Buying your dream home is exciting but also challenging if you don’t have the finances. You may be wondering how it is possible when there are hundreds of finance companies to aid your purchase. Well, you, as my valuable reader, must understand that a residential mortgage is nowhere close to your ordinary loan programs. There are plenty of things that can become an obstacle and the lack of knowledge can make your application a total mess.
Educating yourself is the key to a successful loan sanction, especially for first-time homebuyers. You need a good credit score and a sufficient level of income in hand. What else do you need? Here, take a look, study the essentials in detail for your quick and hassle-free approval of loan –
- Multiple Sources of Income
A stable source of earning is a must to strengthen your reputation in the eyes of lenders. But, if that one source is not enough, your application can get rejected. That is why it is preferable to have more than one source of income and club all to get a loan faster.
- Consistent Credit Score
It takes literally less than a few minutes for lending institutions to pull out your loan history and assess the actual status of your credibility. Your credit activity has more impact than you can ever imagine and with a low score, you are bound to have your application rejected.
- Bigger Down Payment
Once you have budgeted for the price of the house you wish to buy, you have to keep aside at least 20% of that amount as your cash down payment. Although there are home loans that require as little as 3% down payment but they are highly burdensome. And why would it not be – the more you borrow, the more you will need to pay back; let us not forget the monthly interest rates you got to pay.
- Lower Debt-to-Income Ratio
Banks and other lending institutions don’t demand zero outstanding balance on your credit cards. They are just looking for sensible and reliable individuals who owe less to other creditors. So, they evaluate your debt-to-income ratio to determine how much they can allow you to acquire from them. As a thumb rule, your entire monthly debt payments shouldn’t exceed 36% of your monthly gross earnings.
- Earning Co-Applicant
Adding the name of your well-earning spouse, parent, or sibling can significantly increase your chances of loan approval. You can add up their income with yours and show the lenders that you are capable of paying back the loan in the specified time.
- Essential Documents
With all the mandatory paperwork in place, your mortgage brokers can help you both with the new home purchase and refinancing. Lenders always specify what documents they need, so submitting what is required or in fact, more than what they ask is needed to fasten your loan approval process.