How to Qualify for Home Loans, Even if You Think You Cannot
Nov 26, 2018 12:04
Owning a home is many peoples’ dream. The security of having a place to call your own, and knowing that you’re no longer paying rent to someone else is an exciting prospect, but one that many people now seem to be doubting is possible.
According to CoreLogic economist Archana Pradhan, consumers are more cautious now than they have been previously. This is leading to fewer people applying for home loans, even though the denial rate is roughly two-thirds of what it was in 2005, before the Global Financial Crisis.
“The observed decline in originations could be the result of potential applicants being too cautious.”, Pradhan says.
Many potential home buyers seem to be letting the belief that they are unable to qualify for a mortgage get in the way of trying. We’ve outlined below some common misconceptions regarding eligibility for home loans, the facts, and how you can improve your chances of being approved.
Some people seem to be under the impression that you still need a 20% down deposit to qualify for a loan. This simply isn’t true. While having 20% of the down payment can be helpful as it means you don’t need to take out Lender’s Mortgage Insurance, you can get a home loan with as little as 5% deposit.
It is also possible (although rarer) to be able to qualify for a home loan with no deposit. For these loans, you must meet a list of conditions, and a guarantor is often required to be present on the loan. The criteria for a 100% LVR home loan often includes having a high credit rating, a consistent, stable job, and a strong history of paying debts on time.
Many types of employment can qualify you for a loan, meaning not only those with a consistent 9-5 job are eligible. It differs depending on the lender you choose to go with, but sources of income such as part-time jobs, seasonal work, and self-employment are all forms that can often be considered. Some lenders will also consider incomes such as government assistance and child support benefits, but this too differs depending on the institution.
If you’re curious to see how much you could be eligible to borrow, there are useful online tools available that can give you an estimate based on criteria such as your income, living expenses, and a number of dependents.
Most people in the world have some form of debt, and lenders understand this. Some lenders in America are willing to roll student debt into the mortgage total. It’s a good idea to pay off as much debt as possible before applying for a home loan, however, if you have an inexpensive debt such as that of government student loans, it could be helpful to implement good savings habits, such as putting a set amount into a savings account each month. This shows potential lenders that you are aware of how to be consistently financially responsible.
If you are interested in applying for a home loan, it can be useful to check on your credit score first. According to ASIC, “your credit score is a number based on an analysis of your credit file, at a particular point in time”. This number is used by lenders to asses the worthiness of your credit and the risk of future default. There are several national credit reporting bodies (CRB) where you can request one free credit report per year. These include Equifax, Experian, and Get Credit Score. Your credit score will either be a number between zero and 1000 or zero and 1200 (depending on the CRB). Higher numbers indicate a better credit rating, while lower numbers indicate poorer ratings. In general, lenders are more willing to lend to someone with a higher credit rating.
By knowing your credit score before applying for a home loan, you can make changes and possibly work to improve your rating. Some ways that may possibly improve this score include paying bills and rent on time, lowering limits on credit cards, and paying the full sum of credit cards off each month.
When it comes to purchasing an engagement ring for your beloved, there are many styles to choose from. There is an enormous amount of anticipation and excitement when ring shopping, however, if you aren’t aware of what you are looking for then there is nervousness as well. To make the process of choosing the right engagement ring easier for you, as a fine jewelry store Atlanta, we have curated a list of the most popular engagement ring styles. Read more
2020 is one crazy year. One after the other, the world has gone through the most bizarre series of events, such as the city-sized forest fires in Australia, Britain leaving the EU, airplane crashes, streaks of celebrity deaths, and now a global pandemic. The world has gone through a tough time this year, and we saw it all unfold on Instagram. Read more
Learning how to play a musical instrument is not only fun but also has other innumerable benefits to you. However, you will be surprised to know that learning a musical instrument has even more advantages for your kids. That is because it stimulates different parts of the brain, thus being great for the child's cognitive development. Read more