Improving your chances of getting a home loan approved

Three Things to Do to Improve Your Chances of Getting Your Home Loan Approved

Buying a home is an exciting time in anyone’s life, but it also comes with many stresses. Not least of which is applying for a home loan to finance your purchase. This is why you’d want to be as prepared as possible, to improve your chances of securing a loan.

If you know you did your bit properly, you’ll sleep much easier at night while waiting for that phone call from your agent or broker.

While every money-lending institution has their own rules and regulations, there are important measures you can take to satisfy any agent or broker.

Ensure job security

Job hopping might be more acceptable than it used to be, but it’s a red flag for a broker. The same goes for a recent change in industry, a move from full-time to part-time employment, a change to freelance, or a move from a high paying to a low or lower paying job.

This is because a home loan lender will look at your capacity to pay off the loan, as well as how stable that capacity is. If you change jobs often, you might have the ability to pay off the loan, but it’s not considered a stable environment in which the money is being earned or generated.

If you’ve immersed yourself in a new industry shortly before applying for the home loan, questions might be raised as to how successful you are likely to be – do you have the necessary skills or experience to ensure that you will stay employed in your new position? Obviously it will be less of a risk factor if you made the change a considerable amount of time before you applied for the loan.

As for how part-time employment or freelancing affects your loan application, it should be apparent. You’ll be earning less than in a full-time job, and your income might be sporadic in the case of freelancing.

It’s thus very important that you’re gainfully employed, and have been for several months or even years, when you apply for a home loan. If you are considering a change in your career, ensure that it is within the same industry or within your area of expertise, and for a better salary.

Be transparent

When you are asked for information or documents, be forthcoming. In addition, see to it that all your financial affairs are in order. Many times, borrowers make the assumption that the lender will limit their review to the documentation submitted. This isn’t always the case, so don’t be caught with egg on your face.

Work with your tax consultant or financial advisor on this one if you have to. It’s also important that what you submit to the broker or bank correspond with your annual tax return. Stay away from so-called creative accounting – it’s possible that your records will be checked again just before giving you a final answer, and any anomalies are bound to harm your application.

Mange your debt well

This one should come as no surprise. Less debt means more money at your disposal, which means you’ll be able to pay off your home loan. Lenders call this your debt-to-ratio income and evaluate this equation during the approval process. Thus, pay off debt you have diligently and avoid new debt at all costs. Doing this won’t only help your home loan application, it will also make for a better way of living in the long run.

To give you a good idea of what you’re in for as far as future expenses are concerned, calculate how much you could expect to spend on repaying your home loan every month. If you’ve got your eye set on a house that’s above your means, it will be evident, and prevent you from applying for a bond on a house that you can’t afford. It’ll be much better to learn this at the get-go, than months down the line.