Applying for a home loan? The first thing you need to do is make sure you give no reason to the banks to question your credibility to pay the loan back.
While there’s no need for you to have your finances in perfect condition, there is a need to have a good knowledge of what’s required to get your mortgage application approved successfully. To do this, here are a few things you need to keep in mind.
Creditworthiness
For a successful mortgage application, the first thing you need is a proof of your ability to repay. It’s a well-known fact that bad credit causes damage to a loan application, but one thing that is equally bad is having no credit at all. While using cash wherever you can is a great way to avoid debt, it doesn’t help much with building a credible credit history.
Without any proof of a credible credit profile, lenders won’t be able to verify whether you’re capable of repaying the mortgage regularly on time. Therefore, the best way to make your approval process easy is by establishing good credit on a loan. A good credit is an evidence of your sincerity regarding credits and repayments.
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Avoid additional debt
A credit profile and a credit history will show your ability to repay your debts regularly and on time. Along with this, you need to avoid spending money on things you don’t really require. This may lead to an accumulation of debt that you may not be able to repay. Maxing out on credit cards is a complete no-no since this will drastically lower your credit score. Another thing you need to completely avoid is making late payments and paying late fees.
Once you have decided to apply for a mortgage, you should get into the habit of fully repaying your debts every month. Practice this by paying off your credit card balance every month on time.
Save the good deed for another day
When you co-sign a loan for someone else, you become a joint debt holder with that person. The debt then appears on your credit report and affects the ratio of your debt to income, which in turn affects the approval of your mortgage. This is especially true when the person you cosigned for a loan helped doesn’t help you back and puts a hold on the payments. In such as case, you will end up paying the entire loan.
Focus on one dream at a time
If you’re going after your dream home, you will have to keep the job. If you wish to qualify for a mortgage, you need to prove that you have a long-term financial stability. Lenders will always ask you to present your payslips along with your tax returns. If you’re successfully self-employed and have at least a year of profits to show, you can easily purchase a home with your mortgage.
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