A house is the most basic need of every family. Many people are looking for an opportunity to get a house of their own especially since house rentals even for a small space is at an all-time high now. And when your personal finances do not allow you to buy a house with spot cash, your best option would be to get it on a mortgage. If you still find it difficult to get approved for a mortgage, here are some tips that could help you:
1. Keep track of your finances.
Starting January of 2014, new mortgage regulations take effect when it comes to underwriting home loans. These new regulations require lenders to verify the capacity of each borrower to repay his or her loans. Borrowers who are more diligent in keeping track of their finances have the greatest chance of getting approved. For tracking purposes, keep a complete record of your bank statements, W-2s, income tax returns and other assets you may have. If there are any unusual deposits in your bank accounts, be ready to also justify them.
2. Make sure your credit rating is good.
All lenders will check if you are a good creditor before lending you any amount of money. One way they do it is to check your credit rating. And since the credit crunch, lenders are even stricter now in their credit scoring. To improve your credit record, stay loyal to your account provider. The longer you remain in your current job, address and bank, the better it will reflect on your record. More importantly, don’t miss out on your credit card payments.
3. Pay off loans.
If you miss out your loan repayments or credit card payments, it will reflect on your credit record for up to six years and that can affect your mortgage application. Additionally, if you have outstanding loans and plan to apply for a mortgage, consider paying it off first. Lenders assessing the amount of money to lend will normally consider your monthly income less your monthly commitments. Having outstanding loans may lessen the amount you can borrow or may cause the lender to turn you down.
4. Save more.
The days when 100 percent mortgages are available are long gone. Now, home buyers need to save at least 10 percent of the purchase price of the property before a lender may consider you. The more savings you have, the greater is your chance of getting approved and the better will be the deals you can get. Lenders are more prudent now on lending money and they will consider borrowers who are able to put up at least 25 percent of the price.
5. Talk to your bank.
You may also find it easier to borrow from your bank than from a lender that you are transacting with for the first time. According to James Thorpe, spokesperson of HSBC, if they are your current account provider, it will be much easier for them to assess how much money is going in and out of your account each month, and that can provide them a good basis on whether to approve your mortgage application or not.
Aside from the five tips listed, don’t forget to get your paperwork done as soon as possible to process your application. Typical requirements of most lenders include your pay slip for the last three months, your bank statement for the last three months, and proof of your address among others. You could also inquire from your lender on what other requirements they may need attached to your application.
Some people may find it challenging to get approved for a mortgage. But if you apply the five tips mentioned here, you can increase your chances of securing a loan.