Bad Credit Home Loans: How to Get Mortgage with Bad Credit

So, you’ve got bad credit and you’re wondering if you can still buy a home in Australia? The good news—yes, you can. But let’s be real, it won’t be as simple as walking into a bank and getting a standard mortgage. Lenders, especially the big banks, don’t love risky borrowers. If you’ve had missed payments, defaults, or even a bankruptcy, traditional lenders might say no.

But don’t stress just yet—there are specialist lenders out there who work specifically with people in your situation. The key is understanding your options, knowing what to expect, and making moves to improve your chances. Let’s break it all down.

What is a Bad Credit Home Loan?

A bad credit home loan is exactly what it sounds like—a mortgage designed for people who don’t have a perfect credit history. Maybe you missed a few repayments in the past, maybe you defaulted on a loan, or maybe you even went bankrupt. Whatever the case, these loans give you a shot at homeownership when regular banks won’t.

Of course, there’s a catch. Because lenders see bad credit borrowers as a bigger risk, they tend to charge higher interest rates and might require a bigger deposit. You’ll also find that the terms can be a bit stricter. That said, if homeownership is your goal, these loans can still be a good option—you just need to go in with your eyes open.

We Specialise in Bad Credit Home Loans - Speak to Us Today

If you need help getting a home loan with bad credit, fill out the form below and an expert mortgage broker from EE Mortgages will contact you. They will discuss your specific situation and help you find lenders that will give you a home loan, despite your bad credit score. The service provided by EE Mortgages is completely free of charge to you as a client (we are paid a commission by the lender). If you like, you can also call us on (02) 9188 9398.

Where Can You Get a Home Loan with Bad Credit?

If your credit history isn’t great, your best bet is looking beyond the major banks. Instead, you’ll want to consider non-bank lenders and specialist mortgage providers who cater to people with a less-than-perfect credit record. These lenders assess applications differently from the big banks and may be more flexible in their approval process.

Another option is a guarantor loan, where a family member (usually a parent) uses their property as security for your loan. This reduces the lender’s risk and can help you secure a mortgage despite your credit history.

If you’re self-employed or have an unconventional income, a low-doc home loan might be worth considering. These loans require less paperwork than traditional mortgages, but they often come with higher interest rates and stricter lending terms.

Types of Bad Credit Home Loans

If you’re dealing with bad credit, there are several home loan options to consider, each designed for different financial situations.

• One common choice is a low-doc home loan, which is ideal for self-employed people or those without traditional proof of income. Instead of relying on payslips, these loans consider income declarations and other financial documents. However, they tend to come with higher interest rates due to the increased risk for the lender.
• Another option is a non-conforming home loan, which is specifically designed for borrowers with credit issues such as defaults, court judgments, or even past bankruptcies. These loans offer more flexibility but typically come with higher fees and interest rates.
• A guarantor loan can be a great option if you have a family member who is willing to offer their property as additional security for your loan. By reducing the lender’s risk, this arrangement can help you secure a mortgage, often with better interest rates and lower deposit requirements.
• Then, there are specialist lenders who focus on bad credit borrowers. These lenders have more flexible lending criteria and may approve your loan based on your current financial situation rather than just your credit history. While interest rates may be higher, this type of loan could be the key to getting into the property market.

Each of these options has its own benefits and drawbacks, so it’s important to speak to a mortgage broker to determine which one best suits your situation.

How to Boost Your Chances of Approval

Getting a home loan with bad credit isn’t impossible, but you’ll need to put in a little extra effort to improve your chances. One of the best things you can do is save a bigger deposit. The more money you can put down upfront, the less risky you look to lenders, which can increase your approval odds and help you secure better loan terms.

Another important step is reducing any existing debt. If you have credit cards, personal loans, or other outstanding debts, paying them down before applying for a mortgage will show lenders that you’re managing your finances responsibly. Having a stable job and steady income will also work in your favour, as lenders want to see that you’ll be able to keep up with mortgage repayments.

It’s also a good idea to check your credit report for any errors. Sometimes, incorrect information can lower your score, so make sure your report is accurate before applying for a home loan. If you need help navigating your options, working with a mortgage broker who specialises in bad credit loans can make a big difference. They’ll know which lenders are more likely to approve your application and can guide you through the process.

The Downsides of Bad Credit Home Loans

While bad credit home loans can be a great way to get into the property market, they do come with some drawbacks. The biggest downside is the higher interest rates. Since lenders view bad credit borrowers as higher risk, they charge more to compensate for that risk, meaning you’ll pay more in interest over the life of the loan.

You might also face stricter loan conditions, such as needing a larger deposit or agreeing to a shorter loan term. Additionally, if your financial situation takes a turn for the worse, keeping up with repayments could become challenging. That’s why it’s crucial to carefully assess whether you can realistically afford the loan, not just now, but long-term.

What If You Can’t Get Approved Right Now?

If lenders still aren’t willing to work with you, don’t panic—there are still ways to work towards homeownership. One option is a rent-to-own scheme, where you rent a property with the option to buy it later. This gives you time to improve your credit score while still making progress towards owning a home.

Another option is co-buying with a friend or family member, which can make it easier to qualify for a loan by pooling incomes and deposits. If you’re not in a rush, you might also choose to focus on improving your credit score before reapplying in a year or two. Making all your payments on time, reducing debt, and building up savings can significantly improve your chances of approval the next time around.

Conclusion

Having bad credit doesn’t mean you’ll never be able to buy a home—it just means you’ll need to take a different approach. There are lenders in Australia who specialise in bad credit home loans, and with the right strategy, you can still get approved.

The key is to be realistic about what you can afford, explore all your options, and take steps to improve your financial situation along the way. If you’re ready to take the next step, reach out to Eden Emerald Mortgages, who specialise in helping people with bad credit find home loan solutions. Our service is completely free to borrowers, since we're paid by the lenders. You can call us on (02) 9188 9398 or apply online to get started.

Bad credit is just a hurdle—not a roadblock. With the right guidance and some smart financial moves, you can still achieve your homeownership goals.