Last Updated on March 14, 2022 by rabiamuzaffar
Over the years, the mortgage scene has changed significantly, but one thing still stands is that no lender wants to risk a borrower who might not repay the loan. That is why mortgage applications are often strict and sometimes frustrating. For anyone thinking about buying a home, your first concern should be increasing the chances of being approved. However, do not worry too much as there are certain things you can do to increase the chances of being approved for a loan.
Explore Various Lenders
You should note that loan tenure, interest rates, and other charges associated with getting a loan differ across various lenders. You may approach one or two lenders, and they turn you down because of a poor credit history, while another finds a way to navigate that. Therefore, compare as many lenders as possible before you settle on one. Most lenders will offer preferential rates or better loan terms to customers they already have a working relationship with. So, before approaching many lenders, start with the one you have a consumer relationship with. Hardly will they turn you down.
Save Up for Down Payment
The higher the down payment, the less you will have to borrow. That means it will be easier to meet the lender’s loan requirements. By showing proof of savings, the lender can tell that you are financially disciplined, which means you will be making your monthly mortgage installments. Most lenders will ask for at least three months’ proof of saving. And if you can show more than that, the better.
Work on Your Credit ratings
Credit ratings fall among the top factors that a lender will evaluate before approving a home loan. It does not matter whether you are getting a loan for the first time or if it is mortgage renewals. Your credit history and credit score will determine whether you get approved for a loan or not. For one to be approved for a home loan, you have a minimum score of about 620, although loan experts suggest having at least 750. After all, the higher the credit score, the lower the interest rates.
Find a Co-Applicant
Your home loan application will look weak when you have an unsteady income, a low credit score, and an unstable job. One of the ways to avoid this hurdle is by applying for a joint loan with a co-applicant. This can be a spouse or another family member with a good credit score and a stable income. It increases your chances of being approved.
Lower Your Debt-to-Income Ratio
Applying for a loan to get a house means you are taking on a huge debt which you will be paying for quite some time. Consider paying off some debts first, whether it is a car loan, personal loan, or credit card. When you are not dealing with any major debts behind your back, you show a lender you are a responsible borrower who pays their debts on time.
Buying a home comes with so much excitement. But that comes after being approved for a home loan. Use the tips discussed above to increase the chances of being approved for a loan.