Taking out a loan can be an extremely stressful experience. We might be taking out a loan to achieve something exciting; perhaps we’re buying a property, having a home renovation or investing in our business. However, this doesn’t make the process any easier. If this is your first time taking out a home loan, you’ll likely face setbacks on the way. These setbacks shouldn’t deter you and can be easily avoided with the correct planning and preparation.
Here are the things you need to do before approaching a mortgage lender or if you face hurdles during the approval process. Remember, if your application gets declined, don’t rush off to another lender. Check these factors and query what went wrong.
Clear your debt
Having too much debt can seriously harm your lending prospects. The accumulation of debt suggests you’re not good at handling your money. Although this debt might not be massive, and there’s likely a reasonable explanation for it, your lender is unlikely to see this. All your lender knows is that you’ve borrowed money in the past that you’ve been unable to pay back. Having a track record of failing to pay back borrowed money isn’t a good incentive for mortgage lenders to lend you your home loan. Paying off debt before applying for a loan increases the chances of you receiving this loan and reduces the likelihood of things going wrong in the process.
Avoid administrative errors
Your loan application will be under close inspection. Any minor errors will be queried or might even result in instant rejection of your application. It’s highly likely a computer program will inspect your files. Ensuring your administrative information is clear and concise will help the lender’s software accurately and efficiently compute your information. We’re human, and making mistakes is natural, which is why it’s crucial you double and triple check the information you’re providing. Pay close attention to dates and spelling, as this information is frequently overlooked. Although these factors may seem minor, a lender will have no reservations about rejecting your mortgage application to save themselves time and effort.
Have a good credit score
Debt tells a lender you’re not good at handling your finances, while a good credit score shows you can. A good credit score is one of the most redeeming features of your loan application. Your credit history proves you’re reliable, good at paying off debts and an expert at handling your money. Having a good credit score increases the likelihood and speed at which your loan is approved. Equally, having no credit score leaves lenders wondering how efficient you will be at paying off their loan. Unfortunately, if there’s no evidence to prove you’re a good person to lend money to, they’re not inclined to believe it out of the goodness of their hearts.
If you don’t have a credit score or your credit score is low, try to build up your credit score before applying for a home loan. Although this might seem as though you’re increasing the time spent waiting for an approved loan, getting your credit score up reduces the chances of rejection and helps you receive your loan quicker in the long run.
Avoid new credit deals for over a year
Taking out several credit deals at once implies you’re struggling with money. Every credit deal you take out appears on your credit history and affects your credit score. Lender’s don’t want to lend to individuals or businesses who aren’t equipped to handle their money. If you have several credit applications, close these applications and improve your credit score for a minimum of one year before you try applying for a home loan.
Make sure you’re earning enough for the amount you want to borrow
We’re all guilty of wishful thinking from time to time. It’s nice to think borrowing large sums of money can give us that big house by the beach we’ve always dreamed of. However, when it comes to a mortgage, you need to be realistic. Trying to borrow more money than you’ll be able to pay off will result in rejection from your mortgage lender.
Working out how much you’ll be able to pay off requires doing math based on your current income. A reputable and experienced mortgage lender isn’t going to lend you money you can’t pay off on your current salary. Most mortgage lenders will lend a maximum amount of four-and-a-half times your annual income (combined income if you’re buying with someone). Requesting money above this amount might seem like a nice idea, but it’s almost always going to result in rejection, making your loan process take longer.
Ensure you match the lender’s criteria
Lenders tend to have criteria they use to decide whether they want to lend you money. These criteria are specific to them and might encompass age, employment, income, loan amount, property location. Strict guidelines are popular amongst local mortgage lenders who have a reputation to uphold. Before applying for your home loan, inspect the criteria, and ensure you meet what’s required.
Make sure you’re registered to vote
Not many people are aware that you need to be registered to vote before approaching a mortgage lender. Before approaching a mortgage lender, you need to be on the electoral register at your current address. Registering to vote proves who you are and confirms where you live. Before you even begin reaching out to prospective home loan lenders, register to vote.
Having your loan process thrown off track can be immensely frustrating. Whether you face instant rejection or encounter hurdles later down the line, facing problems when borrowing money can be disheartening. It’s important to remember, borrowing money for a home loan is a process. This process takes time and energy, and it’s natural for things to slow down or go wrong— this isn’t a reflection of you or the end of the line for your borrowing prospects.
Before giving in, consider the factors in this list and how they may have affected your application. By making yourself aware of these determinants before applying for your loan, you have a good chance of keeping your loan on track throughout the process.
Here at Total Lending Concepts, we’re ready to help you through every step of this journey. CONTACT US TODAY to begin your journey.