Most people need to take out a home loan to fund their property purchase. However, borrowing money isn’t necessarily as easy as it sounds. Lenders generally have a long list of eligibility criteria meaning that you will need to jump through multiple hoops as part of the application process, and even then, there’s not necessarily any guarantee that you will be approved. Fortunately, there are some things that you can do to increase the likelihood of being accepted for a loan to buy your dream property. Here are our top tips for applying for a home loan.
If you don’t currently know what your credit score is, now is the time to find out. It takes just a few minutes to download your credit report, and many websites will let you do this for free provided you sign up for trial access. Your credit score is a number that depicts your creditworthiness and is based on your credit history – how many credit accounts you have, how much overall debt you have, the ratio of this debt to your income, your repayment history, and more. The higher the score, the better prospect you are for potential lenders. This is because a high credit score usually points to someone who is in control of their finances, who doesn’t borrow more than they can afford, and who makes their payments on time. A credit score is important because it can affect who will offer you a home loan and what percentage interest you are likely to have to pay. People with high credit scores usually repay their loans at lower interest rates. If your credit score is very low, you may need to spend some time building up good credit before buying a property.
If you are a first-time buyer, you may be eligible for some financial help when it comes to stepping onto the property ladder. This is because there are a number of schemes that act as financial incentives for people to buy rather than rent. Examples include down-payment assistance, closing costs assistance, and even discounted interest rates. Make sure you check if there are any schemes or programs that can support you in your first ever property purchase – they could help you to save a considerable amount of money that you could put towards other costs incurred.
Your lender will want to be reassured that you can make your loan repayments, and this means that you’ll need to show that you are capable of holding down steady employment. Don’t be tempted to change your job in the months before applying for your home loan. Any changes to your employment or income status can stop or delay the loan process, and in some cases, can even see your application being rejected.
A deposit or down payment is a crucial part of being approved for a home loan. While some lenders will loan you as much as 95% of the value of your property, the more money you can put down upfront, the less you will have to borrow. Showing that you have saved a down payment confirms your commitment to your property purchase, and if you have less to borrow, you could save a small fortune in interest charges. Putting aside as much as you can afford to will put you in a strong position when it comes to getting your home loan. You’ll need to show where the deposit has come from, so if you are gifted any of it, you’ll need to provide a letter from the donor.
For more tips on applying for a home loan, get in touch with our office today.