Many potential home buyers rely on real estate agents or third parties to assist them with their home loan applications.
When they are turned down, they often don’t understand why they have been declined and what is needed for banks to approve a home loan.
Before applying for a loan, you should investigate your own credit score and take the necessary corrective measures.
First-time home buyers can significantly increase their chances of being approved for a loan if they identify the pitfalls and take care of them before taking the plunge.
Here are a few obstacles that you may want to invest in:
#1 – Affordability
In certain instances, consumers opt for properties that are beyond the amount that they can afford in a month.
Banks want to know if you will be able to afford that monthly installment after your other bills have been paid out of your monthly income. If affordability is an issue, you can consider saving up a bigger deposit, a joint application with a spouse or a family member, or a property of lower value.
Getting pre-qualified before applying for a home loan will help consumers determine if they qualify for a loan of that size and what type of deposit would be required.
#2 – Low credit score
Your credit score takes into account the historical management of your finances.
Lenders want to know whether or not you will be able to pay your monthly mortgage installments and home loaners need to determine whether or not you will be pay the installments on your house, among your other financial commitments.
Before applying for your loan, consider checking your credit score first and see where you can improve on its status. Consumers can get a free annual credit report from a registered credit bureau.
#3 – Unstable monthly income
When you apply for a home loan, you will be required to provide your latest pay slips as well as bank statements for the last three months.
Lenders need assurance that you are in a financial position to meet the monthly installments of the loan.
If you are a self-employed individual, you will be required to produce a minimum of six months’ worth of financial records or bank statements. This is done so that lenders and banks can see that you have regular income and what the approximate amount is that you receive every month.
#4 – Incorrect declaration of expenses
In many cases, applications are declined because expenses might have been duplicated.
You should be very careful when filling in the application form not to include your expenses twice. If you have listed a credit card that you use for petrol and groceries, for example, then you don’t need to include your petrol and groceries expenses again.
It is important to understand that every application is unique and is assessed based on its own merits. Taking the time to build up knowledge about the home loan process and the assessments of application will definitely go a long way in helping you buy your home.
#5 – Unsatisfactory property evaluation
It often happens that a house goes up for sale and it isn’t selling at a price that reflects its actual worth.
Sometimes it can turn into a bargain, but most of the time it ends up becoming a headache for the buyer who pays more than he should for a house in a certain condition.
It is very important that the bank assesses the property that you intend to buy to make sure that it is in good condition. This assessment will then also determine whether it is being sold too far off its market value.