Can we get approved for a home loan with paid default?

Any general questions you might have in regards to loans and finance.
Cathy Bell
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Joined: Wed Oct 02, 2019 6:59 pm

Can we get approved for a home loan with paid default?

Postby Cathy Bell » Wed Oct 02, 2019 7:01 pm

My partner and I are looking for a mortgage, but he has a default of $2000 which has already been paid in full last year. Both of us earn a steady income and have stable jobs. Currently renting but the landlord has plans to increase the rent amount. Since the default is paid, can we get approved for a home loan?

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Otto Dargan
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Re: Can we get approved for a home loan with paid default?

Postby Otto Dargan » Wed Oct 02, 2019 7:21 pm

Hello Cathy Bell. Welcome to the forums.

You could get your mortgage approved with some specialist lenders even if you have defaults on your credit file. It all depends on how old the defaults are, the total number and the dollar value of the defaults.

In your case, since your husband has already paid off the default, lenders might allow you to borrow 80% of the property value, if there is good evidence of the cause of the default.

To increase your chances of approval:
  • Provide a default explanation letter to back up the explanation of the cause of the default.
  • Save a large deposit if it is possible of at least 10-20% of the purchase price.
  • Ensure that all paid defaults are marked as paid on your credit file.
Once your credit file is clear of blemishes, then we can refinance to a major bank with a competitive interest rate

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a bad credit home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Cathy Bell
Posts: 3
Joined: Wed Oct 02, 2019 6:59 pm

Re: Can we get approved for a home loan with paid default?

Postby Cathy Bell » Wed Oct 02, 2019 7:47 pm

What if we're in a situation where we can't save a large deposit and show genuine savings. What can we do?

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Otto Dargan
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Location: Sydney, Australia
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Re: Can we get approved for a home loan with paid default?

Postby Otto Dargan » Wed Oct 02, 2019 8:01 pm

Hi Cathy Bell,

Genuine savings does not necessarily mean having savings in your accounts for more than 3 months. If you can prove that you have been making on-time rental payments, then these genuine savings are acceptable to some of our lenders.
  • Gift: The gift must be in your account and a gift letter must be provided by your parents to confirm that the gift isn’t a loan.
  • Bonus/Dividend/Commission payment: Provide a payslip evidencing payment and bank account statements.
  • Inheritance: Provide a letter from the Executor confirming the amount and date that the funds will be received.
  • Non-real estate asset sale: Provide evidence confirming the details of the asset that you sold. In most cases, this is from the sale of a motor vehicle.
  • Tax Refunds: Provide a copy of your Notice of Assessment.
You can make use of our genuine savings calculator for more details.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Cathy Bell
Posts: 3
Joined: Wed Oct 02, 2019 6:59 pm

Re: Can we get approved for a home loan with paid default?

Postby Cathy Bell » Wed Oct 02, 2019 8:54 pm

Thanks for letting me know these options. Can't I simply borrow the deposit from my parents?

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Otto Dargan
Mortgage Specialist
Posts: 7728
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Can we get approved for a home loan with paid default?

Postby Otto Dargan » Wed Oct 02, 2019 9:28 pm

Hi Cathy Bell,

Some lenders are willing to accept a deposit that you’ve borrowed from your parents because you’re more likely to pay the loan back than if you were to get a personal loan.

Please take note that any repayments you need to make on the borrowed deposit (including interest) will be taken into account when the lender calculates your borrowing power.

You will need to provide the bank with a loan agreement that you've made between you and your family. This is usually drafted by a solicitor.
You and your parents must seek separate legal advice to discuss any contingency plans on what would happen if you fail to repay the borrowed deposit. You can learn more about parent assist home loans here.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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