Every year, the number of new homeowners dwindles.
There are several reasons why. It could be due to outlying student debt or diminished general appeal. Or maybe it’s simply the daunting task of trying to get a housing loan.
Becoming eligible for a loan can seem difficult, but no home seeker should let that stop them. We’re here to help you learn the things that can affect the approval of your loan.
Let’s get into it.
Banks and other lenders will take a look at your credit score to know whether giving you a loan will be a risky investment on their part or not. The amount of income you make doesn’t have much of a say on this. You could make a lot of money and still have a bad credit score.
Your credit score can have an effect on how much of a loan you can get, as well as the interest rate.
Take some time to find out your own credit score before approaching any lenders. Be certain to check your credit report for errors or flaws. You don’t want any wrong information to affect your rates or chance to secure a loan.
Being Self-Employed Can Deny You a Housing Loan
Regardless of how much you make in a year through your self-employment endeavors, the fact remains that it can look poorly to banks and other lenders. Self-employment can look far too variable in their eyes and can make you seem like a risky investment.
Unfortunately, there isn’t much you can do about this, but it is good to know about so that there aren’t any surprises coming your way.
A good thing would be to bring any pay stubs with you when meeting with your potential lenders. This could help you get a quicker approval.
Never Had a Loan
Strange as it may sound, sometimes being loan-free can be a bad thing. Because you’ve never taken a loan before, banks and other lenders can’t easily decide if you are a trustworthy client or not.
Are you the type of person to pay on time? They have no way of knowing and it’s likely they aren’t willing to take that risk.
One way around this predicament is to take out a small personal loan or credit card a year or two before. If you make the payments on time or are able to pay the loan back, you will build up your credit score and show banks that you can be trusted.
Debt to Income Ratio
A lot of the time, people will try to get a loan for far more than they can actually afford. This will, in turn, plummet their credit score and end up being more trouble than it needs to be.
Knowing your Debt to Income Ratio is a good way to figure out how to make a loan’s payment reliably with your monthly income, all while factoring in all of your other due payments as well.
Take a moment to look at your numbers before deciding how much to ask for your housing loan.
It could be tempting to try and hide a particular debt in order to get a housing loan, or maybe make a bad set of debt seem a little better. But honesty is definitely the best policy when it comes to dealing with banks and lenders.
Being dishonest in any of this will risk you being charged with fraud, and it will make it much more difficult to ever find a bank or lender that will want to work with you in the future.
We hope that this has helped you understand more about the process and that you’ll find it easier to expect what will affect your loan. We wish you all the luck in the world for the future.
The feeling of owning that perfect house is way too precious. And we want to help you!
If you have any questions or concerns, please feel free to contact us!