on your credit card, or maybe you have some unpaid defaults.

Maybe you have had the unfortunate experience and ended up in a part 9 or part 10 debt agreement or perhaps you have been bankrupt and only just been discharged from bankruptcy recently.

Depending on your situation, it’s best to speak with an expert who will be able to assess your situation and give you guidance as to the best way forward.

Get Pre-Approval Before Shopping

Pre Approval for Bad Credit Home Loan

Before you run out and start looking at property, it might make sense getting a pre-approval for a home loan, which can give you an advantage when it comes to buying a house.

It lets sellers know that you’re a serious buyer and are good for the money and have the ability to settle on the sale.

Pre-approval also gives you a better idea of what kind of loan terms you can get, so that you don’t overspend when shopping for a home.

Are you Eligible for a Bad Credit Mortgage?

Qualify for a Bad Credit Home Loan

This really depends on your individual circumstances. It might be a good idea speaking to a mortgage broker who can assess your situation and advise you on the best course of action.

They will be able to look at all available options and provide you with tailored advice that is right for you, even if you have bad credit.

Your broker will help guide you through the process from start to finish and can answer any questions you may have.

They can also provide information regarding any other assistance that you are interested in, such as speaking with a credit repair service.

According to the MFAA mortgage brokers arranges approx. 70% of all home loans in Australia.

Disadvantages of Bad Credit Home Loans

Pros and Cons of Bad Credit Home Loans

Depending on your credit history, the interest rate and other terms of a bad credit home loan may be more expensive than with regular home loans, due to the higher risk associated with them.

Additionally, you may have trouble when seeking approval for a bad credit loan. Another disadvantage is that not all lenders offer these types of loans,

Bad Credit Home Loan application

Bad Credit Home Loan Application

Applying for a bad credit home loan can be daunting – especially with poor credit scores. But fear not! With the right guidance, you can work through the process of navigating poor credit to secure a loan.

It’s best to start by getting an understanding of your current financial situation by reviewing your financial details, your credit history and credit score, so you know what type of home loan options are available to you.

After that, it’s only a matter of working on increasing your chances of obtaining approval – things like saving up for a deposit, making sure you pay your bills and debts on time.

Don’t let poor credit stop you from becoming a homeowner: arm yourself with knowledge and research and approach the task with a determined attitude.

What is The Lowest Credit Score for Buying a House?

Credit Score

Having a poor credit rating can be a major disadvantage when it comes to financial matters and can significantly impact your borrowing power.

There is no magic low credit score that means you can’t buy a house, but it may mean that if you are looking for a home loan, it’s possible that you may have to pay a higher interest rate and application fees.

This is because lenders tend to associate poor credit ratings with increased risk, as statistically speaking, there is generally an increased likelihood of a whole or partial repayment defaulting.

In such cases, the lender mitigates this risk by increasing the interest rate, meaning that borrowers with poor credit ratings will usually end up paying more for their borrowed funds than those with higher ratings.

Do Brokers Do Credit Checks?

Credit Check

This depends on the broker as to whether they will do a credit check.

At Pro Options, we will seek your permission to do a credit check as part of the fact-finding process to determine a suitable way forward for your individual situation.

We do this by getting you to sign our credit guide and privacy statement. There is no cost for you for us to do this on your behalf, by doing so it gives us a better picture of your history and how best we may be able to assist.

Will I have to pay a Higher Interest Rate if I Have a Low Credit Score?

Higher Interest Rates

Maybe in some cases, it really depends on what is impacting your credit score, most of the big banks will use credit scoring as part of their application process.

But that are many lenders that don’t credit score and will manually assess your application and you will still have competitive interest rates.

On the other hand, if you have if you have credit defaults, mortgage arrears, too many credit enquiries, unpaid bills, late or missed payments, in a debt agreement, bankruptcy or have multiple debts, this can all contribute to a lower credit score, and you may find the interest rate offered is higher than the standard advertised rates.

Bad credit home loan lenders are prepared to assume greater risks when applying to borrowers with a low credit record.

It has thus forced them to use inflated rates to compensate for the risk of default. The lowest rates are provided to those who have the greatest credit ratings and to people who can offer large deposits or substantial property equity as security.

Bad Credit Home Loans Could be a Stepping Stone

Stepping Stones

Do not let your poor credit history hold you back from creating a better financial future. Your bad credit history is just that, its history.

There are specialist lenders that offer non conforming loans which will often consider a loan applications from someone that has a low credit score, even if you are discharged from bankruptcy.

The good news is that it does not mean that you have to stay with a non conforming lender for your life, once you have 2 or 3 years repayment history you may be in a better situation to refinance to a prime lender, usually with better interest rates, lower fees, etc.

Will My Bank Give Me a Loan with Bad Credit?


Generally speaking you will not get a home loan approved from the major banks, but a specialist lender might be able to assist.

The good news is that a non conforming home loan does not mean you have to keep the loan for the full term, once your history has improved it may be possible to move you to a traditional lender on much better interest rates and terms.

Frequently Asked Questions About Home Loans if You Have Bad Credit


What is the Minimum Credit Score I need for a Bad Credit Home Loan?

Credit requirements for bad credit mortgages vary from lender to lender. Generally, prime lenders consider bad credit scores as anything below a 620 credit score.

However, each lender will evaluate your individual situation and may be willing to accept lower credit scores in certain circumstances.

It’s always to check as often we have gotten approval with prime lenders with a lower credit score, it really depends, one size does not fit all.

My Partner Has Bad Credit But I Don’t How Will this Affect Our Application?

It will affect your application as you are joint borrowers, and lenders will usually look at the lowest credit score for both applicants, you could apply for a home loan on your own, but this will affect the amount you can borrow as you can only use the one income, not both.

If I have a Default can, I Get it Removed?

You would need to speak with a specialist credit repair company to determine if this is feasible and cost effective, some defaults can be removed under certain circumstances.

I have recently been Discharged from Bankruptcy

The short answer is yes, see this article that goes into more details, we had a couple that were both discharged from bankruptcy and wanted to purchase a home; they had a 10% deposit amount; we could secure them a home loan with a non conforming lender and a few years later when the property value increased, and they had repayment history we were able to refinance them into a prime lender with much better interest rates.

Get an Obligation Free Assessment – You’re Not Alone

Get In Touch

Depending on the credit report of borrowers, the bank will see them as being at risk of default and reject their application.

At Pro Options Lending Solutions, we are experts in dealing with unique circumstances and can work with you to see if we can help you.

Get in touch today. Either call us on 02 9068 6644 or request a Free Consultation.

We promise no sales pitch or pressure.

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Alex Sperling - Finance/Mortgage Broker

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