Tristan Powys (Credit Counselor) @ Lucid Living
Buying a dream house is one of the significant goals in everyone’s life. If you are planning to buy a house in the near future, make sure you start exploring pre-conditions you will need to satisfy to apply for home loan and be prepared about the same.
1. A good credit score
This is one of the significant deciding factors. Make sure you have a good credit score in place so as to brighten the prospects to get a home loan.
How can you achieve that?
Make sure you pay your accounts in full and on time. Use your credit card very meaningfully. Accounts or repayments you’ve missed or paid late will show on your credit report and even the smallest blemish can adversely affect your chances of getting a home loan.
Try to clear all your other loans on time without any delay, and try not to have any records of outstanding debts when you submit your home loan application.
Subscribe to Lucid Living’s Credit Fix service:
– to ensure that any errors and unfair blacklisting is removed from your credit report;
– to negotiate settlement discounts on outstanding debts, so these can be paid and the information updated on your credit report;
– to rescind any judgments and have those deleted from your credit report;
– to update your credit report and boost your credit score.
2. Job stability
If you are a frequent job-hopper, you may start with bit of disadvantage. A bank evaluates your ability to pay back the loan without any default and job stability is the prime concern for most of the banks. Frequent job hops may imply instability and could very well become a reason for rejection of your home loan application.
Banks place a very high value on job stability and their credit policy can imply that an applicant needs to be employed with a particular company for a certain minimum period to be eligible for a home loan. The period usually varies from one to three years. Provide reasonable explanations for gaps in your employment history, and also explain why you’ve changed jobs where you have.
Your credit report tracks your employment history. Make sure that the information is accurate and up-to-date.
3. Be ready with complete details of your investments
Each bank has its own policies when it comes to evaluating a home loan application. In general banks assess your savings & investment security and may ask for a complete record of this. Make sure you have complete details of your existing investments such as equity and mutual fund portfolio, fixed deposits, investment policies and any existing property details etc.
All these factors play a significant role in strengthening your case of home loan application.
Do demonstrate through your home loan application to the lender that you are capable of managing your finances and meeting commitments.
4. Application has been rejected earlier
Most banks look into rejected home loan applications while evaluating your home loan application. This information appears on your credit report. What you need to do is not to apply for a home loan to all banks at the same time.
In any case, if your home loan application is rejected, you can rectify your errors before you approach the other lender. If you are not aware of the reason of rejection of your home loan application, make sure you take it up with the concerned bank and find out the exact reason.
If your original home loan application was rejected because of a credit bureau blacklisting and you have since had the blacklisting removed (Lucid’s Credit Fix can achieve this in 14 days in most instances), wait at least 30 days fro m the original application, before re-applying. Banks typically do not draw a new credit report for the same home loan application within a 30 day period.
If you are using the services of a bond originator, insist that the re-application is done manually. This will allow the originator to motivate the application, based on the fact that you have successfully removed the blacklisting. Lucid
Living always issues you with a motivational letter to support your home loan application and this has had great success in getting the re-application approved.
5. The property you want doesn’t satisfy bank’s policy guidelines
Not all types of residential property are suitable security for a loan. Lenders prefer properties that are easy to sell, are in demand, are simple to value, and tend not to fluctuate too much in price.
In addition, choose the right builder so that you don’t face any problems when it comes to verifying your property. The builder should have all the necessary documents and the required number of approvals for this phase to clear smoothly.
If the documents are not in order or if there’s a problem with the title or layout, your home loan application can be rejected.
If you’re serious about a property, check early with your lender that the property makes an acceptable security for a home loan. If it doesn’t, ask what other types of security might be acceptable (such as a second property), or look for something more mainstream.