Home loans are an important step towards purchasing a home. With today’s trends moving towards smaller, condo-style living spaces, the need for a mortgage is becoming more important than ever.
However, getting approved for a loan can be tricky due to all the underwriting standards banks have in place. To apply for a home loan as an individual means that you alone will be responsible for repaying the loan and not any other person or organization such as your partner or parents who live with you.
Banks look at various factors before approving a loan application so it is essential to understand what they are looking at and how you can improve your chances of being accepted. With the help of the best estate agents Yardley, we outlines common mistakes people make after applying for a home loan in Yardley, UK.
Make sure you’re an eligible applicant.
Before you start applying for a home loan, make sure you are eligible to do so. Banks will look at your ability to repay the loan and your credit score, which is based on your payment history and may affect your ability to repay.
This is because banks want to avoid getting stuck with bad debts—where the borrower fails to make payments and the bank has to cover the loss. If you have a bad credit score, it is advised to take some steps to repair it before applying for a home loan. This way, you can increase your chances of being approved.
Don’t forget to factor in your savings.
Banks also look at how much money you have saved for a down payment and other associated closing costs. A down payment is a one-time lump sum payment at the time of purchase that is applied towards the purchase price of the home. The rest of the funds are put towards paying off the home loan. If you want to purchase a home without taking a mortgage, you will need to save money for a down payment, pay for an appraisal, and cover the other associated costs.
Banks will also want to see that you have enough money saved to cover closing costs. Closing fees are associated with getting a mortgage and are paid at the time of purchase. They include fees associated with processing your mortgage application, appraisals, inspections, and title insurance.
Do your research on the property and area.
Banks also factor in how much risk they are taking by approving your application. The loan amount is based on the property’s current market value and the amount of time it will take to repay the loan. Banks will want to see that you have done enough research on the area and property’s estimated market value.
This ensures that you are not overvaluing the home and able to repay the loan comfortably. If you are purchasing a house in an area that is growing in popularity, you may be able to get a higher value for your home in the future. Banks will also factor in the projected general market value and inflation of the area.
Don’t lie about your employment or income.
Banks will look at your current employment, gross monthly income, and previous employment to determine your ability to repay the loan. The amount they are willing to lend you is based on a percentage of your income. Banks want to make sure you are not overstretching your finances by purchasing a home with too much debt. They will also want to see that you have been employed for a certain period of time, usually for a year or more, and have a consistent employment history.
If you have been employed for less than 12 months, banks will want to see that the reason for this is not due to poor performance or misconduct. Make sure you do not lie about your employment or income to get a higher loan amount. It is better to apply for a lower amount and be honest than be caught in a lie and risk losing your home.
Don’t forget about your end goal.
Banks will factor in your overall debt, including personal loans and credit card bills. The amount of debt you have and your ability to repay it will play a role in your application getting approved. If you have too much debt, banks may be reluctant to approve your application.
However, if you have a solid plan of how you are going to repay that debt, banks will be more likely to approve your home loan application. Remember that the more debt you have, the less money you have to put towards purchasing a home. Make sure you are not applying for more than you can reasonably repay.
Conclusion
Applying for a home loan can be a daunting process but with these tips, you can improve your chances of being accepted.
Remember to make sure you are an eligible applicant, don’t forget to factor in your savings, do your research on the property and area, don’t lie about your employment or income, and don’t forget about your end goal. With these considerations in mind, you can be sure to apply for a home loan with confidence.
