Most people dream of having cozy homes but sometimes finances make it impossible for that dream to be achieved. When you need to get a mortgage for a home, you can take up a home loan to facilitate it.
However, people with bad credits experience difficulties when they apply for loans because most lenders are reluctant to loan to people with bad credit. There are other non-conforming and specialist lenders who give home loans for bad credit.
Types of bad credit home loans
Depending on the situation you are in, you can decide the bad credit home loan option that best suits your needs.
- Discharged bankrupt home loans; people who are bankrupt can also get home loans with bad credit, as long as they have been released from the bankruptcy.
- Paid and unpaid defaults home loans; These loans are given to people who have some defaults on their credit files.
- Debt consolidation home loan; this loan is given to people who have incurred small debts over time and have become hard to manage.
- Tax debt home loan; if you have a big debt with the Australian Taxation Office, this is the home loan you are offered. The debt you already have is added to your mortgage and consolidated together to make payment easier.
- Part 9 debt agreement; This loan is given to people who have entered and completed a part IX Agreement.
Pros and cons of home ownership
Owning a home comes with its advantages and disadvantages as well. Depending on your situation and your plans for the future, you can decide if owning a home is better for you or renting out. If you plan on living in the home for a short term, less than 5 years then It is advisable to rent.
- You have privacy to go about your business without interference
- There is tax deduction on the interest paid on the house
- Over time, the value of the real estate increases above the inflation rate
- You can have as many pets as you want
- Monthly housing payments are eliminated once you have settled the mortgage
- Owning a home gives you pride
- It builds up home equity
Cons of home ownership
- Moving to a new location is challenging
- There are extra costs like insurances, taxes, and repairs
- Maintaining your landscape is costly
- During the initial 10 years, the most mortgage payment is taken as interest
- Upfront costs such as home appraisal and down payment for the mortgage
How to get home loans for bad credit
In order to qualify for home loans for bad credit:
Explain your bad credit case to lenders by writing. If you have papers to verify your reasons, include the documentation in your letter to help your case to help lenders understand why you have a bad credit history to determine how best to help you.
Research thoroughly before settling for a lender. It is paramount to have the most reliable lenders to avoid frustrations when paying back the loan.
Before deciding which lender to get home loans with bad credit from, familiarize yourself with the terms and conditions and the interest rates of the specific lender.
In order to avoid getting into more debt, work out a savings plan for your down payment to make it easy to be approved for a bad credit home loan.