Applying for a home loan can be one of the most intimidating processes, especially if you are a first-time buyer. Lenders will consider various different factors when deciding whether or not to approve your home loan. Improve your chances by understanding the steps involved in the evaluation process, making your application less stressful and a lot faster.
A bit of preparation will mean that you arrive at the bank or lender with the required documentation and you will be ready to be evaluated.
Step 1 – Get your credit report
Get a copy of your credit report and review it carefully. Your credit report might contain an error that could lead to the disapproval of your home loan.
Step 2 – Pay your outstanding debt
- Try to pay off all your credit cards and outstanding bills before applying, low credit balances will definitely count in your favor.
Step 3 – Don’t apply for new credit cards
- If you know you will be applying for a home loan in a while, don’t apply for new cards or close current accounts.
Step 4 – Save for a deposit
- A larger amount for a deposit will not only make your loan amount smaller, your loan will more likely be approved as well. With an excellent credit record, the amount you put down for a deposit won’t make a huge difference, but if your credit record is not perfect, the amount of your deposit could mean the difference between your loan being rejected or approved.
Step 5 – Keep your job
- When applying for a home loan, you need to show a steady source of income, so try to keep your job and don’t change jobs just before applying for a home loan.
Step 6 – Save funds for additional costs
- In addition to your deposit, try to save some money for the additional costs involved in a home buying process, such as transfer- and registration costs.
Step 7 – Know what you can afford
- It is important that you know exactly what you can afford before applying for a home loan. The banks will never approve a home loan you can’t afford. Try to work out your debt-to-income ration to find out exactly what you can afford on a monthly basis.
Step 8 – Always be honest
Don’t lie, hide or alter any information to increase your chances of getting a loan approved. You risk being charged with fraud and might never find a bank who will work with you again.
Once you have taken these steps to prepare for your home loan application, approaching a bank is the next step. Be sure to shop carefully when choosing a bank or a mortgage originator. Checking into the loan approval percentages of your lender or broker and their reputation in the industry is wise, helping to ensure that you will be treated fairly.