How high or low are your chances of home loan approval?
It could be high or low, depending on the type of loan you are applying for, the strength of your application and many other factors.
Different mortgage lenders have different eligibility criteria, ranging from your income, age and profession to your credit history. There are many things that go into consideration.
When it comes to mortgage lending, there is no one right way to go. The mortgage scene has changed over the years, and lenders have grown more strict with their requirements.
However, we have some ways to help you improve your chances of approval for that home loan you want.
Bring Up Those Credit Ratings
In the ranking of the factors lenders evaluate for home loans, credit ratings come near the top. Your credit history of the past few years, along with your credit score, plays a valuable role in determining whether you qualify for a home loan.
Traditionally, credit scores start at about 300. To be approved for a home loan, you need a minimum score of 620.and experts suggest at least 750. An ideal credit score is also a gateway to lower interest rates.
Examining your credit rating once in a while allows you to see if there are negative repayments or defaults recorded. This gives you time to fix the credit issues and rectify errors before lenders get to see them. Make sure to keep credit enquiries to a minimum, though. Multiple enquiries will make lenders more cautious.
Calculate your credit score here.
Show Your Ability To Save And Manage Money
Lenders judge an application based on the monetary consistency of an applicant, including your ability to save up cash.
Apart from contributing to a deposit on the property, savings help prove to lenders that you are responsible enough to make timely loan repayments. Hence, you gain improved chances of competitive interest rates and higher chances of home loan approval.
Generally, lenders prefer if at least 20% of the purchase price is saved up. But saving an even larger deposit can help you dodge additional fees like Lenders Mortgage Insurance.
Another important factor in getting the lender on your side is by maintaining a good repayment history on all existing credit. You can do so by minimising arrears, late repayment and payment dishonours. It is best if you can avoid these entirely.
Use A Co-applicant
Home loan applications seem weaker if filled only by someone with a low credit score, unsteady income and unstable employment. One possible way out for such borrowers is to apply for a joint home loan with a trusted co-applicant.
In most cases, a family member with a stable income is the best choice for a co-applicant. This boosts the loan eligibility of the borrower and allows for a higher loan amount.
Needless to say, loan repayments become easier when you and your co-applicant are bearing them together.
Make A Higher Down Payment
In general, lenders are allowed to finance up to 90% of a property’s value. The rest of the cost of the property must be covered by the borrower’s down payment.
Putting down a higher down payment lowers your Loan To Value Ratio. This lets your mortgage become less risky from a lender’s point of view, increasing your chances of home loan approval.
Go For A Longer Repayment Term
Initially, it may seem like a shorter repayment term is ideal for getting the process done and dusted. However, longer loan tenure makes you more eligible for a home loan of a higher amount.
On the other hand, that longer tenure also means more interest payments over the life of the loan.
The Home Loan Experts online home loan repayment calculator will help you figure out the ideal loan repayment term for your situation.
Explore Your Options!
Apart from these strategies, comparing offers from different lenders and researching what works with them is also a good way to improve your chances of home loan approval.
Home Loan Experts’ specialist brokers can assess your situation and do the research for you, to help make your home loan application as strong as possible.
Give us a call on 1300 889 743 or fill in our free online enquiry form.