5 Factors That Will Influence Your Home Loan Application
So you are all excited about the prospect of buying a new home. Like many, however, you are unsure how bank determine whether or not to approve your home loan application. To help you, the following is a 5-point guide of some of the factors that will influence the outcome of your home loan mortgage application:
1. Credit Rating : your credit rating and credit history will be one of the biggest factors that will influence whether or not your home loan application is successful. As such, it is essential that you request a credit report before you submit your home loan application so that you can take the time to review the report. If you have any doubt that an entry on your credit report should not be there, you must takes steps to have this corrected before you proceed with the application. Although having a bad credit history may not necessarily result in your application being denied, it could well influence both the amount you may be lent and also the interest rate you may be charged for borrowing the money to buy your new home.
2. Debt-to-income ratio : historically your debt-to-income ratio, which is the difference between what you earn and how much you already owe people, was a very important factor in determining whether or not you would have your homer loan application approved. With spiralling debt levels today, this is less of a factor, while still remaining very important. Essentially, what you need to show is that you can afford the monthly home loan repayments without too much of a financial burden being placed on you.
3. Loan-to-value ratio : the loan-to-value (LVA) ration can be lumped in with the amount of deposit you are willing to put down on the purchase of the house. For example, if you agree to make a down-payment of 40%, your LVA will be lower and there is much more of a chance that you'll be lent the money than someone who only puts down a down-payment of 10% on a house of a similar value.
4. Stability : it may seem odd that a bank would rate highly a person who lived and worked in the same geographic area for years on end given that you are applying for a home loan mortgage just so you can move to your new home, but that is exactly what they do cherish. If you want to apply for a home loan, best bet is to stick at the same address and with the same bank details for at least 3 years.
5. Appraised value of the property : as soon as you apply for a home loan your bank will instruct its appraiser to appraise the value of the home in question to ensure that the seller's valuation is roughly the same price as the seller's asking price for the property. If there is any difference between the sale price and the bank's valuation price, it is likely that the bank will refuse to provide the home loan.
To sum up then, in order to stand any chance of getting your home loan application approved, you need: (a) to have a good credit history; (b) earn enough to repay the home loan mortgage; (c) put down enough of a deposit to ensure that the LVA ratio is healthy; (d) have lived in one place for a prolonged period of time; and (e) not be paying well over the top for the property.