When you don’t have enough money to buy a new home, your first thought will be to apply for a home loan. But as useful as these financing options are, you are not guaranteed to be approved for one – especially if you don’t meet all the requirements.
If it’s your first time applying for a loan, the whole process can be quite challenging. You don’t know how the process unfolds or what documents you need to send with your application. Also, you don’t know what to do to convince the lender that you deserve approval. Being rejected when you need the money so much can be disappointing, particularly when you want to purchase a house before someone else seizes the opportunity.
All hope is not lost, though, because there are 8 things you can do to boost your chances of having your loan application approved.
- Don’t Be Late with Your Bills
Bills are a burden we all have to deal with, and while everyone wants to be up to date with everything, sometimes other payments must be prioritized.
However, if you want a lender to see you as a responsible person who deserves a loan, you must be up to date on your bills. Lenders check your credit history upon deciding whether they should grant you a loan or not, and they will know if you are late with bill payments.
To make sure you don’t miss any payments, you can set up a direct debit for your credit card payments and your utility bills.
- Remove Former Partners from Joint Accounts
When you get married, you might decide to share an account with your partner. But if the relationship doesn’t work anymore and you get divorced, you should consider removing your ex from the joint account. Otherwise, their potentially irresponsible financial behaviour could negatively impact your credit history, hindering your chances of getting a loan.
- Don’t Go Crazy with Applications
Whenever you apply for a loan, it’ll show up on your credit. If you make too many attempts to obtain funding, this can decrease your credit score but can also look suspicious to the lender you’re sending the application to.
So, make sure you don’t go overboard with credit applications – at least until you secure that home loan.
- Prove You’re Able to Sustain Yourself with Your Usual Income
If you want a new property, then you must prove that you can manage your money properly. Bank statement copies might be required for this, as they will tell the lender if you can live comfortably within your budget or not.
- Be Responsible with Your Debt Payments
You may already have some form of debt, like credit card debt. This will not necessarily interfere with your chances of getting a home loan, but if you don’t want prospective lenders to see you as a red flag, you should know how to reduce debts and be responsible.
This means you should always pay your debt on time and pay more than the minimum monthly payments.
- Don’t Do Sudden Changes to Your Career
It may be tempting to change jobs, especially if you want a better salary. Not only that, but a higher income can also boost your chances of getting approved for a loan. However, sudden career shifts can also lower the likelihood of getting approved.
This is because lenders want borrowers to have been in their job for a longer amount of time. If you just changed your career, your lender may not be too keen on giving you any financing.
Besides, when you send an application, you’ll have to provide copies of payslips for the last 3-6 months.
- Show Evidence of Savings
Did you start saving money for your new home, or you thought you could rely on the home loan?
Lenders want to see that you have been genuinely saving money for at least three months before applying for a loan. It will not look good if you didn’t save and you just wanted to rely on the loan.
- Work on Your Credit History
Check your credit history by asking for a copy of it from Experian, Veda, or similar services. This will show you any issues that require fixing. If you spot errors on time, you can get them solved so lenders are more willing to approve your loan application.
Are you ready to apply for a loan? Make sure to follow these tips and your chances of approval will boost significantly.