What lenders look for on loan application
When you apply for a home loan, the bank will investigate and analyze every aspect of your finances, to ascertain whether or not you are a high risk client or worth their investing in your home. Here are some tips to help ensure that when you visit your prospective lender you make the right impression and get approved in no time at all.
Your credit history
Central to your applications’ approval is what your credit record says about you. Lenders love clients who pay all their debts on time and do not have any arrear amounts outstanding accounts. You are even better off if you make additional payments to your debts every month.
If you are struggling to make payments each month make a payment plan. Having an arrangement in place assures the lender of your continued commitment. Before you visit a lender or mortgage broker get a detailed report of your credit record to see if there are any adverse listings.
Income to debt ratio
You need to take stock of all the money you owe and what you spend each month. When you apply for your home loan, the bank will work out your income to debt ratio. They take into account how much money you earn and tabulate how much debt you owe various creditors every month. This includes; car instalments, insurance, credit cards and accounts etc. Whatever the amount is that you have left over after all these deductions is the amount you can probably afford to pay on your home loan.
You’re off to a good start if you have saved for a down payment. The more money you can put down towards a home loan the better. If you have a deposit you will borrow less money from the bank. The bigger the deposit the smaller the loan and the less interest you pay on your loan in the future. The general consensus is that you should have saved at least 10% of the purchase price of your property.
- Identity documents (not copies) of all persons applying for the bond
- Proof of residence for the past 24 months
- Particulars of landlords and or lenders
- Name, address, and contact information of employers of all loan applicants for the past 24 months.
- Pay slip/ Salary advice or proof of income for the past 3-6 months
- Verification of any additional income to be included in bond application
- Current balance sheet, income tax returns for past 24 months both personal and business
- 3-6 months banking statements
- Any child support or maintenance obligations must be declared, bring a copy of the divorce decree or maintenance agreement.