Easy ways to improve your chances of being approved for a home loan
Applying for a home loan can be quite daunting for many people. The process hasn’t been made transparent enough, which has often led to many application rejections. If you are keen on applying for a home loan from a financial institution and being approved, there are various factors you need to consider.
Following the recession of 2008, lending institutions have become stricter about the criteria which home loan applicants must fulfil. Despite this, as a home loan applicant, you shouldn’t be intimidated, because there are easy ways to improve your chances of being approved for a home loan.
How you can improve your chances of being approved for a home loan:
Be informed
Some people might take being informed for granted. It isn’t too complicated either. The advent of the internet has made it much easier to keep up with the latest developments around home loan applications.
Take the time to understand how banks and other financial institutions assess home loan applications. Be sure to find out about the exact criteria you need to meet.
Check the valuation of the property.
The bank partially bases repayment amounts on the valuation amount, so it helps to do your research.
Don’t take on additional debt. Defaults can result in declines.
By taking on more debt during the application process, you run the risk of defaulting on payments, which ultimately does not work in your favour during your application. Doing this also indicates to lenders that you may be relying too much on debt to fund your lifestyle.
Having a deposit demonstrates your ability to save and increases your chances of getting approval.
While there are various home loan options, such as 100% home loans, paying a deposit puts you in a much better position, because it indicates to lenders that you are consistent and are reliable.
Get pre-approval- it gives you peace of mind knowing that you qualify.
Pre-approval is a simple way of indicating to lenders that you are deemed creditworthy to afford a home loan. It’s also an indicator of your affordability, so when you apply for a home loan from different lenders you stand a much better chance of approval.
Make sure that you check your credit score.
Your credit score is used by lending institutions to gauge how well you have maintained your credit agreements as a credit-active individual. This score indicates your level of risk, so the higher your score is, the lower the risk of granting you credit. Before applying for a home loan, you’ll want to ensure that you have a high score and an impeccable credit record.
Be clear about your affordability.
Affordability is one of the key factors used in the credit-granting decision. For instance, you need to comfortably afford to pay 30% of your monthly salary on the home loan, otherwise your application is likely to be rejected.
Assess the level of debt you have incurred.
If you have too much debt already, your application is likely to be rejected. Previous defaults on payments will factor into the decision.
When applying, keep in mind that there are easy ways to improve your chances of being approved for a home loan, so you can make the necessary changes.
