Unlike car loans, home loans are quite difficult to obtain. You may get disappointed when your application gets rejected, but if you know the real reasons behind it, you will find it fair enough. Most of the applicants make the mistake of doing their reality check before applying for loans whenever there is an offer. They hope to get clearance on the loan even when there are zero chances of the bank approving it. So if there is a key for taking the home loans, what is it? Proper education is necessary to avoid disappointments of getting your application rejected. Learn how the lender thinks and apply for your loan accordingly.
Know Your Credit Score
Your credit report determines how well you are eligible for taking any credit from any lender. Most of the people forget to review their credit score before applying for home loan, assuming they have a good credit score. A low credit score is your dead-end to getting approval, and it is the most crucial element in getting a mortgage loan. The higher credit score requirements, several missed payments, frequent lateness, and other derogatory credit information can stop mortgage approvals. To have a good credit score, pay your bills on time, lower your debt, and stay on top of your credit reports. Pre-paying your EMIs can also help in improving your credit score.
Save Your Cash
The policies for applying for a home loan keep changing, and if you are planning to apply for a home loan in the near future, today is the day you should start saving. Applying for a loan with zero savings is a straight rejection to your application. Lenders are now more cautious and demand down payments on the EMIs. The higher your downpayment, the lower will be your interest rate on the loan. If you can manage to do 20% down payment to your loan, it not only brings down your loan value, but also alleviates private mortgage insurance or PMI. If you can get rid of PMI, you can enjoy lower, more affordable mortgage payments.Apart from down payments, getting a mortgage also involves closing costs, home inspections, home appraisals, title searches, credit report fees, and other expenses.
Stay at your job
It is necessary for the lender to have trust in you that you will be able to pay back the loan amount. TO deliver that trust, you need a constant source of income, which is job security. You need to have approval from your employer that you can capable of earning money. Quitting your job before applying for home loan can make the lender rethink his decisions on passing your application.
Clear your older debt
To apply for a home loan it is best that you go fresh and free of any previous loan. Your debts will determine if you can take a home loan, as well as the amount you can take from the lender. If you have a lot of debt ratio because of a lot of credit card debt, the lender can turn down your request, because your entire monthly debt payments should not exceed 36% of your gross monthly income.