home loan help????

[Kaileysmum]

Hi,
Me and dp would like to buy a house. But the thing is he has a credit defult against his credit rating. I currently already own 1/3 of a house (got it in a estate). Is there anyway we'd get a home loan or will we have to wait until his defult is cleared??? Any advise on this would be great.

[Bearskin]

Regarding the default, it depends on which lender you choose and whether the default has been paid in full and the amount of default.

Some lenders (mostly non bank) will approve a home loan when one of the borrowers has a default listed against them as long as it has been paid, you provide a detailed reason for the default and its not for a huge $ amount, such as a Telstra/Utilities bill of $200. You may have to pay a slightly higher interest rate as your loan may come under the "non-conforming" category but most lenders will at least consider it if you are providing full evidence of employment (such as payslips, tax returns if self employed etc), you can service the loan very comfortably and the loan amount is under 90% of the property value. Remember, for any lender (bank or non bank) they assess the loan application according to the amount of risk taken for them to lend the money. So, if you are only borrowing 80% of the purchase price or property value, the property is in good condition and location and you can provide employment/income documentation then the risk for the lender is relatively low.

There are lenders, such as Liberty and Bluestone that will lend higher loan amounts to value ratios (up to 90% of purchase price)with defaults listed against one of the borrowers however their interest rates can be 2% higher than standard interest rates offered by lenders and their exit/refinance fees can be huge.

Regarding your 1/3 ownership of a property, you generally cannot use that as equity/guarantee for another home loan as I assume there are 2 other people (not your DP) on the title of the property which will not be borrowers on your home loan with DP.

However it looks good on your assets and liability statement in your application form that you own other real estate and are possibly earning income from that property, such as rent.

PM me if you want more information or the names of some Mortgage Brokers that deal with non bank lenders. I can point you to some very reputable Mortgage Brokers (I have no financial interest in them!) which can help find you the best home loan product.

[sharvs]

As Bearskin mentioned, it depends on the lender. I used to work for a credit union and we approved people with defaults sometimes, it depends on the situation.

The other hurdle you may cross is mortgage insurance - whilst the lender may be willing to give you the loan the mortgage insurer may not. Ususally you have to take out mortgage insurance if you are borrowing more than 90% of the purchase price - in this case its the mortgage insurer that has the final say.

Good luck with it all