Small Default
Australian home buyers might think they are ineligible for home loans because of defaults. Even with defaults on your credit file, you can be approved for home loans. Banks and other traditional lenders will assess the type and age of the defaults, whether you paid them, the amount you have and the total dollar value of all the defaults on your credit file.
Bank criteria
Banks assess each loan application with defaults individually. In general, though, you are likely to be approved for a home loan if you have fewer defaults for lower amounts and meet the following criteria:
- Defaults totaling less than $500 if you are borrowing over 80% of the property value
- Defaults totaling less than $1,000 if you are borrowing less than 80% of the property value
- Two or fewer defaults
- All defaults were paid at least six months before the application process was started
- You have accrued 5% or more of the property’s value in your savings over the last three months.
It is important to note that any defaults, even paid ones, will stay on your credit file for five years after the default date.
Specialist Lenders
If banks decline your home loan application because of small defaults on your credit file, specialist lenders may be able to help. Specialist lenders are more flexible with their loan criteria, meaning they can accept more defaults and understand your financial situation and why you have bad credit. In some cases, you may be able to apply for a low doc loan.
Mortgage Street is a non-bank, specialty lender. Our team of brokers is knowledgeable about the ins and outs of securing home loans with poor credit. We can work with you to make your loan application stronger. We will discuss your past financial situations and find a loan that works for you. Even if you have defaulted on debts in the past, our expert brokers will secure a competitively-priced loan that fits your needs.