Bad Credit Home Loan? Here's How to Secure It (2026)

Finding yourself in a situation where you need a home loan but have bad credit can feel daunting. You may be worried about whether you'll qualify for a loan at all, or if you'll face exorbitant interest rates that make home ownership seem out of reach. At Esteb and Co, we understand these concerns and are here to guide you through the complexities of securing a home loan, even with bad credit, by leveraging our extensive network of over 83 lenders. Let's explore your options and help you take steps toward your dream of owning a home.

Understanding Bad Credit Home Loans

Bad credit can result from various factors such as missed payments, loan defaults, or bankruptcy. In Australia, your credit score ranges from 0 to 1200, with scores below 550 often considered as 'bad credit'. Having a low credit score can limit your options, but it doesn't necessarily close the door on obtaining a home loan. Lenders assess risk differently, and some specialise in offering loans to those with less-than-perfect credit histories.

Current Market Information and Options

As of 2026, the Australian home loan market offers a range of options for borrowers with bad credit. Interest rates for these loans typically range from 6.49% to 12%, depending on the lender and your specific circumstances. While these rates are higher than the typical home loan rates, they reflect the increased risk perceived by lenders.

Eligibility criteria for bad credit home loans often include:

• A stable income and employment history.
• A deposit of at least 10-20% of the property value.
• Evidence of efforts to improve your financial situation, such as clearing outstanding debts.

Steps to Getting a Home Loan with Bad Credit

Securing a home loan with bad credit requires careful preparation and a clear strategy. Here’s a step-by-step guide:

1. Check Your Credit Report: Obtain a copy of your credit report to understand your current credit position. Check for errors and take steps to rectify any discrepancies.
2. Improve Your Credit: Make consistent efforts to improve your credit score. Pay off outstanding debts, reduce credit card limits, and avoid new credit enquiries.
3. Save for a Larger Deposit: A larger deposit reduces the lender’s risk and can lead to better loan terms.
4. Consult a Mortgage Broker: Engage with a trusted mortgage broker like Esteb and Co to explore tailored solutions from our panel of 83+ lenders.
5. Prepare Your Documentation: Gather necessary documentation such as proof of income, employment history, and financial statements.
6. Apply for Pre-Approval: Obtain pre-approval to understand how much you can borrow and strengthen your position as a buyer.

Expert Tips and Considerations

Here are some expert tips to consider when applying for a home loan with bad credit:

• Consider a Guarantor: Having a guarantor can improve your chances of approval and may help secure better terms.
• Be Realistic About Property Choice: Opt for a property within a price range you can comfortably afford, even with higher interest rates.
• Stay Informed: Keep abreast of market trends and government incentives that might benefit first-time buyers.
• Budget for Additional Costs: Include potential costs such as higher insurance premiums, legal fees, and stamp duty in your financial planning.

Frequently Asked Questions

• Can I get a home loan with a credit score below 500?

  Yes, some lenders specialise in offering home loans to borrowers with lower credit scores. However, these may come with higher interest rates and stricter terms.

• How can a mortgage broker help me?

  A mortgage broker can provide valuable insights into the lending market, negotiate better terms, and access a variety of loan options tailored to your situation, leveraging a broad panel of lenders.

• What is the minimum deposit required for a bad credit home loan?

  Typically, lenders require a deposit of at least 10-20%. A larger deposit can improve your chances of approval and better loan conditions.

• How long does it take to get approved for a home loan with bad credit?

  The approval process can vary but generally takes longer than standard loans due to the additional risk assessment involved. It can take from a few weeks to a couple of months.

• Are there any government programs that can assist me?

  In Australia, there are various schemes such as the First Home Owner Grant and the First Home Loan Deposit Scheme that may provide assistance, depending on your eligibility.

• What if my loan application is rejected?

  If your application is rejected, it’s important to understand the reasons why. Work on improving these areas and consider reapplying with guidance from a broker.